AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ____________, 1998
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
CLEARVIEW CINEMA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED 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>
------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
A. DALE MAYO
97 MAIN STREET
CHATHAM, NJ 07928
(973) 377-4646
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
JANICE C. HARTMAN
KIRKPATRICK & LOCKHART LLP
1500 OLIVER BUILDING
PITTSBURGH, PA 15222-2312
(412) 355-6500
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE THIS REGISTATION
STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS TO BE OFFERING AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
10 7/8% Senior Notes due 2008.......... $80,000,000 100% $80,000,000 $23,600
Subsidiary Guarantees(3)...............
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Calculated in accordance with Rule 457.
(3) Guarantee of the Registrant's subsidiaries listed in the table on the
following pages.
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE, OF
EXACT NAME OF REGISTRANT AS INCORPORATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER OR ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ----------------------------------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
Clearview Cinema Group, Inc. DE 22-3838356 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Grand Avenue Cinema Corp. DE 11-3279602 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Port Washington Cinema Corp. DE 11-3279598 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Herricks Cinema Corp. DE 11-3279601 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Madison Triple Cinema Corp. NJ 22-3079719 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Manasquan Cinema Corp. NJ 22-3285160 97 Main Street
Chatham, NJ 07298
(973) 377-4646
Clearview Theatre Group, Inc. NJ 22-2997876 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Chester Twin Cinema Corp. NJ 22-3245618 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Summit Cinema Corp. NJ 22-3369311 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Emerson Cinema Corp. DE 22-3441977 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Allwood Cinema Corp. DE 22-3441975 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC New City Cinema Corp. DE 13-3889263 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Washington Cinema Corp. DE 22-3441982 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Kisco Cinema Corp. DE 13-3895210 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bedford Cinema Corp. DE 13-3895213 97 Main Street
Chatham, NJ 07298
(973) 377-4646
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE, OF
EXACT NAME OF REGISTRANT AS INCORPORATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER OR ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ----------------------------------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
CCC Tenafly Cinema Corp. DE 22-3478510 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bergenfield Cinema Corp. DE 22-3478509 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Closter Cinema Corp. DE 22-3478508 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC B.C. Realty Corp. DE 22-3478512 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bronxville Cinema Corp. DE 22-3523957 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Larchmont Cinema Corp. DE 22-3523953 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Mamaroneck Cinema Corp. DE 22-3523958 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Cinema 304 Corp. DE 22-3523955 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Wayne Cinema Corp. DE 22-3523951 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bayonne Cinema Corp. DE 22-3532585 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Marboro Cinema Corp. DE 22-3532587 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Roslyn Cinema Corp. DE 22-3546047 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bellevue Cinema Corp. DE 22-3547418 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Cedar Grove Cinema Corp. DE 22-3547423 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Kin Mall Cinema Corp. DE 22-3547422 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Mansfield Cinema Corp. DE 22-3547402 97 Main Street
Chatham, NJ 07298
(973) 377-4646
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE, OF
EXACT NAME OF REGISTRANT AS INCORPORATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER OR ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ----------------------------------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
CCC Middlebrook Cinema Corp. DE 22-3547420 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Parsippany Cinema Corp. DE 22-3547401 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Succasunna Cinema Corp. DE 22-3547399 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Edison Cinema Corp. DE 22-3552613 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Woodbridge Cinema Corp. DE 22-3552614 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Babylon Cinema Corp. DE 22-3562503 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Manhasset Cinema Corp. DE 22-3562505 97 Main Street
Chatham, NJ 07298
(973) 377-4646
Millburn Twin Cinema Corp. DE 22-3559804 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Morristown Cinema Corp. DE 22-3566664 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Narberth Cinema Corp. DE 23-2944155 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Bala Cynwyd Cinema Corp. DE 52-2074896 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Great Neck Cinema Corp. DE 22-3562506 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Franklin Square Cinema Corp. DE 22-3562510 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Claridge Cinema Corp. DE 22-3559805 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Screening Zone Cinema Corp. DE 22-3559806 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Carmel Cinema Corp. DE 52-2110588 97 Main Street
Chatham, NJ 07298
(973) 377-4646
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE, OF
EXACT NAME OF REGISTRANT AS INCORPORATION I.R.S. EMPLOYER REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER OR ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ----------------------------------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
CCC Cobble Hill Cinema Corp. DE 22-3568867 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC West Milford Cinema Corp. DE 22-3577466 97 Main Street
Chatham, NJ 07298
(973) 377-4646
CCC Colony Cinema Corp. DE 22-3577463 97 Main Street
Chatham, NJ 07298
(973) 377-4646
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JULY ____, 1998
PROSPECTUS
$80,000,000
OFFER TO EXCHANGE ITS
10 7/8% SENIOR NOTES DUE 2008
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR UP TO $80,000,000 PRINCIPAL AMOUNT OF ITS
OUTSTANDING 10 7/8% SENIOR NOTES DUE 2008
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________, 1998 UNLESS EXTENDED.
Clearview Cinema Group, Inc., a Delaware corporation (the 'Company'),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the 'Exchange Offer'), to exchange its 10 7/8% Senior Notes due 2008 (the 'New
Notes') that have been registered under the Securities Act of 1933, as amended
(the 'Securities Act'), pursuant to a Registration Statement (as defined) of
which this Prospectus constitutes a part, for up to $80,000,000 aggregate
principal amount of its outstanding 10 7/8% Senior Notes due 2008 (the 'Old
Notes'), of which $80,000,000 aggregate principal amount is outstanding as of
the date hereof.
The New Notes will evidence the same debt as the Old Notes and will be
issued under and be entitled to the same benefits under the Indenture (as
defined) as the Old Notes. In addition, the New Notes and the Old Notes will be
treated as one series of securities under the Indenture. The terms of the New
Notes are identical in all material respects to the terms of the Old Notes for
which they may be exchanged pursuant to this offer, except for certain transfer
restrictions, registration rights and terms providing for an increase in the
interest rate on the Old Notes under certain circumstances relating to the
registration rights. The New Notes and the Old Notes are collectively referred
to herein as the 'Notes.' See 'Description of Notes.'
Continued on next page
SEE 'RISK FACTORS' BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
------------------
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.
The date of this Prospectus is ___________, 1998.
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 any such State.
<PAGE>
Continued from previous page
The New Notes will mature on June 12, 2008. Interest on the New Notes will
be payable semiannually on June 1 and December 1 of each year, commencing
December 1, 1998, at a rate of 10.875% per annum. The New Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after June 1, 2003, at the redemption prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages (as defined), if any, thereon to the date
of redemption. In addition, at any time prior to June 1, 2001, the Company may
redeem up to 33% of the aggregate principal amount of the New Notes at a
redemption price of 110.875% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages (as defined), if any, thereon to the date
of redemption, with the net cash proceeds of one or more public equity offerings
or Strategic Equity Investments (as defined); provided that at least $53.3
million of the aggregate principal amount of the New Notes remains outstanding
immediately after the occurrence of each such redemption.
Upon the occurrence of a Change of Control (as defined), each holder of New
Notes will have the right to require the Company to purchase all or any part of
such holder's New Notes at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. See 'Description of Notes--Repurchase
at the Option of Holders--Change of Control.'
The Notes represent general unsecured obligations of the Company and rank
pari passu in right of payment with all current and future senior indebtedness
of the Company. The New Notes will be effectively subordinated to all senior
secured indebtedness of the Company to the extent of such security, including
indebtedness under the New Credit Facility (as defined), which provides for up
to $15.0 million of revolving credit loans guaranteed by the Company's
subsidiaries and secured as described herein. As of March 31, 1998, on a pro
forma basis after giving effect to the Transactions (as defined), the Company
would have had $80.0 million of indebtedness outstanding, all of which would
have been represented by the Notes. The operations of the Company are conducted
through its subsidiaries. The Notes are unconditionally guaranteed, jointly and
severally, by the Subsidiary Guarantors (as defined). The Subsidiary Guarantees
(as defined) are general, unsecured obligations of the Subsidiary Guarantors and
rank pari passu in right of payment with all current and future senior
indebtedness of the Subsidiary Guarantors. As of March 31, 1998, on a pro forma
basis after giving effect to the Transactions, the Subsidiary Guarantors would
have had no indebtedness outstanding other than the Subsidiary Guarantees of the
Notes and approximately $39,000 of capital leases. See 'Capitalization' and
'Description of New Credit Facility.'
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Rights Agreement dated as of
June 12, 1998 (the 'Registration Rights Agreement') among the Company, the
Subsidiary Guarantors and Lehman Brothers Inc., as the initial purchaser of the
Old Notes (the 'Initial Purchaser').
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the 'Commission') as set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Company has not sought its own no-action letter, and there can be
no assurance that the staff of the Commission will make a similar determination
with respect to the Exchange Offer as in such other circumstances. Based upon
these interpretations by the staff of the Commission, the Company believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a holder thereof other
than (i) a broker-dealer who purchased such Old Notes directly from the Company
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an 'affiliate' (as defined in Rule 405
of the Securities Act) of the Company without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of such New Notes. Holders of Old
Notes accepting the Exchange Offer will represent to the Company in the Letter
of Transmittal that such conditions have been met. Any holder who participates
in the Exchange Offer for the purpose of participating in a distribution of the
New Notes may not rely on the position of the staff of the Commission as set
forth in these no-action letters and would have to comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any secondary resale transaction. A secondary resale transaction in the United
States by a holder who is using the Exchange Offer to participate in the
distribution of
ii
<PAGE>
New Notes must be covered by a registration statement containing the selling
securityholder information required by applicable regulations promulgated under
the Securities Act.
Each broker-dealer (other than an 'affiliate' of the Company) that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Notes as a result of market-making activities or other
trading activities and will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an 'underwriter' within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the date of this Prospectus, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See 'Plan of Distribution.' Any broker-dealer who is an affiliate
of the Company may not rely on such no-action letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. See 'The Exchange
Offer--Purpose of the Exchange Offer.'
The New Notes are new securities for which there is currently no market.
Although the New Notes are expected to be eligible for trading in the Private
Offerings, Resale and Trading through Automated Linkages ('PORTAL') Market of
the Nasdaq Stock Market, Inc., the Company presently does not intend to apply
for listing of the New Notes on any securities exchange or for quotation through
the National Association of Securities Dealers Automated Quotation System
('NASDAQ'). The Company has been advised by the Initial Purchaser that,
following completion of the Exchange Offer, it currently intends to make a
market in the New Notes; however, the Initial Purchaser is not obligated to do
so, and any market-making activities with respect to the New Notes may be
discontinued at any time without notice. There can be no assurance that an
active public market for the New Notes will develop.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof, and the Company will
have no obligation to such holders (other than the Initial Purchaser) to provide
for the registration under the Securities Act of the Old Notes held by them,
except in limited circumstances. See 'Description of Notes--Registration Rights;
Liquidated Damages.' To the extent that Old Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. It is not expected that an active market for the Old Notes
will develop while they are subject to restrictions on transfer. The Company
will accept for exchange any and all Old Notes that are validly tendered and not
withdrawn on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be ___________, 1998 (the 'Expiration Date'), unless
the Exchange Offer is extended by the Company in its sole discretion (in which
case the Expiration Date shall be the latest date and time to which the Exchange
Offer is extended.) Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date, unless previously
accepted for payment by the Company. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange. However,
the Exchange Offer is subject to certain conditions which may be waived by the
Company and to the terms and provisions of the Registration Rights Agreement.
Old Notes may be tendered only in denominations of $1,000 and integral multiples
thereof. The Company has agreed to pay the expenses of the Exchange Offer. See
'The Exchange Offer--Fees and Expenses.'
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of __________, 1998.
The Company will not receive any proceeds from the Exchange Offer. No
dealer-manager is being used in connection with the Exchange Offer. See 'Use of
Proceeds' and 'Plan of Distribution.'
iii
<PAGE>
UNTIL ____________, 1998, ALL BROKER-DEALERS EFFECTING TRANSACTIONS IN THE
NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF
BROKER-DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
No broker-dealer, salesperson or other individual has been authorized to
give any information or to make any representation in connection with the
Exchange Offer other than those contained in this Prospectus and the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. The delivery of this
Prospectus shall not, under any circumstances, create any implication that the
information herein is correct at any time subsequent to its date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
TENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
This Prospectus includes 'forward-looking statements' within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities and Exchange
Act of 1934, as amended (the 'Exchange Act'). All statements other than
statements of historical facts included in this Prospectus, including, without
limitation, the statements under 'Prospectus Summary,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' and 'Business'
and located elsewhere herein regarding industry prospects, the Company's
prospects and the Company's financial position are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ('Cautionary
Statements') are disclosed in this Prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus
under 'Risk Factors.' All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the United
States Securities Exchange Act of 1934 (the 'Exchange Act') and in accordance
therewith files periodic reports, proxy solicitation materials and other
information with the Commission. Such reports, proxy solicitation materials and
other information can 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 Commission's Regional Offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such materials can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may be found on the Commission's site address, http://www.sec.gov.
The Common Stock is listed on the American Stock Exchange (the 'AMEX'). Such
reports, proxy solicitation materials and other information can also be
inspected and copied at the offices of the AMEX at 86 Trinity Place, New York,
New York 10006.
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act (the 'Registration Statement') with respect to the
New Notes offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. Such additional information may be
obtained from the Commission's principal office in Washington, D.C. or their Web
site as set forth above. For further information, reference is hereby made to
the Registration Statement, including the exhibits filed as a part thereof or
otherwise incorporated herein. Statements made in this Prospectus as to the
contents of any documents referred to are necessarily summaries of such
documents and are not complete, and in each instance reference is made to such
documents for a more complete description and each such statement is qualified
in its entirety by such reference.
iv
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in this Prospectus. 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 is a major regional first run motion picture exhibitor that
operates primarily community-based multiplex theaters in affluent suburban
communities in the New York/New Jersey metropolitan area. Clearview offers a
broad mix of first run films with a particular focus on films designed to appeal
to sophisticated moviegoers and families with younger children residing in these
communities. As of June 30, 1998, the Company operated 40 theaters with a total
of 193 screens. As of the same date, after giving effect to the Pending
Acquisitions (as defined), the Company would have had 42 theaters with a total
of 200 screens. Through additions of screens to existing theaters and new
theater development, the Company also plans to add a total of 71 new screens by
March 31, 1999. Based on the number of screens currently operated, the Company
believes that it is one of the largest motion picture exhibitors in the New
York/New Jersey metropolitan region and the second largest in New Jersey, thus
enabling it to compete effectively with the major national theater circuits in
its markets. As of June 30, 1998, approximately 70.0% of the Company's theaters
were the sole exhibitors in their film zones, and approximately 18.0% were the
leading exhibitors in their film zones. For the year ended December 31, 1997, on
a pro forma basis after giving effect to the 1997 Acquisitions (as defined), the
1998 Acquisitions (as defined) and the Pending Acquisitions, the Company's
revenues and EBITDA (as defined) would have been approximately $47.6 million and
$9.2 million, respectively. For the three months ended March 31, 1998, on a pro
forma basis after giving effect to the 1998 Acquisitions, other than the Cobble
Hill Acquisition (as defined), and the Pending Acquisitions, the Company's
revenues and EBITDA would have been approximately $11.9 million and $2.3
million, respectively.
Clearview operates clean, comfortable, visually appealing and
service-oriented theaters predominantly located in affluent towns and
communities rather than in shopping malls or near highways. The Company believes
that, in many suburban communities in the Middle Atlantic and New England
states, theaters located in town or in community-based retail centers serve
audiences that prefer the convenience and familiarity of such theaters to the
larger out-of-town megaplex theaters that appear to be the focus of the major
theater circuits. Many of the Company's target markets are in densely populated,
affluent areas consisting of numerous small municipalities with local business
districts that are well-suited to the Company's strategy of operating
community-based theaters. In many of these areas it can be difficult for theater
circuit operators to build or expand theaters into large multiplexes or
megaplexes due to a lack of affordable real estate, zoning laws and community
resistance.
Founded in 1994 with four theaters and eight screens, the Company has grown
through both acquisitions and theater development. Since May 1996, the Company
has completed 13 acquisitions, representing 30 theaters with a total of 158
screens, and entered into agreements to operate or lease an additional five
theaters with a total of 15 screens. Management has successfully integrated
these theaters into its operations by reducing operating expenses and
implementing new operating standards, management controls and information
systems. The Company has also upgraded the seating, improved the sound and
projection equipment, refurbished the interior furnishings and broadened the
concession offerings in most locations. Additionally, since early 1995 the
Company has added seven screens to existing theaters and constructed a new
five-screen theater in an existing building, resulting in an aggregate of 40
theaters with a total of 193 screens as of June 30, 1998. See 'Business--
Existing Theaters and Pending Acquisitions.'
During the past ten years, overall movie theater attendance in the United
States has grown from 1,089 million in 1987 to 1,388 million in 1997. Admission
revenue increased from a total of approximately $4.3 billion in 1987 to
approximately $6.4 billion in 1997, or a compound annual growth rate of 4.1%.
The theatrical exhibition industry is fragmented. Although the eleven largest
theater circuits operated approximately 60% of the screens at May 1, 1997, 268
of the approximately 478 remaining exhibitors operated four or fewer
1
<PAGE>
screens. There is also a strong trend toward consolidation in the motion picture
exhibition industry. Two recent major transactions combined Cineplex Odeon
Corporation ('Cineplex') (approximately 1,729 screens) with Sony/Loews Theater
Exhibition Group ('Sony/Loews') (approximately 1,020 screens), and combined Act
III Cinemas ('Act III') (approximately 832 screens) with Regal Cinemas, Inc.
('Regal') (approximately 2,337 screens). The Company believes that it has an
opportunity to acquire additional theaters as the major circuits seek to divest
theaters which do not fit into their strategic plans and independent theater
operators find it increasingly difficult to compete with larger circuits.
OPERATING STRATEGY
The Company's objective is to expand its position as a major regional first
run motion picture exhibitor operating multiplex theaters based on strict
operating controls, principally at in-town locations or in retail centers that
are the focus of community life. The following are the key elements of the
Company's operating strategy:
Maintain and Expand Strong Regional Focus. Based on the number of screens
currently operated, the Company believes that it is one of the largest motion
picture exhibitors in the New York/New Jersey metropolitan region and is the
second largest in New Jersey, thus enabling it to compete effectively with the
major national theater circuits in its markets. In addition, at June 30, 1998,
based on the number of screens currently operated, the Company is the leading
motion picture exhibitor in such upscale suburban areas as Morris County, New
Jersey; Essex County, New Jersey; and the North Shore of Long Island. The
Company seeks to continue to acquire or develop theaters that are close to the
Company's existing theaters and to acquire or develop similar clusters of
theaters in other target markets in the Middle Atlantic and New England states.
Approximately 80% of the Company's theaters are within a 30 mile radius and all
of the Company's theaters are within a 50 mile radius. By developing clusters of
theaters, the Company generally reduces its operating expenses through the
sharing of skilled personnel and management oversight. Also, with a large number
of screens in one area, the Company can operate separate theaters as if they
were a single larger multiplex, thereby enabling the Company to offer a wide
selection of films, play successful films longer and play films with very strong
demand on a number of screens at one time.
Dominate Film Zones. The Company seeks to operate theaters that will be
the sole or leading exhibitors in their geographic film licensing zones. A
geographic film licensing zone or 'film zone' is a geographic area (typically
having a three to five mile radius in suburban markets) customarily recognized
by film distributors, in which a film is licensed for exhibition at only one
theater. As of June 30, 1998, approximately 70.0% of the Company's theaters were
the sole exhibitors in their film zones and approximately 18.0% were the leading
exhibitors in their film zones. Being the sole or leading exhibitor in a film
zone allows the Company to choose which films to exhibit from among the various
films licensed by the production companies. Management believes that this
flexibility in film selection, combined with management's experience and
expertise in selecting films for its target markets, is an important factor in
the Company's success.
Pursue Community-Based Niche Strategy. Clearview operates clean,
comfortable, visually appealing and service-oriented theaters in predominantly
affluent towns and communities rather than in shopping malls or near highways.
The Company believes that, in many suburban communities in the Middle Atlantic
and New England states, theaters located in town or in community-based retail
centers serve audiences that prefer the convenience and familiarity of such
theaters to the larger out-of-town megaplex theaters that appear to be the focus
of the major theater circuits. By concurrently showing first run commercial, art
and family-oriented films, the Company seeks to appeal to three main groups in
affluent suburban communities: baby boomers, older moviegoers and families with
younger children (10 years of age and younger). Because of its community-based
focus, Clearview can adjust its mix of films based on its sensitivity to the
tastes of the audiences in each community. Examples of successful releases at
Clearview theaters during the past twelve months include Titanic, As Good As It
Gets, L.A. Confidential, Good Will Hunting, The Apostle, Sliding Doors, The
Horse Whisperer, Mousehunt and Paulie. Also as part of its community-based
strategy, Clearview encourages community interaction and involvement through
regular participation in local fund-raising and charity functions and through
the hiring of local employees. Clearview believes that its community-based,
niche strategy is exemplified by the Company's motto, 'We Bring Neighbors to the
Movies.'
Maintain Cost Controls and Pursue Margin Enhancement. The Company seeks to
improve the profitability of its theaters by: (i) controlling theater-level
costs through centralized management; (ii) increasing
2
<PAGE>
efficiencies in concession purchasing; (iii) reducing general and administrative
expenses as a percentage of revenues; and (iv) selecting films that appeal to
Clearview's target audiences but result in relatively low aggregate film rental
costs as a percentage of box office receipts. For the year ended December 31,
1997, Clearview's box office margin (total box office revenues less film rental
and booking fees divided by total box office revenues) was 52.3%, its concession
margin (total concession revenues less cost of concession sales divided by total
concession revenues) was 83.8%, and its theater level cash flow margin (total
revenues less film rental and booking fees, cost of concession sales and theater
operating expenses divided by total sales) was 22.4%. For the three months ended
March 31, 1998, Clearview's box office margin was 56.8%, its concession margin
was 84.4% and its theater level cash flow margin was 29.0%. The Company believes
that such percentages compared favorably with those of the five largest motion
picture exhibitors for the year ended December 31, 1997. The Company believes
that its regional focus, centralized management and emphasis on sophisticated
management information systems also create efficiencies and reduce operating and
general and administrative expenses as a percentage of revenues for most of the
theaters it acquires.
Operate Clean, Modern Theaters which Appeal to Customer Base. Clearview's
theaters generally are multiplexes located in towns and communities rather than
in shopping malls or near highways. Each of the Company's theaters has at least
one auditorium equipped with digital sound. Most locations are surrounded by
stores and restaurants, with available parking nearby. An important aspect of
Clearview's operating strategy is to provide a clean, comfortable and visually
appealing environment, which usually includes chandeliers, a decorative
fireplace and silk flower arrangements. 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, provide a courtesy phone so that patrons can make free local telephone
calls and selectively add digital sound. The concession stand at each theater
offers snack and food items designed to appeal to the Company's generally
upscale customer base, such as fruit, bottled water, ice cream, cappuccino and
Swiss chocolates, as well as more traditional theater concession items such as
soft drinks, popcorn and an assortment of candy items. The Company has adopted a
set of procedures designed to keep its theaters clean and to ensure proper film
presentation.
GROWTH STRATEGY
The Company intends to increase revenues and cash flow by: (i) selectively
acquiring theaters in its target markets; (ii) adding screens to its existing
theaters; (iii) developing new theaters; and (iv) increasing other sources of
high margin revenues.
Selectively Acquire Theater Operations. The Company believes that one of
its strengths is its ability to identify available theaters at attractive prices
in appropriate locations. Clearview identifies many of its potential
acquisitions from the following two sources: (i) major circuits seeking to
divest theaters which do not fit into their strategic plans and (ii) independent
theater operators finding it increasingly difficult to compete with larger
circuits. In addition, Clearview believes it is able to acquire these theaters
at favorable prices as compared with prices for acquisitions of theaters that
fit more closely into the strategic plans of many of the larger theater
circuits. Potential acquisition candidates typically exhibit the following
characteristics: (i) location that strengthens Clearview's position in an
existing market or, when combined with other available acquisitions or new
theater development, provides a sufficient entree into a new market; (ii)
position as the sole or a leading exhibitor in a film zone; (iii) demographics
consistent with the Company's other locations; and (iv) availability at
favorable prices. The Company believes that it has improved the profitability of
its acquired theaters by aggressively implementing cost controls and other
measures to enhance EBITDA margins.
Add Screens to Existing Theaters. The Company adds screens to existing
theaters when the Company believes that such additions will increase revenues
and cash flow and provide sufficient return on capital. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Depending on the configuration of an existing theater, the Company may
add screens without necessarily increasing the overall dimensions of the theater
by dividing an individual auditorium into two or more smaller auditoriums.
Dividing an auditorium in this fashion can create additional revenue with only a
marginal increase in expense. In certain instances, the Company may also add
screens by expanding into adjacent space for the buildout of additional screens.
The Company currently plans to add 26 screens to existing theaters by March 31,
1999. See 'Business--Theater Expansion and Development.'
3
<PAGE>
Develop New Theaters. The Company believes that it can successfully
identify locations in suitable communities that can be developed into theaters.
The Company currently plans to develop four theaters with a total of 45 screens
in the New York/New Jersey metropolitan area and the Philadelphia main line by
March 31, 1999. See 'Business--Theater Expansion and Development.' From time to
time, opportunities are presented to Clearview by real estate developers who
wish to enhance the value of their properties with the presence of a movie
theater. These opportunities often require limited direct investment by the
Company. In addition, due to its reputation for operating community-based
theaters, Clearview has been approached by local governments or community
development agencies of towns in the New York/New Jersey metropolitan area and
the Philadelphia main line that are interested in revitalizing parts of their
communities and believe that a movie theater could provide an impetus to such
redevelopment.
Increase Other Sources of Revenues. Clearview seeks to increase revenues
and cash flow from sources other than admissions and concessions, including
party, theater rental and on-screen advertising revenues. For the year ended
December 31, 1997, Clearview had other revenues of approximately $420,000, or
2.4% of total revenues, and for the three months ended March 31, 1998, had other
revenues of approximately $320,000, or 3.3% of total revenues. Clearview intends
to increase these high margin revenue sources in the future. For example, in May
1998 the Company initiated a children's party program designed to maximize use
of its theaters at times when they otherwise would not be operating. In
addition, the Company has recently renegotiated its advertising contracts to
increase the rates for on-screen advertising. See 'Business--Other Sources of
Revenue.'
RECENT AND PENDING ACQUISITIONS
Since its initial acquisition of four theaters in December 1994, Clearview
has completed 13 acquisitions, representing 30 theaters with an aggregate of 158
screens. The Company has agreed to purchase an additional two theaters with an
aggregate of 7 screens. See 'Business--Existing Theaters and Pending
Acquisitions.' Listed below is a summary of the Company's acquisitions during
1997 and 1998 and of the Pending Acquisitions.
1997 ACQUISITIONS
UA I Theaters. On September 12, 1997, the Company purchased from United
Artists Theater Circuits, Inc., for total consideration of approximately $8.7
million in cash, the Mamaroneck Playhouse in Mamaroneck, NY (4 screens), the
Bronxville Cinemas in Bronxville, NY (3 screens), the Larchmont Cinemas in
Larchmont, NY (1 screen), the Cinema 304 in New City, NY (2 screens) and the
Wayne Preakness Cinemas in Wayne, NJ (4 screens) (collectively, the 'UA I
Theaters').
Nelson Ferman Theaters. On November 21, 1997, the Company purchased from
an independent theater operator, for total consideration of $18.5 million paid
in a combination of cash, subordinated notes of the Company and shares of Common
Stock, the Parsippany Cinema 12 in Parsippany, NJ (12 screens) and the
Succasunna Cinema 10 in Succasunna, NJ (10 screens) (together, the 'Nelson
Ferman Theaters').
CJM Theaters. On December 12, 1997, the Company purchased from an
independent theater operator, for total consideration of $8.7 million paid in a
combination of cash, shares of the Company's Class B Nonvoting Cumulative
Redeemable Preferred Stock, $.01 par value (the 'Class B Preferred Stock'), and
shares of Common Stock, the Bellevue Theaters in Upper Monclair, NJ (4 screens),
the Kin Mall Cinemas in Kinnelon, NJ (8 screens), the Cinema 23 in Cedar Grove,
NJ (5 screens) and the Middlebrook Galleria Cinema in Middlebrook, NJ (10
screens) (collectively, the 'CJM Theaters').
Other 1997 Acquisitions. Also during 1997, the Company acquired for an
aggregate of approximately $2.0 million in cash, the Roslyn Cinemas in Roslyn,
NY (3 screens), the Edison Cinemas in Edison, NJ (8 screens) and the Woodbridge
Cinemas in Woodbridge, NJ (5 screens) (collectively, the 'Other 1997
Acquisitions'). The acquisitions of the UA I Theaters, the Nelson Ferman
Theaters and the CJM Theaters, together with the Other 1997 Acquisitions, are
hereinafter referred to as the '1997 Acquisitions.'
1998 ACQUISITIONS
During 1998, the Company has purchased for an aggregate of approximately
$15.3 million, paid in a combination of cash and shares of Common Stock, the
Clairidge Cinemas in Montclair, NJ (6 screens), the Manhasset Cinemas in North
Hempstead, NY (3 screens), the Babylon Cinemas in Babylon, NY (3 screens), the
Cobble Hill Cinemas in Brooklyn, NY (5 screens) (the 'Cobble Hill Acquisition'),
the Headquarters 10
4
<PAGE>
Cinemas in Morristown, NJ (10 screens) (the 'AMC Acquisition') the Great Neck
Squire Cinemas in Great Neck, NY (7 screens), and the Franklin Square Cinemas in
Franklin Square, NY (6 screens) (together, the 'Great Neck/Franklin Square
Acquisition', and, collectively, the '1998 Acquisitions').
PENDING ACQUISITIONS
The Company has entered into agreements to purchase, for an aggregate of
$1.5 million in cash, the Colony Cinemas in Livingston, NJ (3 screens), and the
West Milford Cinemas in West Milford, NJ (4 screens) (collectively, the 'Pending
Acquisitions'). As of June 30, 1998, after giving effect to the Pending
Acquisitions, the Company would have had 42 theaters with a total of 200
screens. There can be no assurance that the Pending Acquisitions will be
completed, or, if completed, will prove profitable.
Clearview has financed all of its completed acquisitions through a
combination of borrowings under the Old Credit Facility (as defined), the
issuance of subordinated promissory notes, Class B Preferred Stock and Common
Stock, and the net proceeds from its initial public offering of Common Stock in
August 1997 (the 'Common Stock Offering'), its sale of the Class C Preferred
Stock in April 1998 and its offering of the Old Notes in June 1998 (the 'Notes
Offering'). See the Company's consolidated financial statements and the notes
thereto included elsewhere in this Prospectus and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'
RECENT FINANCING TRANSACTIONS
In August 1997, the Company completed the Common Stock Offering for $7.1
million in aggregate net proceeds. In late 1997 and early 1998, the Company
amended its Credit Agreement with The Provident Bank (as amended, the 'Old
Credit Facility') to, among other things, increase availability under the Term
Loans (as defined) from $11.2 million to $40.8 million, substantially all of
which was used to fund in part the acquisition of additional theaters. In April
1998, the Company completed the sale of the Class C Preferred Stock to Marshall
Capital Management, Inc. for aggregate consideration of approximately $3.0
million. See 'Capitalization' and 'Description of Capital Stock--Class C
Preferred Stock'. Additionally, in June 1998 the Company completed the Notes
Offering for $80,000,000 in gross proceeds before fees and expenses. Concurrent
with the closing of the Notes Offering the Company repaid the Old Credit
Facility and entered into the New Credit Facility (as defined) with The
Provident Bank, which provides for a secured revolving line of credit in the
aggregate principal amount of $15.0 million. See 'Description of New Credit
Facility.'
References in this Prospectus to the 'Transactions' are to (i) the Notes
Offering and the application of the net proceeds therefrom (including the AMC
Acquisition, the Great Neck/Franklin Square Acquisition and the Pending
Acquisitions); (ii) the issuance of the Class C Preferred Stock; and (iii) the
issuance of shares of Common Stock in connection with the acquisition of the
leasehold interest and related construction permit for a new theater in
Mansfield Township, New Jersey (the 'Mansfield Theater'). The net proceeds from
the sale of the Notes have been used to repay the amount outstanding under the
Old Credit Facility of $40.2 million along with a prepayment premium of
approximately $400,000 and accrued interest of approximately $470,000; to repay
other outstanding indebtedness of approximately $6.3 million; to repurchase 600
shares of the outstanding Class B Preferred Stock for approximately $600,000; to
pay issuance costs on the New Credit Facility of approximately $155,000; to fund
the aggregate purchase price for the AMC Acquisition and the Great Neck/Franklin
Square Acquisition of approximately $9.3 million; to purchase the fee real
estate interest in a property the Company had been operating under lease for
approximately $700,000; to fund the $400,000 in construction costs to date of
the Mansfield Theater; and to pay $3.6 million in fees and expenses of the Notes
Offering. The remaining net proceeds will be used to fund the $1.5 million
purchase price of the Pending Acquisitions; to fund a $750,000 escrow account in
connection with the acquisition of the CJM Theaters; to purchase for $1.15
million the fee real estate interest in a property the Company is currently
operating under lease; to repurchase the remaining 750 shares of outstanding
Class B Preferred Stock of approximately $750,000; to fund the $2.7 million
remainder of the estimated construction cost of the Mansfield Theater; to pay
the remaining fees and expenses of the Notes Offering; and for working capital,
capital expenditures and general corporate purposes, including the buildout of
additional screens at existing theaters, new theater developments and possible
additional theater acquisitions. See 'Business--New Theater Expansion and
Development.'
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................ The Company is offering to exchange pursuant to the Exchange Offer an
aggregate principal amount of up to $80,000,000 of New Notes for a
like principal amount of the Old Notes. The Company will issue the
New Notes on or promptly after the Exchange Date. As of the date of
this Prospectus, $80,000,000 aggregate principal amount of the Old
Notes is outstanding. The terms of the New Notes are identical in all
material respects to the terms of the Old Notes for which they may be
exchanged pursuant to this offer, except for certain transfer
restrictions, registration rights and terms providing for an increase
in the interest rate on the Old Notes under certain circumstances
relating to the registration rights. The New Notes will evidence the
same debt as the Old Notes and will be issued under and be entitled
to the same benefits under the Indenture as the Old Notes. The
issuance of the New Notes and the Exchange Offer are intended to
satisfy certain obligations of the Company under the Registration
Rights Agreement. See 'The Exchange Offer' and 'Description of
Notes.'
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time on
____________, 1998, unless extended by the Company in its sole
discretion (in which case the Expiration Date will be the latest date
and time to which the Exchange Offer is extended). See 'The Exchange
Offer--Expiration Date; Extensions; Amendments.'
Exchange Date............................. The date of acceptance for exchange of the Old Notes and the
consummation of the Exchange Offer will be the first business day
following the Expiration Date unless extended. See 'The Exchange
Offer--Terms of the Exchange.'
Conditions of the Exchange Offer.......... The Company's obligation to consummate the Exchange Offer will be
subject to certain conditions. See 'The Exchange Offer-- Conditions
to the Exchange Offer.' The Company reserves the right to terminate
or amend the Exchange Offer at any time prior to the Expiration Date.
Withdrawal Rights......................... Tenders may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date; otherwise, all tenders will be
irrevocable. See 'The Exchange Offer--Withdrawal of Tenders.'
Procedures For Tendering Old Notes........ See 'The Exchange Offer--Procedures for Tendering.'
U.S. Federal Income Tax Consequences...... The exchange of Old Notes for New Notes pursuant to the Exchange
Offer will not result in any income, gain or loss to holders who
participate in the Exchange Offer or to the Company for U.S. federal
income tax purposes. See 'Certain United States Federal Income Tax
Consequences.'
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Resales of New Notes...................... The Company is making the Exchange Offer in reliance on the position
of the staff of the Commission as set forth in certain no-action
letters addressed to other parties in other transactions. However,
the Company has not sought its own no-action letter, and there can be
no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Based on these interpretations by the staff of the
Commission, the Company believes that New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof other
than (i) a broker-dealer who purchased such Old Notes directly from
the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an
'affiliate' (as defined in Rule 405 of the Securities Act) of the
Company without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any persons to participate, in the distribution of
such New Notes. Holders of Old Notes accepting the Exchange Offer
will represent to the Company in the Letter of Transmittal that such
conditions have been met. Any holder who participates in the Exchange
Offer for the purpose of participating in a distribution of the New
Notes may not rely on the position of the staff of the Commission as
set forth in these no-action letters and would have to comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. A
secondary resale transaction in the United States by a holder who is
using the Exchange Offer to participate in the distribution of New
Notes must be covered by a registration statement containing the
selling securityholder information required by applicable regulations
promulgated under the Securities Act. Each broker-dealer (other than
an 'affiliate' of the Company) that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
acquired the Old Notes as the result of market-making activities or
other trading activities and will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter'
within the meaning of the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other
trading activities. In addition, pursuant to Section 4(3) under the
Securities Act, until _____________, all dealers effecting
transactions in the New Notes, whether or not participating in the
Exchange Offer, may be required to deliver a Prospectus. The Company
has agreed that, for a period of 90 days after the date of this
Prospectus, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See 'Plan
of Distribution.' Any broker-dealer who is an affiliate of the
Company may not rely on such no-action letters and must comply with
the registration and prospectus delivery
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
requirements of the Securities Act in connection with any secondary
resale transaction. See 'The Exchange Offer--Purpose of the Exchange
Offer.'
Consequences of Failure to Tender Old
Notes................................... Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer or whose Old Notes are not accepted for exchange will
continue to hold such Old Notes and will be entitled to all the
rights and preferences, and will be subject to the limitations,
applicable thereto under the Indenture. All untendered and tendered
but unaccepted Old Notes (collectively, the 'Remaining Old Notes')
will continue to bear legends restricting their transfer. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
securities laws. To the extent that the Exchange Offer is effected,
the trading market, if any, for Remaining Old Notes could be
adversely affected. See 'Risk Factors--Consequences of Failure to
Properly Tender Old Notes Pursuant to the Exchange Offer' and 'The
Exchange Offer--Terms of the Exchange.'
Exchange Agent............................ The exchange agent with respect to the Exchange Offer is The Bank of
New York (the 'Exchange Agent'). The address and telephone number of
the Exchange Agent are set forth in 'The Exchange Offer--Exchange
Agent.'
Use of Proceeds........................... There will be no proceeds to the Company from the exchange pursuant
to the Exchange Offer. See 'Use of Proceeds.'
THE NEW NOTES
Securities Offered........................ $80,000,000 in aggregate principal amount of 10 7/8% Senior Notes due
2008 that have been registered under the Securities Act.
Maturity Date............................. June 12, 2008.
Interest Rate............................. 10.875% per annum.
Interest Payment Dates.................... Interest will accrue from the most recent date to which interest has
been paid or duly provided for on the Old Notes surrendered in
exchange for such New Notes or, if no such interest has been paid or
duly provided for on such Old Notes, from June 12, 1998, the date of
issuance of the Old Notes, and will be payable semiannually on each
June 1 and December 1, commencing December 1, 1998.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Optional Redemption....................... New Notes will be redeemable at the option of the Company, in whole
or in part, at any time after June 1, 2003, at the redemption prices
set forth herein, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption. In addition, at
any time prior to June 1, 2001, the Company may redeem up to 33% of
the aggregate principal amount of the Notes at a redemption price of
110.875% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds from one or more public equity
offerings or Strategic Equity Investments; provided that at least
$53.3 million of the aggregate principal amount of Notes remains
outstanding immediately after the occurrence of each such redemption.
See 'Description of Notes-- Optional Redemption.'
Ranking................................... The New Notes will be general unsecured obligations of the Company,
ranking pari passu in right of payment with all future senior
indebtedness of the Company. The New Notes will be effectively
subordinated to all senior secured indebtedness of the Company to the
extent of such security, including indebtedness under the New Credit
Facility, which provides for up to $15.0 million of revolving credit
loans guaranteed by the Company's subsidiaries and secured by
substantially all of the assets of the Company. As of March 31, 1998,
on a pro forma basis, after giving effect to the Transactions, the
Company would have had $80.0 million of indebtedness outstanding, all
of which would have been represented by the Notes. The operations of
the Company are conducted through its subsidiaries. The New Notes are
unconditionally guaranteed, jointly and severally, by the Subsidiary
Guarantees. The Subsidiary Guarantees are general, unsecured
obligations of the Subsidiary Guarantors and rank pari passu in right
of payment with all current and future senior indebtedness of the
Subsidiary Guarantors. As of March 31, 1998, on a pro forma basis
after giving effect to the Transactions, the Subsidiary Guarantors
would have had no indebtedness outstanding other than the Subsidiary
Guarantees of the Notes and approximately $39,000 of capital leases.
See 'Capitalization' and 'Description of New Credit Facility.'
Subsidiary Guarantees..................... The New Notes will be unconditionally guaranteed, jointly and
severally, by the Subsidiary Guarantors. The Subsidiary Guarantees
will be general, unsecured obligations of the Subsidiary Guarantors
and will rank pari passu in right of payment with all current and
future senior indebtedness of the Subsidiary Guarantors. As of March
31, 1998, on a pro forma basis after giving effect to the
Transactions, the Subsidiary Guarantors would have had no
indebtedness outstanding other than the Subsidiary Guarantees of the
Notes and approximately $39,000 of capital leases. The Subsidiary
Guarantors will also guarantee, on a senior secured basis, all
borrowings by the Company under the New Credit Facility. See
'Description of Notes--Subsidiary Guarantees.'
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Change of Control......................... Upon the occurrence of a Change of Control, each holder of New Notes
will have the right to require the Company to repurchase all or any
part of such holders' New Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of purchase. See
'Description of Notes--Repurchase at the Option of Holders-- Change
of Control.'
Certain Covenants......................... The Indenture pursuant to which the Old Notes were issued and the New
Notes will be issued (the 'Indenture') contains certain covenants
that, among other things, limit the ability of the Company and its
Restricted Subsidiaries (as defined) to (i) incur additional
indebtedness and issue preferred stock, (ii) pay dividends or make
certain other restricted payments, (iii) enter into transactions with
affiliates, (iv) make certain asset dispositions, (v) merge or
consolidate with, or transfer substantially all its assets to,
another person, (vi) encumber assets under certain circumstances,
(vii) restrict dividends and other payments from Restricted
Subsidiaries and (viii) engage in certain business activities. See
'Description of Notes--Certain Covenants.' In addition, under certain
circumstances, the Company will be required to offer to purchase the
New Notes at a price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase with the proceeds of certain Asset Sales
(as defined). See 'Description of Notes--Repurchase at the Option of
Holders--Asset Sales.'
</TABLE>
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary financial data should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' 'Unaudited Pro Forma Combined Financial Information,' and the
historical consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. The summary historical financial data
for the year ended December 31, 1997 presented below are derived from the
Company's consolidated financial statements audited by PricewaterhouseCoopers
LLP, independent accountants, whose report covering the Company's consolidated
financial statements as of December 31, 1997 and for the year then ended and the
related financial statements are included elsewhere herein. The summary
historical financial data for the years ended December 31, 1996 and 1995
presented below are derived from the Company's consolidated financial statements
audited by Wiss & Company, LLP, independent accountants, whose report covering
the Company's consolidated financial statements as of December 31, 1996 and 1995
and for the years then ended and the related financial statements are included
elsewhere herein. The summary pro forma combined financial data presented below
are derived from the unaudited pro forma combined financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------- ----------------------------------------
HISTORICAL PRO FORMA(2) HISTORICAL PRO FORMA(2)
------------------------------------ ------------ ------------------------- ------------
1995 1996(1) 1997(1) 1997 1997 1998 1998
-------- ---------- ---------- ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Theater revenues:
Box office.................. $ 1,759 $ 6,195 $ 12,926 $ 35,095 $ 2,712 $ 7,077 $ 8,743
Concession.................. 555 1,861 3,914 11,315 744 2,284 2,828
Other....................... 31 142 422 1,175 49 320 333
-------- ---------- ---------- ------------ ----------- ----------- ------------
2,345 8,198 17,262 47,585 3,505 9,681 11,904
-------- ---------- ---------- ------------ ----------- ----------- ------------
Operating expenses:
Film rental and booking
fees...................... 824 3,022 6,168 15,874 1,196 3,060 3,782
Cost of concession sales.... 99 279 635 1,860 108 357 444
Theater operating
expenses.................. 1,078 3,298 6,591 17,843 1,227 3,455 4,372
General and administrative
expenses.................. 375 590 1,131 2,805 192 1,010 1,010
Depreciation and
amortization.............. 100 635 2,051 5,866 413 1,263 1,516
-------- ---------- ---------- ------------ ----------- ----------- ------------
2,476 7,824 16,576 44,248 3,136 9,145 11,124
-------- ---------- ---------- ------------ ----------- ----------- ------------
Operating income (loss)....... (131) 374 686 3,337 369 536 780
Interest expense(3)........... 85 592 2,015 7,707 358 1,161 1,876
-------- ---------- ---------- ------------ ----------- ----------- ------------
Net income (loss)............. $ (216) $ (218) $ (1,329) $ (4,370) $ 11 $ (625 ) $ (1,096)
-------- ---------- ---------- ------------ ----------- ----------- ------------
-------- ---------- ---------- ------------ ----------- ----------- ------------
Basic and diluted income
(loss) per share............ $ (.36) $ (.29) $ (1.03) $ (2.72) $ .01 $ (.30 ) $ (.49)
-------- ---------- ---------- ------------ ----------- ----------- ------------
-------- ---------- ---------- ------------ ----------- ----------- ------------
OPERATING DATA:
Box office margin(4).......... 53.2% 51.2% 52.3% 54.8% 55.9% 56.8 % 56.7%
Concession margin(5).......... 82.2% 85.0% 83.8% 83.6% 85.5% 84.4 % 84.3%
Number of theaters............ 7 16 31 42 16 37 42
Number of screens............. 21 60 148 200 60 169 200
Attendance.................... 315,406 1,167,409 2,322,063 480,529 1,278,273
Average ticket price(6)....... $ 5.58 $ 5.31 $ 5.57 $ 5.64 $ 5.54
Average concession revenue per
patron(7)................... $ 1.76 $ 1.59 $ 1.69 $ 1.55 $ 1.79
OTHER DATA:
Theater level cash flow(8).... $ 344 $ 1,599 $ 3,868 $ 12,008 $ 974 $ 2,809 $ 3,306
Theater level cash flow
margin(9)................... 14.7% 19.5% 22.4% 25.2% 27.8% 29.0 % 27.8%
EBITDA(10).................... $ (31) $ 1,009 $ 2,737 $ 9,203 $ 782 $ 1,799 $ 2,296
EBITDA margin(11)............. (1.3)% 12.3% 15.9% 19.3% 22.3% 18.6 % 19.3%
Capital expenditures(12)...... $ 631 $ 318 $ 3,486 $ 305 $ 765
Ratios of:
EBITDA to cash interest
expense(13)............... 1.3x 1.3x
Net debt to EBITDA(14)...... 6.6x
Earnings to fixed charges... --(15) --(15)
<PAGE>
CASH FLOWS FROM:
Operating activities.......... $ 119 $ 1,147 $ 3,934 $ 780 $ 1,175
Investing activities.......... (1,239) (7,295) (33,647) (399) (6,604 )
Financing activities.......... 853 6,723 30,608 299 5,252
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------
HISTORICAL PRO FORMA(2)
----------- ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 1,470 $ 19,238
Total assets............................................................... 63,408 97,610
Total long-term debt, including current maturities......................... 46,903 80,039
Redeemable preferred stock................................................. 1,350
Total stockholders' equity................................................. 9,873 10,295
</TABLE>
- ------------------
(1) See Note 2 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. for the year ended December 31, 1997 with respect to its
acquisitions in 1996 and 1997.
(2) For a discussion of assumptions and adjustments underlying the unaudited pro
forma combined financial information, see 'Unaudited Pro Forma Combined
Financial Information.'
(3) See Note 11 of the Notes to Unaudited Pro Forma Combined Statement of
Operations for the year ended December 31, 1997 and Note 8 of the Notes to
Unaudited Pro Forma Combined Statement of Operations for the quarter ended
March 31, 1998 for pro forma interest expense and pro forma cash interest
expense calculations.
(4) Box office margin represents total box office revenues less film rental and
booking fees divided by total box office revenues.
(5) Concession margin represents total concession revenues less cost of
concession sales divided by total concession revenues.
(6) Average ticket price represents total box office revenue divided by
attendance.
(7) Average concession revenue per patron represents concession revenue divided
by attendance.
(8) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concession sales and theater operating expenses.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, 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.
(9) Theater level cash flow margin represents theater level cash flow divided by
total revenues.
(10) Earnings before interest, taxes, depreciation and amortization ('EBITDA')
is a financial measure commonly used in the Company's industry. Although it
is not a measure of performance calculated in accordance with generally
accepted accounting principles, EBITDA is presented 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.
(11) EBITDA margin represents EBITDA divided by total revenues.
(12) Capital expenditures represent purchase of property, equipment and
leasehold improvements, excluding acquisitions. For the year ended December
31, 1997, capital expenditures included (a) construction of a new theater
in an existing building in Summit, NJ and the addition of four screens to
an existing theater in Chester, NJ; (b) upgrades to Clearview's existing
theaters and to theaters included in the 1997 Acquisitions; and (c)
replacement capital expenditures. For the quarter ended March 31, 1998,
capital expenditures included (a) upgrades to theaters included in the 1997
Acquisitions; (b) additional improvements to the Summit, NJ theater; (c)
furniture and equipment for the Company's expanded corporate offices; and
(d) replacement capital expenditures.
(13) EBITDA to cash interest expense represents EBITDA divided by interest
expense less non-cash amortization of debt issuance costs and discounts.
Non-cash amortization of debt issuance costs and discounts for the year
ended December 31, 1997 and the three month period ended March 31, 1998 on
a pro forma basis would have been $370,000 and $93,000, respectively. For
the pro forma cash interest expense for the periods ended December 31, 1997
and March 31, 1998, pro forma interest expense has been calculated using a
rate of interest on the Notes of 10.875% per annum. See Note 11 of the
Notes to Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1997 and Note 8 of the Notes to Unaudited Pro Forma
Combined Statement of Operations for the quarter ended March 31, 1998 for
pro forma interest expense and pro forma cash interest expense
calculations.
(14) Net debt to EBITDA represents total debt (including redeemable securities)
less cash and cash equivalents divided by EBITDA.
(15) The ratio of earnings to fixed charges is computed by dividing operating
income (loss) before fixed charges by fixed charges. Fixed charges is
calculated as interest expense, including capitalized interest, plus one
third of rental expense. Management believes one third of rental expense
represents an appropriate portion representative of the interest factor.
Earnings were insufficient to cover fixed charges for the historical and
pro forma years ended December 31, 1997 by $1,369,868 and $4,410,579,
respectively.
12
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the risk factors set forth
below, as well as the other information appearing in this Prospectus, before
making any investment in the New Notes.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES PURSUANT TO THE EXCHANGE
OFFER
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the Company
for exchange, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Registration Rights Agreement will terminate. See 'Description of
Notes--Registration Rights; Liquidated Damages.'
Remaining Old Notes will continue to be subject to the following
restrictions on transfer: (i) the Remaining Old Notes may be resold only if
registered pursuant to the Securities Act, if any exemption from registration is
available thereunder, or if neither such registration nor such exemption is
required by law, and (ii) the Remaining Old Notes will bear a legend restricting
transfer in the absence of registration or an exemption therefrom. The Company
does not currently anticipate that it will register the Old Notes under the
Securities Act. To the extent that Old Notes are tendered and accepted in
connection with the Exchange Offer, any trading market for Remaining Old Notes
could be adversely affected.
SUBSTANTIAL LEVERAGE; RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S
INDEBTEDNESS
The Company is, and will continue after the Exchange Offer to be, highly
leveraged. As of March 31, 1998, on a pro forma basis after giving effect to the
Transactions, the Company would have had total consolidated indebtedness of
approximately $80.0 million and total stockholders' equity of approximately
$10.3 million. For the year ended December 31, 1997, on a pro forma basis after
giving effect to the 1997 Acquisitions, the 1998 Acquisitions and the Pending
Acquisitions, the Company's earnings would have been insufficient to cover fixed
charges by $4,410,579. For the quarter ended March 31, 1998, on a pro forma
basis after giving effect to the 1998 Acquisitions, other than the Cobble Hill
Acquisition, and the Pending Acquisitions, earnings would have been insufficient
to cover fixed charges by $1,096,283. Clearview and its subsidiaries will be
permitted to incur additional indebtedness in the future, including up to $15.0
million under the New Credit Facility. See 'Capitalization,' 'Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources,' 'Description of New Credit Facility' and
'Description of Notes.'
The degree to which the Company is leveraged could have important
consequences to holders of the New Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with respect
to the Notes, (ii) increasing the Company's vulnerability to general adverse
economic and industry conditions, (iii) limiting the Company's ability to obtain
additional financing to fund future working capital, acquisitions, capital
expenditures and other general corporate requirements, (iv) requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital,
acquisitions, capital expenditures or other general corporate purposes, (v)
limiting the Company's flexibility in planning for, or reacting to, changes in
its business and the industry and (vi) placing the Company at a competitive
disadvantage compared to less leveraged competitors. In addition, the degree to
which the Company is leveraged could prevent it from repurchasing all of the
Notes tendered to it upon the occurrence of a Change of Control. See
'--Repurchase of the Notes Upon a Change of Control,' 'Description of New Credit
Facility' and 'Description of Notes--Repurchase at the Option of Holders--Change
of Control.'
The Company's ability to make scheduled payments of principal of, or to pay
interest on, its debt obligations, and its ability to refinance any such debt
obligations (including the Notes), or to fund acquisitions or planned capital
expenditures, will depend on its future performance, which, to a certain extent,
is subject to
13
<PAGE>
general economic, financial, competitive, regulatory and other factors that are
beyond its control. The Company's growth strategy contemplates substantial
expansion of its theaters and screens. Based on the Company's current operations
and anticipated revenue growth, management believes that cash flow from
operations and other available cash, including available borrowings under the
New Credit Facility, will be sufficient to fund the Company's growth strategy
through at least the end of 1998. Thereafter, however, or in the event the
Company exceeds its currently anticipated expansion plans, the Company
anticipates that it will need to seek additional equity or debt financing to
fund its growth strategy. Failure to obtain any such financing could have a
material adverse effect on the Company's ability to achieve its growth strategy.
In addition, the Company may need to refinance all or a portion of its
indebtedness (including the Notes) on or prior to its scheduled maturity. There
can be no assurance that the Company will generate sufficient cash flow from
operations in the future, that anticipated revenue growth will be realized or
that future borrowings, equity contributions or loans from affiliates will be
available in an amount sufficient to service its indebtedness, fund acquisitions
and make anticipated capital expenditures. In addition, there can be no
assurance that the Company will be able to effect any required refinancings of
its indebtedness (including the Notes) on commercially reasonable terms or at
all. See '--Expansion Plans' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
The Indenture and the New Credit Facility contain numerous restrictive
covenants, including but not limited to covenants that restrict the Company's
ability to incur indebtedness, pay dividends, create liens, sell assets and
engage in certain mergers and acquisitions. In addition, the New Credit Facility
requires the Company to maintain certain financial ratios. The ability of the
Company to comply with the covenants and other terms of the New Credit Facility
and the Indenture and to satisfy its respective debt obligations (including,
without limitation, borrowings and other obligations under the New Credit
Facility) will depend on the future operating performance of the Company. In the
event the Company fails to comply with the various covenants contained in the
New Credit Facility or the Indenture, as applicable, it would be in default
thereunder, and in any such case, the maturity of substantially all of its
long-term indebtedness could be accelerated. A default under the Indenture would
also constitute an event of default under the New Credit Facility. See
'Description of New Credit Facility' and 'Description of Notes.'
RANKING OF THE NOTES; ASSET ENCUMBRANCES
The Notes represent general unsecured obligations of the Company and will
rank pari passu in right of payment with all future senior indebtedness of the
Company. The Notes will be effectively subordinated to all senior secured
indebtedness of the Company to the extent of such security, including
indebtedness under the New Credit Facility, which provides for revolving credit
borrowings of up to $15.0 million. The Company's obligations under the New
Credit Facility are secured by a pledge of substantially all of the capital
stock of the Company's subsidiaries, and the tangible and intangible assets of
the Company and its subsidiaries. If the Company becomes insolvent or is
liquidated, or if payment under the New Credit Facility is accelerated, the
lenders under the New Credit Facility will be entitled to exercise the remedies
available to a secured lender under applicable law pursuant to the New Credit
Facility. Accordingly, such lenders will have a prior claim with respect to such
assets. Further, to the extent the Company is permitted under the Indenture to
incur indebtedness in excess of $15.0 million under the New Credit Facility or
any refinancing or replacement thereof, the Indenture would permit such
additional borrowings to be secured. The Subsidiary Guarantees also will be
effectively subordinated to all senior secured indebtedness of the Subsidiary
Guarantors to the extent of such security, including the guarantees by such
Subsidiary Guarantors of indebtedness of the Company under the New Credit
Facility. See 'Capitalization,' 'Description of New Credit Facility' and
'Description of Notes.'
LIMITED OPERATING HISTORY AND RESULTS; NET LOSSES
The Company was incorporated on November 23, 1994 and acquired the
leaseholds of four theaters with eight screens on December 21, 1994. Since May
1996, the Company has acquired the leaseholds of 26 theaters, acquired eight
theaters with the underlying real estate, entered into operating agreements for
five theaters and developed one theater resulting in a total of 193 screens in
operation as of June 30, 1998. As a result of this rapid growth in the number of
screens operated, the Company has a limited combined operating history. In
addition, the Company had net losses of $216,316, $218,328 and $1,328,938 for
the years ended December 31, 1995, 1996
14
<PAGE>
and 1997, respectively, and net income of $10,622 and a net loss of $625,283 for
the quarters ended March 31, 1997 and 1998, respectively. For the year ended
December 31, 1997, on a pro forma basis after giving effect to the 1997
Acquisitions, 1998 Acquisitions and the Pending Acquisitions, the Company would
have had a net loss of $4,369,954. For the three months ended March 31, 1998, on
a pro forma basis after giving effect to the 1998 Acquisitions, other than the
Cobble Hill Acquisition, and the Pending Acquisitions, the Company would have
had a net loss of $1,095,520. There can be no assurance that the Company will
generate net income in the future. See 'Unaudited Pro Forma Combined Financial
Data,' 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' and the Company's consolidated financial statements, including
the notes thereto, appearing elsewhere in this Prospectus.
EXPANSION PLANS
The Company's growth strategy is to acquire or develop theaters and add
screens to its existing 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
assurance that the Company will be able to execute this strategy or to operate
profitably the theaters that it develops or acquires. See 'Business--Operating
Strategy' and '--Growth Strategy.'
Need For Additional Financing. Clearview intends to continue to acquire
theaters and is pursuing the acquisition of additional locations. Based on the
Company's current operations and anticipated revenue growth, management believes
that cash flow from operations and other available cash, including available
borrowings under the New Credit Facility, will be sufficient to fund the
Company's growth strategy through at least the end of 1998. Thereafter, however,
or in the event the Company exceeds its currently anticipated expansion plans,
the Company anticipates that it will need to seek additional equity or debt
financing to fund its growth strategy. Failure to obtain any such financing
could have a material adverse effect on the Company's ability to achieve its
growth strategy. 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
flows after any such acquisition or development. There can be no assurance 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 growth strategy is dependent on its ability to acquire
or develop theaters in favorable locations, with advantageous lease terms in the
case of leased locations. There can be no assurance that the Company will be
able to locate or develop theaters in appropriate communities or, if it does
locate any such theaters, purchase or lease them on favorable terms. The failure
of the Company to acquire or develop theaters in favorable locations or to
purchase or lease theaters on advantageous terms could result in an inability to
achieve the objectives of its growth strategy.
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 most 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 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, increases in the costs of labor and materials and adverse changes in
financial and economic conditions generally. There can be no assurance that any
such theater development or renovation will be successfully completed in a
timely manner.
15
<PAGE>
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 assurance 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 $2.5
million on the life of Mr. Mayo. See 'Management.'
GEOGRAPHIC CONCENTRATION
Each of the Company's current theaters is presently located in the New
York/New Jersey metropolitan area and the theaters that it has agreed to or is
contemplating acquiring or developing are principally in the same area. As a
result, negative economic or demographic changes in that area could 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, which Mr. Marks would
be entitled to share, from the owner of that theater, or Mr. Marks personally
may be entitled to a commission directly from the owner. In connection with
Clearview's acquisition of the UA I Theaters in September 1997, First New York
and Mr. Marks received approximately $259,500 and $77,850, respectively. In
connection with Clearview's acquisitions of a three-screen theater in Roslyn,
New York, the CJM Theaters, the Nelson Ferman Theaters, a six-screen theater in
Montclair, New Jersey, two three-screen theaters in Manhasset and Babylon, New
York, the Cobble Hill Acquisition and the Great Neck/Franklin Square
Acquisition, Mr. Marks received fees of approximately $100,200 in the aggregate.
In addition, in connection with the Company's lease of office space in Chatham,
New Jersey, Mr. Marks received a fee of approximately $5,000. 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 or increase in popularity 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.'
16
<PAGE>
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 23% of the Company's revenues
in each of the years ended December 31, 1996 and 1997. Accordingly, the
financial success of the Company depends, to a significant extent, on its
ability to successfully generate concession sales in the future. See
'Business--Concessions.'
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. Thus, the
motion picture exhibition industry's revenues are seasonal, although 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 may not
necessarily be 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.'
OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL STOCKHOLDERS
As of June 30, 1998, the directors and executive officers of the Company
(the 'Senior Management') collectively beneficially own approximately 58.5% of
the outstanding Common Stock assuming the conversion of the outstanding shares
of Class A Preferred Stock (as defined) (approximately 55.2% of the Common Stock
assuming the additional conversion of the outstanding shares of Class C
Preferred Stock), including approximately 24.3% of the outstanding Common Stock
which is subject to voting trusts for which Mr. Mayo is the trustee. As a result
of this ownership, if the directors and executive officers as a group 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. See 'Management' and 'Principal
Stockholders.'
RISK OF FRAUDULENT CONVEYANCE LIABILITY
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness and other obligations in connection with
the Notes Offering, including the issuance of the Notes. If a court were to find
in a lawsuit by an unpaid creditor or representative of creditors of the Company
that the Company did not receive fair consideration or reasonably equivalent
value for incurring such indebtedness or obligation and, at the time of such
incurrence, the Company (i) was insolvent; (ii) was rendered insolvent by reason
of such incurrence; (iii) was engaged in a business or transaction for which the
assets remaining in the Company constituted unreasonably small capital; or (iv)
intended to incur or believed it would incur obligations beyond its ability to
pay such obligations as they mature, such court, subject to applicable statutes
of limitation, could determine to invalidate, in whole or in part, such
indebtedness and obligations as fraudulent conveyances or subordinate such
indebtedness and obligations to existing or future creditors of the Company.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction which is being applied. Generally, however, the
Company would be considered insolvent at a particular time if the sum of its
debts was then greater than all of its property at a fair valuation or if the
present fair saleable value of its assets was then less than the amount that
would be required to pay its probable liabilities on its existing debts as they
become absolute and matured. On the basis of its historical financial
information, its recent operating history as discussed in 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
other factors, the Company's management believes that, after giving effect to
the Notes Offering, the Company was not rendered insolvent, it has sufficient
capital for the businesses in which it will be
17
<PAGE>
engaged and it will be able to pay its debts as they mature. However, management
has not obtained any independent opinion regarding such issues. There can be no
assurance as to what standard a court would apply in making such determinations.
In addition, the Subsidiary Guarantees may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
any of the Subsidiary Guarantors. In such a case, the analysis set forth above
would generally apply, except that the Subsidiary Guarantees could also be
subject to the claim that, since the Subsidiary Guarantees were incurred for the
benefit of the Company (and only indirectly for the benefit of the Subsidiary
Guarantors), the obligations of the Subsidiary Guarantors thereunder were
incurred for less than reasonably equivalent value or fair consideration. A
court could avoid a Subsidiary Guarantor's obligation under its Subsidiary
Guarantee, subordinate the Subsidiary Guarantee to other indebtedness of a
Subsidiary Guarantor or take other action detrimental to the holders of the
Notes.
REPURCHASE OF THE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the holders of the Notes will have the right to
require Clearview to repurchase such holders' Notes, in whole or in part, at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase. If a
Change of Control were to occur, Clearview might not have the financial
resources to repurchase all of the Notes and repay any other indebtedness that
would become payable upon the occurrence of such Change of Control. In
particular, a Change of Control may cause an acceleration of, or require the
repayment of loans under, the New Credit Facility, in which case such loans
would be required to be repaid in full prior to any repurchase of the Notes. The
inability to repay such indebtedness, if accelerated, and to purchase all of the
tendered Notes, would constitute an event of default under the Indenture. The
Change of Control purchase feature of the Notes may in certain circumstances
discourage or make more difficult a sale or takeover of the Company. See
'Description of Notes--Repurchase at the Option of Holders--Change of Control.'
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes will constitute a new class of securities with no established
trading market. The New Notes are expected to be eligible for trading in the
PORTAL market by 'qualified institutional buyers' ('QIBs'), as defined in Rule
144A under the Securities Act; however, there can be no assurance given as to
the liquidity of, or the trading market for, the New Notes, the ability of
holders of the New Notes to sell their New Notes or the price at which holders
would be able to sell their New Notes. The Company does not intend to list the
New Notes on any national securities exchange or to seek the admission thereof
to trading on the NASDAQ National Market System. Future trading prices of the
New Notes will depend on many factors, including, among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. The Initial Purchaser has advised the Company that it currently
intends to make a market in the New Notes. The Initial Purchaser is not
obligated to do so, however, and any market-making activities will be subject to
the limits imposed by the Securities Act and the Exchange Act, and may be
limited during the Exchange Offer and the pendency of any Shelf Registration
Statement.
YEAR 2000
The Company is currently evaluating the potential impact of the year 2000
on the electronic data processing and other information systems relevant to the
Company's business and is developing a plan to resolve this issue. The year 2000
issue is the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using '00' as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures. This issue creates risk for the Company from unforeseen problems in
its own computer systems and from third parties with whom the Company deals on
various transactions. Based on preliminary information, costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's results of operations, financial position or cash flows.
18
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement with the Initial Purchaser, pursuant to which the
Company agreed to use its best efforts to file with the Commission a
registration statement with respect to the exchange of the Old Notes for a
series of registered debt securities with terms identical in all material
respects to the terms of the Old Notes, except for certain transfer
restrictions, registration rights and terms providing for an increase in the
interest rate on the Old Notes under certain circumstances relating to the
registration rights.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in Exxon Capital Holdings Corp., SEC
No-Action Letter (April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action
Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2,
1993). However, the Company has not sought its own no-action letter, and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Based upon these interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof other than (i) a broker-dealer who purchased such Old Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an 'affiliate' (as
defined in Rule 405 of the Securities Act) of the Company without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes. Holders of Old Notes accepting the Exchange Offer will
represent to the Company in the Letter of Transmittal that such conditions have
been met. Any holder who participates in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may not rely on the position of
the staff of the Commission as set forth in these no-action letters and would
have to comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. A secondary
resale transaction in the United States by a holder who is using the Exchange
Offer to participate in the distribution of New Notes must be covered by a
registration statement containing the selling securityholder information
required by applicable regulations promulgated under the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes as a result
of market-making activities or other trading activities and will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Letter of
Transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. The Company has agreed that for a period of 90
days after the date of this Prospectus, it will make this Prospectus available
to broker-dealers for use in connection with any such resale. See 'Plan of
Distribution.'
Except as described above, this Prospectus may not be used for an offer to
resell, resale or other retransfer of New Notes.
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Old Notes are withdrawn in accordance with the
withdrawal rights specified in '--Withdrawal of Tenders', accept any and all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The date of acceptance for exchange of the Old Notes, and consummation of
the Exchange Offer, is the Exchange Date,
19
<PAGE>
which will be the first business day following the Expiration Date (unless
extended as described herein). The Company will issue, on or promptly after the
Exchange Date, an aggregate principal amount of up to $80,000,000 of New Notes
in exchange for a like principal amount of outstanding Old Notes tendered and
accepted in connection with the Exchange Offer. The New Notes issued in
connection with the Exchange Offer will be delivered on the earliest practicable
date following the Exchange Date. Holders may tender some or all of their Old
Notes in connection with the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions, registration
rights and terms providing for an increase in the interest rate on the Old Notes
under certain circumstances relating to the registration rights. The New Notes
will evidence the same debt as the Old Notes and will be issued under and be
entitled to the same benefits under the Indenture as the Old Notes. As of the
date of this Prospectus, $80,000,000 aggregate principal amount of the Old Notes
is outstanding.
In connection with the issuance of the Old Notes, the Company arranged for
the Old Notes originally purchased by qualified institutional buyers to be
issued and transferable in book-entry form through the facilities of The
Depository Trust Company ('DTC'), acting as depositary. Except as described
under 'Description of Notes--Book-Entry, Delivery and Form,' the New Notes will
be issued in the form of a global note registered in the name of DTC or its
nominee and each holder's interest therein will be transferable in book-entry
form through DTC. See 'Description of Notes--Book-Entry, Delivery and Form.'
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but
will be entitled to registration rights under the Registration Rights Agreement
only in limited circumstances.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See '--Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on
, 1998, unless extended by the Company in its sole discretion (in which
case the Expiration Date shall be the latest date and time to which the Exchange
Offer is extended).
The Company reserves the right, in its sole discretion (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Old Notes not previously accepted, if any
of the conditions set forth below under 'Conditions to the Exchange Offer' shall
not have been satisfied and shall not have been waived by the Company (if
permitted to be waived by the Company) and (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
20
<PAGE>
If the Company determines to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
INTEREST OF THE NEW NOTES
Each New Note will bear interest at the rate of 10 7/8% per annum from the
most recent date to which interest has been paid or duly provided for on the Old
Note surrendered in exchange for such New Note or, if no interest has been paid
or duly provided for on such Old Note, from June 12, 1998. Interest on the New
Notes will be payable semiannually on June 1 and December 1 of each year,
commencing on the first such date following the original issuance date of the
New Notes.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after such Interest
Payment Date or, if no such interest has been paid or duly provided for, from
and after June 12, 1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Old Notes for any New
Notes, and may terminate or amend the Exchange Offer before the acceptance of
any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable good faith judgment, would be expected
to impair the ability of the Company to proceed with the Exchange Offer, or
(b) any law, statute, rule or regulation is adopted or enacted, or any
existing law, statute, rule or regulation is interpreted by the Commission
or its staff, which, in the Company's reasonable good faith judgment, would
be expected to impair the ability of the Company to proceed with the
Exchange Offer.
If the Company determines in its reasonable good faith judgment that either
of the foregoing conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders who tendered such
Old Notes to withdraw their tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business days.
PROCEDURES FOR TENDERING
Only a holder of record of Old Notes on , 1998 may tender such Old
Notes in connection with the Exchange Offer. To tender in connection with the
Exchange Offer, a holder must complete, sign and date the Letter of Transmittal,
or a facsimile thereof, have the signatures thereon guaranteed if required by
the Letter of Transmittal and deliver such Letter of Transmittal or such
facsimile, together with the Old Notes (unless such tender is being effected
pursuant to the procedure for book-entry transfer described below) and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to
21
<PAGE>
and received or confirmed by the Exchange Agent at its addresses set forth under
the caption 'Exchange Agent,' below, prior to 5:00 p.m., New York City time, on
the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes should be sent to the Company. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the tenders for such holders.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivery of such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled 'Special Payment Instructions' or
'Special Delivery Instructions' on the Letter of Transmittal, or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an 'eligible guarantor institution' within the meaning of Rule
17Ad-15 under the Exchange Act (an 'Eligible Institution').
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed by such registered holder or accompanied by a properly completed bond
power, in each case signed or endorsed in blank by such registered holder as
such registered holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed or
endorsed by trustees, executors, administrators, guardians, attorney-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes whose acceptance by the Company would, in
the opinion of counsel to the Company, be unlawful. The Company also reserves
the right to waive any defects, irregularities or conditions of tender as to any
particular Old Notes either before or after the Expiration Date. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to request the Exchange Agent to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall have any duty or incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the
22
<PAGE>
tendering holders, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration date.
In addition, the Company reserves the right, as set forth above under the
caption 'Conditions to the Exchange Offer,' to terminate the Exchange Offer.
By tendering, each holder represents to the Company that, among other
things, the New Notes acquired in connection with the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an 'affiliate' (as defined in Rule 405 under the
Securities Act) of the Company. If the holder is a broker-dealer that will
receive New Notes for its own account in exchange of Old Notes, it will
acknowledge that it acquired such Old Notes as the result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. See 'Plan of Distribution.'
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or cannot
complete the procedure for book-entry transfer, prior to the Expiration Date,
may effect a tender of their Old Notes if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) together with the certificate or certificates
representing the Old Notes to be tendered in proper form for transfer (or
confirmation of a book-entry transfer into the Exchange Agent's account at
DTC of Old Notes delivered electronically) and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof) as well as the certificate or certificates representing
all tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in connection with the Exchange Offer, a
written facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person who deposited the Old Notes to be withdrawn (the
'Depositor'), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer
23
<PAGE>
and no New Notes will be issued with respect thereto unless Old Notes so
withdrawn are validly re-tendered. Any Old Notes which have been tendered but
which are not accepted for exchange or which are withdrawn will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under the caption 'Procedures for Tendering' at any time prior
to the Expiration Date.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance and requests for additional copies
of this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent address as follows:
<TABLE>
<S> <C> <C>
By Mail: By Facimile Transmission: By Hand:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street
Floor 7 East Confirm by Telephone: New York, New York 10286
New York, New York 10286 (212) 815-2791 Attention: Ground Level
Attention: Denise Robinson, By Overnight Delivery: Corporate Trust
Reorganization Section The Bank of New York Services Window
101 Barclay Street
Floor 7 East
New York, New York 10286
Attention: Denise Robinson,
Reorganization Section
</TABLE>
The Bank of New York also serves as Trustee under the Indenture.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company will pay certain other
expenses to be incurred in connection with the Exchange Offer, including the
fees and expenses of the Exchange Agent, accounting fees and certain legal fees.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if tendered Old Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendered holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. Any expenses of the
Exchange Offer that are paid by the Company will be amortized by the Company
over the term of the New Notes in accordance with generally accepted accounting
principles.
24
<PAGE>
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the
Company, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Registration Rights Agreement will terminate. See 'Description of
Notes--Registration Rights; Liquidated Damages.'
In the event the Exchange Offer is consummated, the Company will be
required to register the Remaining Old Notes only in limited circumstances.
Remaining Old Notes will continue to be subject to the following restrictions on
transfer: (i) the Remaining Old Notes may be resold only if registered pursuant
to the Securities Act, if any exemption from registration is available
thereunder, or if neither such registration nor such exemption is required by
law, and (ii) the Remaining Old Notes will bear a legend restricting transfer in
the absence of registration or an exemption therefrom. The Company does not
currently anticipate that it will register the Remaining Old Notes under the
Securities Act. To the extent that Old Notes are tendered and accepted in
connection with the Exchange Offer, any trading market for Remaining Old Notes
could be adversely affected.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as described in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the terms of which are identical in all material respects to
those of the New Notes, except for certain transfer restrictions, registration
rights and terms providing for an increase in the interest rate on the Old Notes
under certain circumstances relating to the registration rights. The Old Notes
surrendered in exchange for the New Notes will be retired and canceled and
cannot be reissued. Accordingly, the issuance of the New Notes will not result
in any change in indebtedness of the Company.
CAPITALIZATION
The following table sets forth as of March 31, 1998 the historical
capitalization of the Company and the capitalization of the Company as adjusted
to give effect to the Transactions. See 'Prospectus Summary--Recent Financing
Transactions.' The following table should be read in conjunction with 'Unaudited
Pro Forma Combined Financial Information', 'Management's Discussion and Analysis
of Financial Condition and Results
25
<PAGE>
of Operations' and the Company's consolidated financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. See also
'Business--Existing Theaters and Pending Acquisitions.'
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents, including escrow deposit(1)................................... $ 1,470 $19,238
---------- -----------
---------- -----------
Debt (including current maturities):
Senior credit facility(2)........................................................... $ 40,558
Senior Notes due 2008............................................................... $80,000
Subordinated notes payable.......................................................... 6,000
Note payable to bank................................................................ 305
Capital lease obligations........................................................... 39 39
Class B Redeemable Preferred Stock....................................................... 1,350
Stockholders' equity:
Undesignated Preferred Stock, 2,478,697 shares authorized; 2,475,697 shares
authorized on a pro forma basis....................................................
Class A Convertible Preferred Stock, par value $.01, 1,303 shares authorized, 779
shares issued and outstanding...................................................... -- --
Class C Convertible Preferred Stock, par value $.01, 3,000 shares authorized, issued
and outstanding on a pro forma basis(3)............................................ -- --
Common Stock, par value $.01, 10,000,000 shares authorized, 2,227,879 issued and
outstanding, 2,304,802 shares outstanding on a pro forma basis(4).................. 22 23
Additional paid-in-capital(3)(4).................................................... 12,415 18,636
Accumulated deficit(3)(5)........................................................... (2,564) (8,364)
---------- -----------
Total stockholders' equity........................................................ 9,873 10,295
---------- -----------
Total capitalization.............................................................. $ 58,125 $90,334
---------- -----------
---------- -----------
</TABLE>
- ------------------
(1) For a reconciliation of Historical and Pro Forma As Adjusted cash and cash
equivalents, see Note 1 of Notes to Unaudited Pro Forma Combined Balance
Sheet.
(2) Reflects the aggregate outstanding balance under the Old Credit Facility of
$40.8 million, net of debt discount of $242,000 related to a warrant issued
to The Provident Bank. The Company made a $600,000 payment of principal on
April 1, 1998 under the Old Credit Facility. The Company repaid all amounts
outstanding under the Old Credit Facility from the net proceeds of the Notes
Offering and currently has $15.0 million of availability under the New
Credit Facility.
(3) On April 23, 1998, the Company issued 3,000 shares of Class C Preferred
Stock to the Selling Stockholder for aggregate consideration of
approximately $3.0 million resulting in a non-cash preferred stock dividend
of $1.7 million which has been reflected in stockholders' equity. See Note 7
to Unaudited Pro Forma Combined Balance Sheet.
(4) On April 30, 1998, the Company acquired the leasehold interest and related
construction permit for the Mansfield Theater in exchange for the issuance
of approximately $1,548,000 in Common Stock (76,923 shares of Common Stock).
(5) In connection with the repayment of the Old Credit Facility, the Company was
required to pay a prepayment premium of $412,000. The prepayment premium,
taken together with the write-off of unamortized debt discount and debt
issuance costs of $242,000 and $1,439,000, respectively, will result in an
extraordinary loss of $2,093,000. In addition, interest expense on the
$14,658,000 of proceeds of the Notes Offering to be used for the
construction of the Mansfield Theater and for general corporate purposes,
has been reflected in stockholders' equity, but has not been included in the
pro forma combined statements of operations included elsewhere herein. Such
interest expense was $1,594,000 for the year ended December 31, 1997 and
$399,000 for the three month period ended March 31, 1998.
26
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information presents
the Pro Forma Combined Balance Sheet of the Company at March 31, 1998 and the
Pro Forma Combined Statements of Operations of the Company for the year ended
December 31, 1997 and the three months ended March 31, 1998.
The Unaudited Pro Forma Combined Balance Sheet is based on the historical
consolidated balance sheet of the Company as of March 31, 1998, which includes
the 1997 Acquisitions and the 1998 Acquisitions, and gives effect to the
Transactions as if they had been consummated at March 31, 1998.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1997 is based on the historical combined statements of operations
of the Company, the UA I Theaters, the CJM Theaters, the Nelson Ferman Theaters,
the Other 1997 Acquisitions, and the 1998 Acquisitions and gives effect to the
Transactions, the 1997 Acquisitions and the 1998 Acquisitions as if they had
been consummated at January 1, 1997.
The Unaudited Pro Forma Combined Statement of Operations for the three
months ended March 31, 1998 is based on the historical combined statements of
operations of the Company and the 1998 Acquisitions and gives effect to the
Transactions and the 1998 Acquisitions as if they had been consummated at
January 1, 1997.
In the opinion of the Company's management, all adjustments necessary to
present fairly such unaudited pro forma combined financial information have been
made.
The pro forma acquisition adjustments give effect to the acquisitions under
the purchase method of accounting and the assumptions and adjustments (which the
Company believes to be reasonable) described in the accompanying Notes to
Unaudited Pro Forma Combined Financial Information. Under the purchase method of
accounting, assets acquired and liabilities assumed will be recorded at their
estimated fair value at the date of acquisition. The pro forma adjustments set
forth in the following Unaudited Pro Forma Combined Financial Information are
estimated and may differ from the actual adjustments when they become known.
The Pro Forma Combined Financial Information is provided for comparative
purposes only. It does not purport to be indicative of the results that actually
would have occurred if the acquisitions of the UA I Theaters, the CJM Theaters,
the Nelson Ferman Theaters, the Other 1997 Acquisitions, the 1998 Acquisitions,
and the Pending Acquisitions had been consummated on the dates indicated or that
may be obtained in the future. The Unaudited Pro Forma Combined Financial
Information should be read in conjunction with the notes thereto, the financial
statements of the UA I Theaters, the CJM Theaters, and the Nelson Ferman
Theaters and the notes thereto, included elsewhere herein, and the Company's
consolidated financial statements and the notes thereto, included elsewhere
herein.
27
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
PRO FORMA
OFFERING AND PRO
HISTORICAL ACQUISITION FORMA
CLEARVIEW ADJUSTMENTS AS ADJUSTED
--------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including escrow deposit...................... $ 1,470 $ 17,768(1) $19,238
Inventories.............................................................. 163 163
Other current assets..................................................... 434 434
--------- ------------ -----------
Total current assets................................................... 2,067 17,768 19,835
Property, equipment and leaseholds, net.................................... 36,549 6,672(2) 43,221
Intangible assets, net..................................................... 23,877 9,762(2) 33,639
Other non-current assets................................................... 915 915
--------- ------------ -----------
$63,408 $ 34,202 $97,610
--------- ------------ -----------
--------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..................................... $ 5,205 $ (5,205)(3) --
Subordinated notes payable............................................... 2,000 (2,000)(3) --
Accounts payable and accrued expenses.................................... 5,283 1,993(4) $ 7,276
--------- ------------ -----------
Total current liabilities.............................................. 12,488 (5,212) 7,276
Long-term debt and capital leases, less current maturities................. 35,697 (35,658)(3) 39
Senior Notes............................................................... 80,000(5) 80,000
Subordinated notes payable................................................. 4,000 (4,000)(3)
Class B redeemable preferred stock......................................... 1,350 (1,350)(3)
Stockholders' equity:
Undesignated Preferred Stock, 2,478,697 shares authorized; 2,475,697
shares authorized on a pro forma basis................................. -- --
Class A Preferred Stock, par value $.01, 1,303 shares authorized, 779
shares issued and outstanding.......................................... -- --
Class C Preferred Stock, par value $.01, 3,000 shares authorized, issued
and outstanding on a pro forma basis................................... -- --
Common Stock, par value $.01, 10,000,000 shares authorized; 2,227,879
shares issued and outstanding, 2,304,802 shares issued and outstanding
on a pro forma basis................................................... 22 1(6) 23
Additional paid-in capital............................................... 12,415 6,221(7) 18,636
Accumulated deficit...................................................... (2,564) (5,800)(8) (8,364)
--------- ------------ -----------
Total stockholders' equity................................................. 9,873 422 10,295
--------- ------------ -----------
$63,408 $ 34,202 $97,610
--------- ------------ -----------
--------- ------------ -----------
</TABLE>
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(1) Cash and cash equivalents, including escrow deposit, has been adjusted for
the following (in thousands):
<TABLE>
<S> <C> <C>
Proceeds from issuance of Senior Notes........................................ $ 80,000
Proceeds from issuance of Class C Preferred Stock, net of issuance costs...... 2,960
Less:
o Repayment of Old Credit Facility, including a $412,000 prepayment premium
and a $600,000 principal payment made on April 1, 1998.................... (41,212)
o Repayment of other indebtedness........................................... (6,305)
o Redemption of Class B Preferred Stock..................................... (1,350)
o Purchase price of the Great Neck/Franklin Square Acquisition, the AMC
Acquisition and the Pending Acquisitions.................................. (10,775)
o Purchase of real estate presently under lease............................. (1,850)
Less: estimated fees and expenses............................................. (3,700)
--------
Net change in cash............................................................ $ 17,768
--------
--------
</TABLE>
Cash and cash equivalents includes $750,000 which is restricted and which
will be held in escrow to fund the contingent additional consideration to be
paid to a seller in connection with the acquisition of the CJM Theaters.
(2) Reflects the following:
(a) Preliminary allocation of purchase price paid in connection with the
Great Neck/Franklin Square Acquisition, the AMC Acquisition and the
Pending Acquisitions based on the estimated fair values of the assets
acquired or to be acquired, which includes only land, buildings and
improvements or leasehold interests, furniture and equipment and
intangible assets as follows (in thousands):
<TABLE>
<CAPTION>
GREAT NECK/ WEST
AMC FRANKLIN SQUARE LIVINGSTON MILFORD TOTAL
------ --------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Land...................................... $ 150 $ 150
Buildings and improvements................ 600 600
Leasehold interests....................... $ 242 $ 458 $ 39 739
Furniture and equipment................... 460 1,022 175 128 1,785
------ ------- ---------- ------- -------
Total property, equipment and
leaseholds, net................. 702 1,480 925 167 3,274
Covenant non-compete...................... 23 23
Goodwill.................................. 2,073 4,997 125 283 7,478
------ ------- ---------- ------- -------
Total intangible assets............ 2,073 5,020 125 283 7,501
------ ------- ---------- ------- -------
Total purchase price...................... $2,775 $ 6,500 $1,050 $ 450 $10,775
------ ------- ---------- ------- -------
------ ------- ---------- ------- -------
</TABLE>
(b) The adjustment to property, equipment and leaseholds, net, represents
(i) the estimated fair value of property, equipment and leaseholds,
net, acquired or to be acquired in connection with the Great
Neck/Franklin Square Acquisition, the AMC Acquisition and the Pending
Acquisitions set forth in (a) above of $3,274,000, (ii) the combined
purchase price of $1,850,000 for the underlying real estate of two
theaters presently under lease and (iii) the purchase price of
$1,548,000 for the acquisition of the Warren County Cinemas which owned
the construction permit for the Mansfield Theater. Such purchase price
of $1,548,000 has been allocated as such in the pro forma balance sheet
because the Company has commenced construction of this theater.
(c) The adjustment to intangible assets represents (i) the estimated fair
value of intangible assets acquired or to be acquired in connection
with the Great Neck/Franklin Square Acquisition, the AMC Acquisition
and the Pending Acquisitions set forth in (a) above of $7,501,000, (ii)
the write-off of unamortized debt issuance costs of $1,439,000 incurred
in connection with the issuance of the Old Credit Facility and (iii)
the capitalization of $3,700,000 of estimated fees and expenses to be
incurred in connection with the Notes Offering.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET--(CONTINUED)
AS OF MARCH 31, 1998
(3) Reflects the application of the proceeds from the Notes Offering to repay
indebtedness and to redeem Class B Preferred Stock as follows (in
thousands):
<TABLE>
<S> <C> <C>
(a) Repayment of Old Credit Facility, including $600 principal payment made on
April 1, 1998, net of discounts of $242........................................ $40,558
Repayment of note payable to bank.............................................. 305
-------
40,863
Less: current portion.......................................................... (5,205)
-------
$35,658
-------
-------
(b) Repayment of subordinated notes payable........................................ $ 6,000
Less: current portion.......................................................... (2,000)
-------
$ 4,000
-------
-------
(c) Redemption of Class B Preferred Stock.......................................... $ 1,350
-------
-------
</TABLE>
(4) Reflects pro forma interest expense for the period from January 1, 1997
through March 31, 1998 of approximately $1,993,000 on the $14,658,000 of the
Notes to be used for the construction of the Mansfield Theater and for
general corporate purposes. See also note (8) below.
(5) Represents $80 million aggregate principal amount of the Notes.
(6) Reflects the par value of the 76,923 shares of Common Stock issued on April
30, 1998 in connection with the merger with Warren County Cinemas which
owned the construction permit for the Mansfield Theater.
(7) Reflects the 76,923 shares of Common Stock issued on April 30, 1998 in
connection with the merger with Warren County Cinemas which owned the
construction permit for the Mansfield Theater. Such 76,923 shares of Common
Stock had an aggregate fair market value of approximately $1,548,000 based
upon the quoted market price of the Common Stock on that date. In addition,
the adjustment reflects the issuance on April 23, 1998 of 3,000 shares of
Class C Preferred Stock in exchange for approximately $2,960,000 in cash,
net of offering costs. In accordance with the Emerging Issues Task Force
Abstract D-60: Accounting for the Issuance of Convertible Preferred Stock
and Debt Securities with a Non-Detachable Conversion Feature, the intrinsic
value of the beneficial conversion feature of the Class C Preferred Stock,
which is measured as the difference between the conversion price and fair
value of the Common Stock on the date of issuance, is recognized as a
non-cash preferred stock dividend over the period from issuance to earliest
conversion (90 days) in the statement of changes in shareholders' equity.
Based on the Company's stock price on April 23, 1998, the fair value of the
conversion feature is $1,714,000, which will be reflected as a preferred
stock dividend over the period from issuance through July 21, 1998, the
earliest conversion date. Such preferred stock dividend has been reflected
in the adjustment to additional paid-in capital on the pro forma combined
balance sheet. The effect on the Company's income (loss) per share through
July 21, 1998 will be a reduction in net income (increase in net loss)
available to common shareholders to the extent of the preferred stock
dividend.
(8) Reflects an adjustment to stockholders' equity (which is not included in the
pro forma combined statements of operations) to include an extraordinary
loss of $2,093,000, reflecting (i) a prepayment premium on the Old Credit
Facility of $412,000, (ii) the write-off of associated unamortized debt
discount and debt issuance costs of $242,000 and $1,439,000 respectively.
The adjustment also includes pro forma interest expense for the period from
January 1, 1997 through March 31, 1998 of approximately $1,993,000 on the
$14,658,000 of the Notes to be used for the construction of the Mansfield
Theater and for general corporate purposes which has been reflected in
accounts payable and accrued expenses. The adjustment also includes the
effect of the preferred stock dividend described in note (7) above.
30
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------------------------------- --------------
OTHER PRO FORMA
NELSON COMPLETED PENDING ACQUISITION
CLEARVIEW UA I(1) CJM(2) FERMAN(3) ACQUISITIONS(4) ACQUISITIONS(5) ADJUSTMENTS
--------- ------- ------ --------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Theater revenues
Box office............... $ 12,926 $2,599 $4,382 $ 4,594 $ 9,839 $ 755
Concession............... 3,914 759 1,259 1,095 2,732 292 $ 1,264(6)
Other.................... 422 178 15 96 437 27
--------- ------- ------ --------- ------ ------ -------
17,262 3,536 5,656 5,785 13,008 1,074 1,264
--------- ------- ------ --------- ------ ------ -------
Operating expenses
Film rental and booking
fees................... 6,168 1,167 1,999 1,990 4,486 342 (278)(7)
Cost of concession
sales.................. 635 126 241 365 47 446(6)
Theater operating
expenses............... 6,591 1,288 2,101 1,768 5,689 456 (50)(8)
General and
administrative
expenses............... 1,131 181 145 820 603 (75)(9)
Depreciation and
amortization........... 2,051 132 242 356 867 86 2,132(10)
--------- ------- ------ --------- ------ ------ -------
16,576 2,894 4,728 4,934 12,010 931 2,175
--------- ------- ------ --------- ------ ------ -------
Operating income (loss).... 686 642 928 851 998 143 (911)
Interest expense, net...... 2,015 306 191 176 306 12 2,176(11)
Provision for income
taxes.................... 26 (26)
--------- ------- ------ --------- ------ ------ -------
Net income (loss)(12)...... $ (1,329) $ 336 $ 711 $ 675 $ 692 $ 131 $ (3,061)
--------- ------- ------ --------- ------ ------ -------
--------- ------- ------ --------- ------ ------ -------
Basic and diluted loss per
share(13)................ $ (1.03)
Theater level cash
flow(14).................
Theatre level cash flow
margin(15)...............
EBITDA(16).................
EBITDA margin(17)..........
Ratio of EBITDA to cash
interest expense(18).....
Ratio of net debt to
EBITDA(19)...............
<CAPTION>
PRO FORMA
PRO FORMA NOTES OFFERING PRO FORMA
COMBINED ADJUSTMENT AS ADJUSTED
--------- ------------------ -----------
<S> <C> <C> <C>
Theater revenues
Box office............... $ 35,095 $ 35,095
Concession............... 11,315 11,315
Other.................... 1,175 1,175
--------- ------- -----------
47,585 47,585
--------- ------- -----------
Operating expenses
Film rental and booking
fees................... 15,874 15,874
Cost of concession
sales.................. 1,860 1,860
Theater operating
expenses............... 17,843 17,843
General and
administrative
expenses............... 2,805 2,805
Depreciation and
amortization........... 5,866 5,866
--------- ------- -----------
44,248 44,248
--------- ------- -----------
Operating income (loss).... 3,337 3,337
Interest expense, net...... 5,182 2,525(11) 7,707
Provision for income
taxes....................
--------- ------- -----------
Net income (loss)(12)...... $ (1,845 ) $ (2,525) $ (4,370)
--------- ------- -----------
--------- ------- -----------
Basic and diluted loss per
share(13)................ $ (2.72)
Theater level cash
flow(14)................. $ 12,008
Theatre level cash flow
margin(15)............... 25.2%
EBITDA(16)................. $ 9,203
EBITDA margin(17).......... 19.3%
Ratio of EBITDA to cash
interest expense(18)..... 1.3x
Ratio of net debt to
EBITDA(19)............... 6.6x
</TABLE>
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(1) Derived from the unaudited financial statements of United Artists
Theaters at Bronxville, Larchmont, Wayne, New City and Mamaroneck for
the period from January 1, 1997 through September 12, 1997, the date
of acquisition of the UA I Theaters.
(2) Derived from the audited combined financial statements of the CJM
Theaters at Kin-Mall, Middlebrook, Cedar Grove and Bellevue for the
period from January 1, 1997 through September 30, 1997 and the
unaudited results for the period from October 1, 1997 through December
11, 1997.
(3) Derived from the audited combined financial statements of Nelson
Ferman Theaters at Parsippany and Roxbury for the period from January
1, 1997 through September 30, 1997 and the unaudited combined
financial statements for the period from October 1, 1997 through the
acquisition date of November 21, 1997.
(4) Other Completed Acquisitions includes combined results of the Other
1997 Acquisitions and the 1998 Acquisitions. The historical results
were derived from:
(a) Unaudited historical financial information of the Roslyn Cinemas
in Roslyn, NY for the period from January 1, 1997 through the
acquisition date of November 3, 1997.
(b) Unaudited historical financial information for Edison Cinemas in
Edison, NJ and Woodbridge Cinemas in Woodbridge, NJ for the period
from January 1, 1997 through the acquisition dates of December 12,
1997.
(c) Unaudited historical financial information for Clairidge Cinemas
in Montclair, NJ; Manhasset Cinemas in North Hempstead, NY;
Babylon Cinemas in Babylon, NY; and Cobble Hill Cinemas in
Brooklyn, NY for the year ended December 31, 1997.
(d) Unaudited historical financial information of the Great Neck
Squire Cinemas in Great Neck, NY for the twelve month period from
February 14, 1997 through February 11, 1998.
(e) Unaudited historical financial information of the Franklin Square
Cinemas in Franklin Square, NY for the year ended December 31,
1997.
(f) Unaudited historical financial information of the Headquarters 10
Cinemas in Morristown, NJ for the fiscal year period from March
28, 1997 through March 27, 1998.
(5) Pending Acquisitions include combined historical results derived from
unaudited historical financial information of the Colony Cinemas in
Livingston, NJ and the West Milford Cinemas in West Milford, NJ for
the year ended December 31, 1997.
(6) Reflects an increase in historical concession revenue of approximately
$1,264,000, representing revenues that were not recognized by the
sellers for the Nelson Ferman Theaters, Clairidge Cinemas, Franklin
Square Cinemas and Great Neck Squire Cinemas because each of the
sellers operated the respective concession stands through independent
third party concessionaires. The cost of concession sales of
approximately $446,000 is estimated based on the historical costs of
the concession sales of the Company. Upon acquisition of such theaters
by the Company, theater management began operating the concession
stands, and the respective agreements with the independent third party
concessionaires were terminated.
(7) In February 1998, the Company employed three professionals to perform
film booking services in-house for all screens operated by the Company
and, in March 1998, terminated its arrangements for third party film
booking services. The pro forma adjustment of approximately $278,000
in film rental and booking fees represents amounts paid for third
party film booking services by the Company, the Nelson Ferman Theaters
and the CJM Theaters during 1997. The pro forma adjustment to
general and administrative expenses includes an increase of
approximately $190,000 representing costs of the Company's three film
booking professionals assuming that such professionals were hired on
January 1, 1997. See note (9) below.
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS-- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(8) Reflects a reduction of rent of $50,000 for the Roslyn Cinemas as the
application of net proceeds from the Notes Offering includes the
acquisition of the underlying fee real estate of this theater.
(9) The former owners of the Franklin Square Cinemas, the Cobble Hill
Cinemas and the CJM Theaters provided management advisory services to
the theaters and received compensation for such services of
approximately $100,000, $100,000 and $70,000, respectively during the
year ended December 31, 1997. Upon acquisition of these theaters, the
owner/manager of each no longer provides such services to the
theaters as the Company is able to support the operations of these
seven theaters under its current management structure. These
decreases in expenses have been offset by $190,000 in general and
administrative expenses related to the employment of the three film
booking professionals referred to in note (7) above.
(10) Reflects an increase in depreciation and amortization expense of
$2,132,000 for property and equipment, leasehold interests and
intangible assets acquired in the 1997 Acquisitions, the 1998
Acquisitions, and to be acquired in the Pending Acquisitions,
including amortization of the excess of the purchase price (or
expected purchase price) over the estimated fair values of the assets
acquired. The Company estimates the useful lives to be 40 years for
buildings and improvements and five to seven years for furniture and
equipment. Leasehold interests represent acquired rights to operate
theaters under previously existing operating leases. The fair value
assigned to these leasehold interests is amortized over the term of
the lease. Goodwill represents the excess of the purchase price,
including acquisition costs, over the fair value of the tangible and
identifiable intangible assets acquired which is amortized over
fifteen years.
(11) Pro forma interest expense is calculated as follows:
<TABLE>
<S> <C>
Historical combined interest expense, net (pre-acquisition basis)........................ $3,006
Interest expense assuming all acquisitions were consummated on January 1, 1997 under the
Old Credit Facility....................................................................... 2,176
------
Pro forma combined interest expense...................................................... 5,182
------
Less: amounts in historical combined interest expense for refinanced debt................ (4,951)
Add: interest expense on the Notes at 10.875%............................................ 7,106
Amortization of debt issuance costs...................................................... 370
------
Pro forma Notes Offering adjustment...................................................... 2,525
------
Pro forma interest expense............................................................... $7,707
------
------
Pro forma cash interest expense.......................................................... $7,337
------
------
</TABLE>
Pro forma interest expense has been calculated based on the amount of
the Notes which was or will be used to repay the Old Credit Facility,
repay other indebtedness, redeem the Class B Preferred Stock, pay the
escrow deposit, close the Great Neck/Franklin Square Acquisition, the
AMC Acquisition and the Pending Acquisitions, acquire the real estate
presently under lease and pay estimated fees and expenses of the Notes
Offering of $65.3 million. Pro forma interest expense is not
indicative of results that will actually occur upon issuance of the
$80 million of Notes as it does not include interest expense of
approximately $1,594,000 on $14,658,000 of the Notes to be used for
the construction of the Mansfield Theater and for general corporate
purposes. However, such costs have been reflected in stockholders'
equity. See the Unaudited Pro Forma Combined Balance Sheet.
(12) In connection with the repayment of the Old Credit Facility, the
Company was required to pay a prepayment premium of $412,000. The
prepayment premium, taken together with the write-off of unamortized
debt discount and debt issuance costs of $242,000 and $1,439,000,
respectively, will result in an extraordinary loss of $2,093,000,
which has not been reflected in the pro forma combined
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS-- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
statement of operations, but has been reflected in stockholders' equity.
See the Unaudited Pro Forma Combined Balance Sheet.
(13) Basic income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding during the
period. Diluted earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares
outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Unaudited pro forma
basic and diluted loss per share has been calculated for the year
ended December 31, 1997 by dividing unaudited pro forma net loss
available to common shareholders by the weighted average number of
shares outstanding during the period. Unaudited pro forma net loss
available to common shareholders is computed as unaudited pro forma
net loss less preferred stock dividends. Unaudited pro forma net loss
available to common shareholders, includes recognition of non-cash
preferred stock dividends on the Class C Preferred Stock issued on
April 23, 1998. The non-cash preferred stock dividend of $1.7 million
represents the amount that will be reflected in stockholders' equity
during 1998 (the period from issuance to earliest conversion date in
July 1998) based on the fair value of the conversion feature as
measured on the date of issuance. The pro forma weighted average
number of common shares outstanding used to calculate pro forma basic
and diluted loss per share for the year ended December 31, 1997 is
2,304,802 shares.
(14) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concessions and theater operating expenses.
Although it is not a measure of performance calculated in accordance
with generally accepted accounting principles, theater level cash flow
is presented because the Company believes that certain investors find
it useful in analyzing companies in the motion pictures exhibition
industry.
(15) Theater level cash flow margin represents theater level cash flow
divided by total revenues.
(16) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance
with generally accepted accounting principles, EBITDA is presented 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.
(17) EBITDA margin represents EBITDA divided by total revenues.
(18) Ratio of EBITDA to cash interest expense represents EBITDA divided by
interest less non-cash amortization of debt issuance costs and
discounts. For the pro forma ratio of EBITDA to cash interest expense
for the year ended December 31, 1997, pro forma interest expense has
been calculated using a rate of interest on the Notes of 10.875% per
annum.
(19) Ratio of Net debt to EBITDA represents total debt (including
redeemable securities) less cash and cash equivalents divided by
EBITDA.
34
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------
----------------------------------------------- PRO FORMA
1998 PENDING ACQUISITION PRO FORMA
CLEARVIEW ACQUISITIONS(1) ACQUISITIONS(2) ADJUSTMENTS COMBINED
--------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Theater revenues
Box office............................. $ 7,077 $ 1,499 $ 167 $ 8,743
Concession............................. 2,284 381 64 99(3) 2,828
Other.................................. 320 10 3 333
--------- --------------- ----- ----------- ---------
9,681 1,890 234 99 11,904
--------- --------------- ----- ----------- ---------
Operating expenses
Film rental and booking fees........... 3,060 700 68 (46)(4) 3,782
Cost of concession sales............... 357 45 10 32(3) 444
Theater operating expenses............. 3,455 818 113 (14)(5) 4,372
General and administrative expenses.... 1,010 89 (89)(6) 1,010
Depreciation and amortization.......... 1,263 128 20 105(7) 1,516
--------- --------------- ----- ----------- ---------
9,145 1,780 211 (12) 11,124
--------- --------------- ----- ----------- ---------
Operating income (loss).................. 536 110 23 111 780
Interest expense, net.................... 1,161 72 5 2(8) 1,240
Provision for income taxes...............
--------- --------------- ----- ----------- ---------
Net income (loss)........................ $ (625 ) $ 38 $ 18 $ 109 $ (460)
--------- --------------- ----- ----------- ---------
--------- --------------- ----- ----------- ---------
Basic and diluted loss per share(9)...... $ (.30 )
Theater level cash flow(10)..............
Theater level cash flow margin(11).......
EBITDA(12)...............................
EBITDA margin(13)........................
Ratio of EBITDA to cash interest
expense(14)............................
<CAPTION>
PRO FORMA
OFFERING PRO FORMA
ADJUSTMENT AS ADJUSTED
------------- -----------
<S> <C> <C>
Theater revenues
Box office............................. $ 8,743
Concession............................. 2,828
Other.................................. 333
-----------
11,904
-----------
Operating expenses
Film rental and booking fees........... 3,782
Cost of concession sales............... 444
Theater operating expenses............. 4,372
General and administrative expenses.... 1,010
Depreciation and amortization.......... 1,516
-----------
11,124
-----------
Operating income (loss).................. 780
Interest expense, net.................... 636(8) 1,876
Provision for income taxes...............
------------- -----------
Net income (loss)........................ $ (636) $ (1,096)
------------- -----------
------------- -----------
Basic and diluted loss per share(9)...... $ (.49)
Theater level cash flow(10).............. $ 3,306
Theater level cash flow margin(11)....... 27.8%
EBITDA(12)............................... $ 2,296
EBITDA margin(13)........................ 19.3%
Ratio of EBITDA to cash interest
expense(14)............................ 1.3x
</TABLE>
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(1) The historical results of the 1998 Acquisitions were derived from:
(a) Unaudited historical financial information for Clairidge Cinemas in
Montclair, NJ for the period from January 1, 1998 through the
acquisition date of February 12, 1998.
(b) Unaudited historical financial information for Manhasset Cinemas in
North Hempstead, NY and Babylon Cinemas in Babylon, NY for the period
from January 1, 1998 through the acquisition date of March 6, 1998.
(c) Unaudited historical financial information for the quarter ended March
31, 1998 for Franklin Square Cinemas in Franklin Square, NY and the
Great Neck Squire Cinemas in Great Neck, NY.
(d) Historical financial information for Cobble Hill Cinemas in Brooklyn,
NY for the period from January 1, 1998 through the acquisition date of
March 23, 1998 has not been included as no financial information was
available.
(e) Unaudited historical financial information for the quarter ended March
31, 1998 for the Headquarters 10 Cinemas in Morristown, NJ.
(2) Pending Acquisitions includes combined historical results derived from
unaudited historical financial information for the quarter ended March 31,
1998 of the Colony Cinemas in Livingston, NJ, and the West Milford Cinemas
in West Milford, NJ.
(3) Reflects an increase in historical concession revenue of approximately
$99,000, representing revenues that were not recognized by the sellers, for
the Clairidge Cinemas, Franklin Square Cinemas and Great Neck Squire Cinemas
because each of the sellers operated the respective concession stands
through independent third party concessionaires. The cost of concession
sales of approximately $32,000 is estimated based on the historical costs of
the concession sales of the Company. Upon acquisition of such theaters by
the Company, theater management began operating the concession stands and
the respective agreements with the independent third party concessionaires
have been terminated.
(4) In February 1998, the Company employed three professionals to perform film
booking services in-house for all screens operated by the Company and, in
March 1998, terminated its arrangements for third party film booking
services. The pro forma adjustment of approximately $46,000 in film rental
and booking fees represents amounts paid for third party film booking
services by the Company during 1998. The pro forma adjustment to general and
administrative expenses includes an increase of approximately $48,000
representing costs of the Company's three film booking professionals
assuming that such professionals were hired on January 1, 1997.
(5) Reflects a reduction of rent of $14,000 for the Roslyn Cinemas as the
application of net proceeds of the Offering includes the acquisition of the
underlying fee real estate of this theater.
(6) The net decrease in general and administrative expenses is due to management
advisory services provided by the former owner of the Franklin Square
Cinemas and the addition of film booking professionals for the three months
ended March 31, 1998 as more fully described in note (9) to the Unaudited
Pro Forma Combined Statement of Operations for the year ended December 31,
1997.
(7) Reflects an increase in depreciation and amortization expense of $105,000
for property and equipment, leasehold interests and intangible assets
acquired in connection with the 1998 Acquisitions and the Pending
Acquisitions, including amortization of the excess of the purchase price (or
expected purchase price) over the estimated fair values of the assets
acquired. The Company estimates the useful lives to be 40 years for
buildings and improvements and five to seven years for furniture and
equipment. Leasehold interests represent acquired rights to operate theaters
under previously existing operating leases. The fair value assigned to these
leasehold interests is amortized over the term of the lease. Goodwill
represents the excess of the purchase price, including acquisition costs,
over the fair value of the tangible and identifiable intangible assets
acquired which is amortized over fifteen years.
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(8) Pro forma interest expense is calculated as follows:
<TABLE>
<S> <C>
Historical combined interest expense, net (pre-acquisition basis).......... $1,238
Interest expense assuming all acquisitions were consummated on January 1,
1997 under the Old Credit Facility....................................... 2
------
Pro forma combined interest expense, net................................... 1,240
------
Less: amounts in historical combined interest expense
for refinanced debt...................................................... (1,233)
Add: interest expense on the Notes at 10.875%.............................. 1,776
Amortization of debt issuance costs........................................ 93
------
Pro forma Notes Offering adjustment........................................ 636
------
Pro forma interest expense................................................. $1,876
------
------
Pro forma cash interest expense............................................ $1,783
------
------
</TABLE>
Pro forma interest expense has been calculated based on the amount of the
Notes which was or will be used to repay the Old Credit Facility, repay
other indebtedness, redeem the Class B Preferred Stock, pay the escrow
deposit, close the Great Neck/Franklin Square Acquisition, the AMC
Acquisition and the Pending Acquisitions, acquire the real estate presently
under lease and pay fees and expenses of the Notes Offering of $65.3
million. Pro forma interest expense is not indicative of results that will
actually occur upon issuance of the $80 million of Notes as it does not
include interest expense of approximately $399,000 on the $14,658,000 of
the Notes to be used for the construction of the Mansfield Theater and for
general corporate purposes.
(9) Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding during the period.
Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding, while
also giving effect to all dilutive potential common shares that were
outstanding during the period. Unaudited pro forma basic and diluted loss
per share has been calculated for the three months ended March 31, 1998 by
dividing unaudited pro forma net loss available to common shareholders by
the weighted average number of shares outstanding during the period.
Unaudited pro forma net loss available to common shareholders is computed
as unaudited pro forma net loss less preferred stock dividends. The pro
forma weighted average number of common shares outstanding used to
calculate pro forma basic and diluted loss per share for the three month
period ended is 2,304,802 shares.
(10) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concessions and theater operating expenses. Although
it is not a measure of performance calculated in accordance with generally
accepted accounting principles, theater level cash flow is presented
because the Company believes that certain investors find it useful in
analyzing companies in the motion pictures exhibition industry.
(11) Theater level cash flow margin represents theater level cash flow divided
by total revenues.
(12) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, EBITDA is presented 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.
(13) EBITDA margin represents EBITDA divided by total revenues.
(14) Ratio of EBITDA to cash interest expense represents EBITDA divided by
interest less non-cash amortization of debt issuance costs and discounts.
For the pro forma ratio of EBITDA to cash interest expense for the period
ended March 31, 1998, pro forma interest expense has been calculated using
a rate of interest on the Notes of 10.875% per annum.
37
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and the historical consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. The
consolidated financial data for the year ended December 31, 1997 presented below
are derived from the Company's consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, whose report covering the
Company's consolidated financial statements as of December 31, 1997 and for the
year then ended and the related financial statements is included elsewhere
herein. The consolidated financial data for the years ended December 31, 1996
and 1995 presented below are derived from the Company's consolidated financial
statements audited by Wiss & Company, LLP, independent accountants, whose report
covering the Company's consolidated financial statements as of December 31, 1996
and 1995 and for the years then ended and the related financial statements is
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH
------------------------------- 31,
1995 1996(1) 1997(1) --------------------------
------- ------- ------- 1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Theater revenues:
Box office.......................................... $ 1,759 $ 6,195 $12,926 $ 2,712 $ 7,077
Concession.......................................... 555 1,861 3,914 744 2,284
Other............................................... 31 142 422 49 320
------- ------- ------- ----------- -----------
2,345 8,198 17,262 3,505 9,681
------- ------- ------- ----------- -----------
Operating expenses:
Film rental and booking fees........................ 824 3,022 6,168 1,196 3,060
Cost of concession sales............................ 99 279 635 108 357
Theater operating expenses.......................... 1,078 3,298 6,591 1,227 3,455
General and administrative expenses................. 375 590 1,131 192 1,010
Depreciation and amortization....................... 100 635 2,051 413 1,263
------- ------- ------- ----------- -----------
2,476 7,824 16,576 3,136 9,145
------- ------- ------- ----------- -----------
Operating income...................................... (131) 374 686 369 536
Interest expense...................................... 85 592 2,015 358 1,161
------- ------- ------- ----------- -----------
Net income (loss)..................................... $ (216) $ (218) $(1,329) $ 11 $ (625)
------- ------- ------- ----------- -----------
------- ------- ------- ----------- -----------
Basic and diluted income (loss) per share(2).......... $ (.36) $ (.29) $ (1.03) $ .01 $ (.30)
------- ------- ------- ----------- -----------
------- ------- ------- ----------- -----------
OPERATING DATA:
Box office margin(3).................................. 53.2% 51.2% 52.3% 55.9% 56.8%
Concession margin(4).................................. 82.2% 85.0% 83.8% 85.5% 84.4%
Number of theaters.................................... 7 16 31 16 37
Number of screens..................................... 21 60 148 60 169
Attendance............................................ 315,406 1,167,409 2,322,063 480,529 1,278,273
Average ticket price(5)............................... $ 5.58 $ 5.31 $ 5.57 $ 5.64 $ 5.54
Average concession revenue per patron(6).............. $ 1.76 $ 1.59 $ 1.69 $ 1.55 $ 1.79
Ratio of earnings to fixed charges(7)................. -- -- -- --
OTHER DATA:
Theater level cash flow(8)............................ $ 344 $ 1,599 $ 3,868 $ 974 $ 2,809
Theater level cash flow margin(9)..................... 14.7% 19.5% 22.4% 27.8% 29.0%
EBITDA(10)............................................ $ (31) $ 1,009 $ 2,737 $ 782 $ 1,799
EBITDA margin(11)..................................... (1.3)% 12.3% 15.9% 22.3% 18.6%
Capital expenditures(12).............................. $ 631 $ 318 $ 3,486 $ 305 $ 765
CASH FLOWS FROM:
Operating activities.................................. $ 119 $ 1,147 $ 3,934 $ 780 $ 1,175
Investing activities.................................. (1,239) (7,295) (33,647) (399) (6,604)
Financing activities.................................. 853 6,723 30,608 299 5,252
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................. $ 176 $ 751 $ 1,647 $ 1,432 $ 1,470
Total assets.......................................... 2,029 15,761 57,352 16,630 63,408
Total long-term debt, including current maturities.... 948 10,252 41,112 10,663 46,903
Redeemable preferred stock............................ 2,132 2,781
Class B redeemable preferred stock.................... 1,350 1,350
Redeemable common stock............................... 113 357 357
Total stockholders' equity............................ 353 1,792 10,328 1,155 9,873
</TABLE>
38
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(1) See Note 2 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. with respect to its acquisitions in 1996 and 1997.
(2) Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted average number of common shares outstanding during the
period. Diluted income (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding,
while also giving effect to all dilutive potential common shares that were
outstanding during the period.
(3) Box office margin represents total box office revenues less film rental and
booking fees divided by total box office revenues.
(4) Concession margin represents total concession revenues less cost of
concession sales divided by total concession revenues.
(5) Average ticket price represents total box office revenue divided by
attendance.
(6) Average concession revenue per patron represents total concession revenues
divided by attendance.
(7) The ratio of earnings to fixed charges is computed by dividing operating
income (loss) before fixed charges by fixed charges. Fixed charges is
calculated as interest expense, including capitalized interest, plus one
third of rental expense. Management believes one third of rental expense
represents an appropriate portion representative of the interest factor.
Earnings were insufficient to cover fixed charges for the years ended
December 31, 1995, 1996 and 1997 by $216,316, $218,328 and $1,369,868,
respectively, and for the three months ended March 31, 1998 by $625,283.
(8) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concession sales and theater operating expenses.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, 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.
(9) Theater level cash flow margin represents theater level cash flow divided
by total revenues.
(10) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, EBITDA is presented 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.
(11) EBITDA margin represents EBITDA divided by total revenues.
(12) Capital expenditures represent purchase of property, equipment and
leasehold improvements, excluding acquisitions. For the year ended December
31, 1997, capital expenditures included (a) construction of a new theater
in an existing building in Summit, NJ and the addition of four screens to
an existing theater in Chester, NJ; (b) upgrades to Clearview's existing
theaters and to theaters included in the 1997 Acquisitions; and (c)
replacement capital expenditures. For the quarter ended March 31, 1998,
capital expenditures included (a) upgrades to theaters included in the 1997
Acquisitions; (b) additional improvements to the Summit, NJ theater; (c)
furniture and equipment for the Company's expanded corporate offices; and
(d) replacement capital expenditures.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's results of
operations and financial condition should be read in conjunction with the
information set forth in the financial statements and the notes thereto included
elsewhere in this Prospectus.
OVERVIEW
Since the inception of its business in December 1994, when the Company
acquired the right to operate four theaters with eight screens, through March
31, 1998 the Company had acquired the right to operate an additional 32 theaters
with 150 screens, had added six screens to two existing theaters and had
constructed a new five-screen theater in an existing building, resulting in a
total of 37 theaters and 169 screens operated by the Company at March 31, 1998.
The Company operated 16 theaters with 60 screens as of March 31, 1997. The
Company expects that its future revenue growth will be derived primarily from
the acquisition of additional theaters, the addition of screens to existing
theaters and the development of new theaters. In order to fund its plans for
continued growth, the Company may need to seek additional debt or equity
financing. Failure to obtain any such financing could require the Company to
significantly curtail its acquisition activities. 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 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 number of weeks the film has run.
Film rental costs generally decline as a percentage of box office receipts the
longer a film has been showing. Because 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.
General and administrative expenses consist primarily of corporate overhead
costs, such as management and office salaries and related fringe benefits 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 significantly without
incurring proportionate increases in general and administrative expenses. The
management information system has on-line capabilities to collect information
concerning box office receipts, ticketing, concession sales, inventory control
and booking. This system allows the Company to closely track and manage box
office and concession revenues.
During the three months ended March 31, 1998, the Company purchased the
Clairidge Cinemas in Montclair, New Jersey (6 screens) for $2.1 million in cash
and 14,782 shares of Common Stock; the Manhasset Cinemas in North Hempstead, NY
(3 screens) and the Babylon Cinemas in Babylon, NY (3 screens) for an aggregate
of $1.5 million in cash; and the Cobble Hill Cinemas in Brooklyn, NY (5 screens)
for $2.2 million in cash. In the first three months of 1998, the Company also
leased the Millburn Twin Cinemas in Millburn, New Jersey (2 screens) and The
Screening Zone in Montclair, New Jersey (2 screens). The acquisition and lease
of these additional theaters increased the Company's total number of theaters to
37 and its screen count to 169, as of March 31, 1998.
Upon repayment of the Old Credit Facility with a portion of the net
proceeds of the Notes Offering, the Company was required to pay a prepayment
premium of $412,000. The prepayment premium, taken together with a write-off of
unamortized debt discount and debt issuance costs of $242,000 and $1,439,000,
respectively, in connection with repayment of the Old Credit Facility, will
result in an extraordinary loss of $2,093,000 in the quarter ended June 30,
1998.
40
<PAGE>
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 1998 AND 1997
Total Revenues. Total revenues for the three months ended March 31, 1998
increased 176.2% to $9,680,809 from $3,505,451 for the comparable 1997 period.
Box office receipts for the three months ended March 31, 1998 increased 160.9%
to $7,077,119 from $2,712,210 for the comparable 1997 period. The increase in
box office receipts resulted primarily from an increase in attendance for the
three months ended March 31, 1998 of 136.7% to approximately 1,278,000 from
540,000 attendees in the comparable 1997 period. This increase in attendance was
attributable primarily to the operation of theaters acquired in the third and
fourth quarters of 1997 and the first quarter of 1998. Total concession sales
for the three months ended March 31, 1998 increased 207.0% to $2,284,059 from
$743,986 for the comparable 1997 period, primarily due to the increase in the
number of theaters operated. Other revenue (which consists primarily of
advertising revenue and rental income on fee-owned properties) for the three
months ended March 31, 1998 increased 548.9% to $319,631 from $49,255 for the
comparable 1997 period. The increase in other revenue was the result of
operating additional theaters during the period.
Film Rental and Booking Fees. Film rental and booking fees for the three
months ended March 31, 1998 increased 155.8% to $3,060,197 from $1,196,126 for
the comparable 1997 period, principally due to the operation of additional
theaters as previously discussed. Film rental and booking fees as a percentage
of box office receipts decreased to 43.2% for the three months ended March 31,
1998 compared to 44.1% for the comparable 1997 period.
Cost of Concession Sales. Cost of concession sales for the three months
ended March 31, 1998 increased 229.1% to $357,465 from $108,605 for the
comparable 1997 period. This increase was attributable primarily to the
operation of the theaters acquired in the third and fourth quarters of 1997 and
in the first quarter of 1998. As a percentage of concession revenues, the cost
of concession sales increased to 15.7% for the three months ended March 31, 1998
compared to 14.6% for the comparable 1997 period. This increase was attributable
to the fact that the inventory mix at theaters acquired in the first quarter of
1998 did not match patrons' preferences, and that their cost of concession sales
did not reflect purchasing efficiencies available to the Company.
Theater Operating Expenses. Theater operating expenses for the three
months ended March 31, 1998 increased 181.7% to $3,455,314 from $1,226,799 for
the comparable 1997 period. This increase was attributable primarily to the
operation of the theaters acquired as previously discussed. Theater operating
expenses, as a percentage of total revenues, increased to 35.7% for the three
months ended March 31, 1998 from 35.0% for the comparable 1997 period. This
increase was attributable to the operation of the theaters acquired in the first
quarter of 1998 whose operating results did not reflect Clearview's operating
efficiencies for the entire period.
General and Administrative Expenses. General and administrative expenses
for the three months ended March 31, 1998 increased 426.4% to $1,009,744 from
$191,806 for the comparable 1997 period. The increase was due principally to the
hiring of personnel and related increases in salaries to support the Company's
transition from 16 theaters and 60 screens as of January 1, 1997 to 37 theaters
and 169 screens as of March 31, 1998. General and administrative expenses, as a
percentage of total revenues, increased to 10.4% for the three months ended
March 31, 1998 from 5.5% for the comparable 1997 period. The increase was
partially due to the incremental professional fees incurred during the period in
connection with increased external reporting requirements as a result of the
Common Stock Offering in August 1997. The increase was also attributable to the
hiring of in-house film booking and legal professionals to support the Company's
growth and future expansion plans. The Company expects general and
administrative expenses as a percentage of total revenues to decline over the
remainder of the fiscal year.
Depreciation and Amortization. Depreciation and amortization expense for
the three months ended March 31, 1998 increased 205.7% to $1,262,625 from
$413,011 for the comparable 1997 period. The increase was a direct result of the
substantial increase in the screen count and number of theaters operated since
the end of the first quarter of 1997, which significantly increased the
Company's depreciable and amortizable assets.
Operating Income. Operating income for the three months ended March 31,
1998 increased 45.1% to $535,464 from $369,104 for the comparable 1997 period.
Operating income as a percentage of total revenues,
41
<PAGE>
decreased to 5.5% for the three months ended March 31, 1998 from 10.5% in the
comparable 1997 period. Operating income decreased as a percentage of total
revenue due to the increase in general and administrative and depreciation and
amortization expenses.
Interest Expense. Interest expense for the three months ended March 31,
1998 increased 223.8% to $1,160,747 from $358,482 for the comparable 1997
period. The Company's borrowing rate on the Existing Credit Facility decreased
from Prime + 2% to Prime + 1.5% in September 1997. This decrease was offset by a
significant increase in total debt outstanding during the first quarter of 1998
due to the funding of the Company's acquisitions in 1997 and 1998.
Net Income (Loss). Net loss for the three months ended March 31, 1998 was
$625,283 compared to net income of $10,622 in the comparable 1997 period. The
net loss was attributable primarily to substantial increases in both
depreciation and amortization expense and interest expense, resulting from the
Company's growth through acquisitions and related borrowings.
Other Financial Data. EBITDA for the three months ended March 31, 1998
increased 129.9% to $1,798,089 from $782,115 for the comparable 1997 period.
EBITDA as a percentage of total revenues for the three months ended March 31,
1998 decreased to 18.6% from 22.3% in the comparable 1997 period due primarily
to an increase in general and administrative expenses previously discussed.
Theater level cash flow increased 188.4% to $2,809,000 for the three months
ended March 31, 1998 from $974,000 for the comparable period in 1997. Theater
level cash flow margin increased to 29% in 1998 from 27.8% in 1997. These
improvements were attributable to increased revenues for new screens without a
commensurate increase in theater operating expenses and an improved box office
margin, respectively. EBITDA and theater level cash flow are financial measures
commonly used in the Company's industry. Although they are not measures of
performance calculated in accordance with generally accepted accounting
principles, they are presented as alternatives 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.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Total Revenues. Total revenues for 1997 increased 110.6% to $17,261,977
from $8,197,974 in 1996. The increase in box office receipts resulted primarily
from an increase in attendance of 98.9% to approximately 2,322,000 attendees in
1997 from approximately 1,167,000 attendees in 1996. This increase in attendance
is attributable primarily to the Company's operation of the nine theaters
acquired during 1996 for a full year in 1997, as well as the operation of the 14
theaters acquired and the one theater developed during 1997. Additionally, the
average ticket price increased from $5.31 in 1996 to $5.57 in 1997. Total
concession sales increased 110.3% for 1997 to $3,914,416 from $1,861,155 in the
comparable 1996 period, primarily due to the increase in the number of theaters
operated.
Film Rental and Booking Fees. Film rental and booking fees for 1997
increased 104.1% to $6,168,380 in 1997 from $3,022,377 in 1996, principally due
to the operation of additional theaters as discussed above. Film rental and
booking fees, as a percentage of box office receipts, decreased to 47.7% for the
year ended December 31, 1997 compared to 48.8% for 1996.
Cost of Concession Sales. Cost of concession sales for 1997 increased
126.9% to $634,395 from $279,549 for 1996. This increase was attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of concession revenues, the cost of concession sales increased
to 16.2% in 1997 from 15.0% in 1996. This increase was attributable to the
number of theaters the Company added at the height of the 1997 holiday season
when the majority of the concession sales are lower margin candy sales.
Theater Operating Expenses. Theater operating expenses for 1997 increased
99.8% to $6,590,703 from $3,297,825 for 1996. This increase was attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of total revenues, theater operating expenses decreased to 38.2%
in 1997 from 40.2% in 1996. The decrease, as a percentage of total revenues, was
primarily due to the Company's ability to control and manage its variable costs,
such as labor, and the lower average per-theater fixed costs, such as
42
<PAGE>
occupancy costs, property taxes and utilities, of the theaters acquired in 1997
as compared to the Company's other theaters.
General and Administrative Expenses. General and administrative expenses
for 1997 increased 91.7% to $1,130,855 from $589,822 in 1996. This increase was
due principally to the hiring of additional personnel and related increases in
salaries resulting from the transition from seven locations and 21 screens at
January 1, 1996 to 16 locations and 60 screens at January 1, 1997 and to 31
theaters and 148 screens at December 31, 1997. The increase was also due to the
increase in certain costs in 1997, such as professional fees, which are
typically associated with the transition from a private company to a public
company. As a percentage of total revenues, however, general and administrative
expenses for 1997 decreased to 6.6% from 7.2% for 1996. This decrease was
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
1997 increased 223.0% to $2,051,163 from $635,007 in 1996. This increase was a
direct result of the 14 additional theaters acquired in 1997, which
significantly increased the Company's depreciable and amortizable assets, as
well as the effect of a full year of depreciation and amortization on the assets
of the nine theaters acquired in 1996.
Operating Income. Operating income for 1997 increased 83.8% to $686,481
from $373,394 for 1996. As a percentage of total revenues, operating income
decreased to 4.0% for the year ended December 31, 1997, compared to 4.6% for the
year ended December 31, 1996. Operating income decreased as a percentage of
total revenues primarily due to the substantial increase in depreciation and
amortization expense, which more than tripled in 1997 over 1996, compared to
total revenues, which approximately doubled over the same period. Excluding
depreciation and amortization, increases in the Company's other operating
expenses were less, on a percentage basis, than the growth in total revenues, as
summarized below:
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE OVER 1996
------------------
<S> <C>
Total theater revenues..................................................... 110.6%
Film rental and booking fees............................................... 104.1%
Other theater operating expenses........................................... 99.8%
General and administrative expenses........................................ 91.7%
Depreciation and amortization.............................................. 223.0%
</TABLE>
Interest Expense. Interest expense increased 240.6% in 1997 to $2,015,419
from $591,722 in 1996. The Company's borrowing rate on its credit facility
decreased from Prime +2% to Prime +1.5% in September 1997. This decrease was
offset by a significant increase in total debt outstanding during 1997 as a
result of the funding of the Company's acquisitions.
Net Loss. Net loss for the year ended December 31, 1997 increased to
$1,328,938 from $218,328 in the comparable 1996 period. This increase in net
loss was attributable primarily to the substantial increases in both
depreciation and amortization ($1,416,156) and interest expense ($1,423,697),
together totaling over $2,800,000. These increases were due to the additional
screens operated by the Company in 1997 and their related acquisition financing
costs, which were offset by reduced film rental costs, theater operating
expenses and general and administrative expenses, which were less, on a
percentage basis, than the growth in total revenues.
Other Financial Data. EBITDA for the year ended December 31, 1997
increased 171% to $2,737,000 from $1,009,000 for the year ended December 31,
1996. EBITDA as a percentage of total revenue increased to 15.9% for the year
ended December 31, 1997 from 12.3% for the year ended December 31, 1996. This
increase was primarily attributable to the reduction of general and
administrative expenses from 7.2% of revenues for the year ended December 31,
1996 to 6.6% of revenues for the year ended December 31, 1997. This decrease in
general and administrative expenses as a percentage of revenues was a result of
Clearview management's cost controls which allowed the Company to expand its
revenue base without incurring a proportionate increase in corporate overhead.
Theater level cash flow for the year ended December 31, 1997 increased 142% to
$3,868,000 from $1,599,000 in 1996. Theater level cash flow margin for the year
ended December 31, 1997 increased to 22.4% of revenue from 19.5% of revenue in
1996. This increase was primarily due to the reduction of theater
43
<PAGE>
operating expenses as a percentage of revenue from 40.2% for the year ended
December 31, 1996 to 38.2% for the year ended 1997. EBITDA and theater level
cash flow are financial measures commonly used in the Company's industry.
Although they are not measures of performance calculated in accordance with
generally accepted accounting principles, they are presented as alternatives 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.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total Revenues. Total revenues for 1996 increased 249.5% to $8,197,974
from $2,345,697 for 1995. This increase in total revenues was primarily a result
of an increase in attendance of 270% to approximately 1,167,000 attendees in
1996 from approximately 315,000 attendees in 1995. The increase in attendance
occurred principally because of the addition of 39 screens during 1996 and the
first full year of operation of the 11 screens added during 1995. Revenues from
those theaters operated by the Company throughout 1995 and 1996 increased 15.7%
from $1,541,843 to $1,783,260. This increase in same theater revenues was
attributable primarily to an overall increase 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 for 1996
increased 266.9% 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 was
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 for 1996
205.8% to $3,297,825 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 was
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 was 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.
44
<PAGE>
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, offset by higher depreciation and amortization expense.
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.
Other Financial Data. EBITDA for the year ended December 31, 1996
increased to $1,009,000 from a loss of $31,000 for the year ended December 31,
1995. This increase was due to the screens added in 1996, and to the Company's
ability to increase its revenue base while maintaining low corporate overhead.
Theater level cash flow for the year ended December 31, 1996 increased 365% to
$1,599,000 from $344,000 in 1995. Theater level cash flow margin for the year
ended December 31, 1997 increased to 19.5% for the year ended December 31, 1996
from 14.7% for the year ended December 31, 1995. This increase was attributable
to the decreased concession costs obtained through volume purchasing and to the
implementation of Clearview management's cost controls at the theater level, in
particular, the reduction in labor and related fringe benefit costs. EBITDA and
theater level cash flow are financial measures commonly used in the Company's
industry. Although they are not measures of performance calculated in accordance
with generally accepted accounting principles, they are presented as
alternatives 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company receives substantially all of its revenues in cash from box
office receipts and concession sales and, therefore, benefits from minimal
accounts receivable and inventory requirements. The Company's most significant
operating expense, film rental fees, continues to be paid to distributors 30 to
45 days following the receipt of the applicable cash ticket payments. In
addition, nearly all of the Company's other operating expenses such as
concession purchases, theater payroll and theater rents, are paid bi-weekly or
monthly, respectively. The period between the receipt of cash from operations
and the 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 $10,421,404 and
$1,484,683 at March 31, 1998 and March 31, 1997, respectively, and negative
working capital of $5,334,136 at December 31, 1997 and $1,710,825 at December
31, 1996, respectively. The increases in negative working capital were
attributable to the increase in the current portion of long-term debt used to
finance the Company's theater acquisitions during such periods, and the increase
in film rental fees payable due to the increase in the number of screens.
The Company has financed its day-to-day operations principally from the
cash flow generated by its operating activities. Such cash flow totaled
$1,174,819 for the three months ended March 31, 1998, as compared to $780,455
for the comparable 1997 period, and $3,934,204 in 1997 as compared to $1,147,062
in 1996. The difference between the Company's net losses and its cash flows from
operating activities for these periods was
45
<PAGE>
principally due to non-cash depreciation and amortization expenses and increases
in accounts payable and accrued expenses.
The Company's primary capital requirements are to fund additional theater
acquisitions and for remodeling, expansion and maintenance of existing theaters.
While the Company has acquired fee-owned theaters from time to time, the Company
prefers to acquire theaters as leasehold properties in order to preserve
capital. Clearview also has historically developed, and plans to continue
developing, new theaters principally by entering into long-term leases, which
provide an opportunity to share construction and development costs with the
lessor. All of Clearview's landlords are unaffiliated third parties. As of March
31, 1998, the aggregate annual minimum lease payments for all the Company's
theaters over the next five years are as follows: 1998: $2,976,584; 1999:
$3,056,606; 2000: $2,991,443; 2001: $2,865,295; and 2002: $2,909,506. After
giving effect to the Pending Acquisitions, the AMC Acquisition and the Great
Neck/Franklin Square Acquisition, such aggregate annual minimum lease payments
would be: 1998: $3,991,672; 1999: $4,290,069; 2000: $4,239,306; 2001:
$4,049,198; and 2002: $4,109,480.
Capital expenditures, exclusive of theater acquisitions, totaled
approximately $765,000 in the first three months of 1998 and $305,000 in the
first three months of 1997. During the first quarter of 1998, the Company funded
its capital expenditures, other than theater acquisitions, through cash flow
from operations.
The Company's capital requirements in 1997 arose principally in connection
with theater acquisitions ($37.9 million), the renovation of acquired and
existing theaters ($2.4 million), the development of a new theater ($866,000)
and the addition of screens to an existing theater ($258,000). Capital
expenditures, exclusive of theater acquisitions, totaled approximately
$3,486,000 in 1997 and $318,000 in 1996. During 1997, the Company funded its
capital expenditures, including theater acquisitions, through the net proceeds
of its initial public offering of approximately $7.1 million, approximately $24
million of bank borrowings, issuance of $6.0 million of subordinated debt, the
issuance of 750 shares of Class B Preferred Stock valued at $750,000 and the
issuance of 104,297 shares of common stock, valued at approximately $1.2
million.
In February 1998, the Company amended and restated its Old Credit Facility
by obtaining a third term note ('Term Note C') totaling $5.8 million which was
used to fund in part the 1998 Acquisitions. The aggregate availability under the
Old Credit Facility was $41.8 million at March 31, 1998. On June 12, 1998, the
Old Credit Facility was repaid, and the Company entered into the New Credit
Facility providing for a secured revolving line of credit in the aggregate
principal amount of $15.0 million. The New Credit Facility will mature on June
12, 2003. The New Credit Facility is collateralized by substantially all of the
assets of the Company and contains various restrictive covenants. See
'Description of New Credit Facility.'
On April 23, 1998, the Company issued 3,000 shares of Class C Preferred
Stock for approximately $3.0 million.
On June 12, 1998, the Company received $80.0 million in aggregate gross
proceeds before fees and expenses from the Notes Offering.
The Company's future capital expenditures for planned maintenance will be
funded through cash flow from operations. In accordance with the Company's
growth strategy, Clearview intends to continue to acquire theaters and is
pursuing the acquisition of additional locations. Based on the Company's current
operations and anticipated revenue growth, management believes that cash flow
from operations and other available cash (including from the Notes Offering),
together with available borrowings under the New Credit Facility, will be
sufficient to fund the Company's growth strategy through at least the end of
1998. Thereafter, however, or in the event the Company exceeds its currently
anticipated expansion plans, the Company anticipates that it will need to seek
additional debt or equity financing to fund its growth strategy. Failure to
obtain any such financing could have a material adverse effect on the Company's
ability to achieve its growth strategy. In the absence of additional financing,
the Company believes that it is capable of funding its current operations
(including principal and interest payments as they come due) through
internally-generated cash flow from operations and existing debt financing.
46
<PAGE>
QUARTERLY RESULTS AND SEASONALITY
Historically, the most successful films have been released during the
summer months (July and August) and Thanksgiving through the year-end holiday
season. Consequently, motion picture exhibitors generally have had
proportionally higher revenues during such periods, although seasonality of
motion picture exhibition revenues 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 first run independent
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.
EFFECTS OF INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
YEAR 2000
The Company is currently evaluating the potential impact of the year 2000
on the electronic data processing and other information systems relevant to the
Company's business and is developing a plan to resolve this issue. The year 2000
issue is the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using '00' as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures. This issue creates risk for the Company from unforeseen problems in
its own computer systems and from third parties with whom the Company deals on
various transactions. Based on preliminary information, costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's results of operations, financial position or cash flows.
47
<PAGE>
BUSINESS
Clearview is a major regional first run motion picture exhibitor that
operates primarily community-based multiplex theaters in affluent suburban
communities in the New York/New Jersey metropolitan area. Clearview offers a
broad mix of first run films with a particular focus on films designed to appeal
to sophisticated moviegoers and families with younger children residing in these
communities. As of June 30, 1998, the Company operated 40 theaters with a total
of 193 screens. As of the same date, after giving effect to the Pending
Acquisitions, the Company would have had 42 theaters with a total of 200
screens. Through additions of screens to existing theaters and new theater
development, the Company also plans to add a total of 71 new screens by March
31, 1999. Based on the number of screens currently operated, the Company
believes that it is one of the largest motion picture exhibitors in the New
York/New Jersey metropolitan region and the second largest in New Jersey, thus
enabling it to compete effectively with the major national theater circuits in
its markets. As of June 30, 1998, approximately 70.0% of the Company's theaters
were the sole exhibitors in their film zones, and approximately 18.0% were the
leading exhibitors in their film zones. For the year ended December 31, 1997, on
a pro forma basis after giving effect to the 1997 Acquisitions, the 1998
Acquisitions and the Pending Acquisitions, the Company's revenues and EBITDA
would have been approximately $47.6 million and $9.2 million, respectively. For
the three months ended March 31, 1998, on a pro forma basis after giving effect
to the 1998 Acquisitions, other than the Cobble Hill Acquisition, and the
Pending Acquisitions, the Company's revenues and EBITDA would have been
approximately $11.9 million and $2.3 million, respectively.
Clearview operates clean, comfortable, visually appealing and
service-oriented theaters predominantly located in affluent towns and
communities rather than in shopping malls or near highways. The Company believes
that, in many suburban communities in the Middle Atlantic and New England
states, theaters located in town or in community-based retail centers serve
audiences that prefer the convenience and familiarity of such theaters to the
larger out-of-town megaplex theaters that appear to be the focus of the major
theater circuits. Many of the Company's target markets are in densely populated,
affluent areas consisting of numerous small municipalities with local business
districts that are well-suited to the Company's strategy of operating
community-based theaters. In many of these areas it can be difficult for theater
circuit operators to build or expand theaters into large multiplexes or
megaplexes due to a lack of affordable real estate, zoning laws and community
resistance.
Founded in 1994 with four theaters and eight screens, the Company has grown
through both acquisitions and theater development. Since May 1996, the Company
has completed 13 acquisitions, representing 30 theaters with a total of 158
screens, and entered into agreements to operate or lease an additional five
theaters with a total of 15 screens. Management has successfully integrated
these theaters into its operations by reducing operating expenses and
implementing new operating standards, management controls and information
systems. The Company has also upgraded the seating, improved the sound and
projection equipment, refurbished the interior furnishings and broadened the
concession offerings in most locations. Additionally, since early 1995 the
Company has added seven screens to existing theaters and constructed a new
five-screen theater in an existing building, resulting in an aggregate of 40
theaters with a total of 193 screens as of June 30, 1998. See '--Existing
Theaters and Pending Acquisitions.'
During the past ten years, overall movie theater attendance in the United
States has grown from 1,089 million in 1987 to 1,388 million in 1997. Admission
revenue increased from a total of approximately $4.3 billion in 1987 to
approximately $6.4 billion in 1997, or a compound annual growth rate of 4.1%.
The theatrical exhibition industry is fragmented. Although the eleven largest
theater circuits operated approximately 60% of the screens at May 1, 1997, 268
of the approximately 478 remaining exhibitors operated four or fewer screens.
There is also a strong trend toward consolidation in the motion picture
exhibition industry. Two recent major transactions combined Cineplex
(approximately 1,729 screens) with Sony/Loews (approximately 1,020 screens), and
combined Act III (approximately 832 screens) with Regal (approximately 2,337
screens). The Company believes that it has an opportunity to acquire additional
theaters as the major circuits seek to divest theaters which do not fit into
their strategic plans and independent theater operators find it increasingly
difficult to compete with larger circuits.
48
<PAGE>
OPERATING STRATEGY
The Company's objective is to expand its position as a major regional first
run motion picture exhibitor operating multiplex theaters based on strict
operating controls, principally at in-town locations or in retail centers that
are the focus of community life. The following are the key elements of the
Company's operating strategy:
Maintain and Expand Strong Regional Focus. Based on the number of screens
currently operated, the Company believes that it is one of the largest motion
picture exhibitors in the New York/New Jersey metropolitan region and is the
second largest in New Jersey, thus enabling it to compete effectively with the
major national theater circuits in its markets. In addition, at June 30, 1998,
based on the number of screens currently operated, the Company is the leading
motion picture exhibitor in such upscale suburban areas as Morris County, New
Jersey; Essex County, New Jersey; and the North Shore of Long Island. The
Company seeks to continue to acquire or develop theaters that are close to the
Company's existing theaters and to acquire or develop similar clusters of
theaters in other target markets in the Middle Atlantic and New England states.
Approximately 80% of the Company's theaters are within a 30 mile radius and all
of the Company's theaters are within a 50 mile radius. By developing clusters of
theaters, the Company generally reduces its operating expenses through the
sharing of skilled personnel and management oversight. Also, with a large number
of screens in one area, the Company can operate separate theaters as if they
were a single larger multiplex, thereby enabling the Company to offer a wide
selection of films, play successful films longer and play films with very strong
demand on a number of screens at one time.
Dominate Film Zones. The Company seeks to operate theaters that will be
the sole or leading exhibitors in their geographic film licensing zones. A
geographic film licensing zone or 'film zone' is a geographic area (typically
having a three to five mile radius in suburban markets) customarily recognized
by film distributors, in which a film is licensed for exhibition at only one
theater. As of June 30, 1998, approximately 70.0% of the Company's theaters were
the sole exhibitors in their film zones and approximately 18.0% were the leading
exhibitors in their film zones. Being the sole or leading exhibitor in a film
zone allows the Company to choose which films to exhibit from among the various
films licensed by the production companies. Management believes that this
flexibility in film selection, combined with management's experience and
expertise in selecting films for its target markets, is an important factor in
the Company's success.
Pursue Community-Based Niche Strategy. Clearview operates clean,
comfortable, visually appealing and service-oriented theaters in predominantly
affluent towns and communities rather than in shopping malls or near highways.
The Company believes that, in many suburban communities in the Middle Atlantic
and New England states, theaters located in town or in community-based retail
centers serve audiences that prefer the convenience and familiarity of such
theaters to the larger out-of-town megaplex theaters that appear to be the focus
of the major theater circuits. By concurrently showing first run commercial, art
and family-oriented films, the Company seeks to appeal to three main groups in
affluent suburban communities: baby boomers, older moviegoers and families with
younger children (10 years of age and younger). Because of its community-based
focus, Clearview can adjust its mix of films based on its sensitivity to the
tastes of the audiences in each community. Examples of successful releases at
Clearview theaters during the past twelve months include Titanic, As Good As It
Gets, L.A. Confidential, Good Will Hunting, The Apostle, Sliding Doors, The
Horse Whisperer, Mousehunt and Paulie. Also as part of its community-based
strategy, Clearview encourages community interaction and involvement through
regular participation in local fund-raising and charity functions and through
the hiring of local employees. Clearview believes that its community-based,
niche strategy is exemplified by the Company's motto, 'We Bring Neighbors to the
Movies.'
Maintain Cost Controls and Pursue Margin Enhancement. The Company seeks to
improve the profitability of its theaters by: (i) controlling theater-level
costs through centralized management; (ii) increasing efficiencies in concession
purchasing; (iii) reducing general and administrative expenses as a percentage
of revenues; and (iv) selecting films that appeal to Clearview's target
audiences but result in relatively low aggregate film rental costs as a
percentage of box office receipts. For the year ended December 31, 1997,
Clearview's box office margin (total box office revenues less film rental and
booking fees divided by total box office revenues) was 52.3%, its concession
margin (total concession revenues less cost of concession sales divided by total
concession revenues) was 83.8%, and its theater level cash flow margin (total
revenues less film rental and booking fees, cost of concession sales and theater
operating expenses divided by total sales) was
49
<PAGE>
22.4%. For the three months ended March 31, 1998, Clearview's box office margin
was 56.8%, its concession margin was 84.4% and its theater level cash flow
margin was 29.0%. The Company believes that such percentages compared favorably
with those of the five largest motion picture exhibitors for the year ended
December 31, 1997. The Company believes that its regional focus, centralized
management and emphasis on sophisticated management information systems also
create efficiencies and reduce operating and general and administrative expenses
as a percentage of revenues for most of the theaters it acquires.
Operate Clean, Modern Theaters which Appeal to Customer Base. Clearview's
theaters generally are multiplexes located in towns and communities rather than
in shopping malls or near highways. Each of the Company's theaters has at least
one auditorium equipped with digital sound. Most locations are surrounded by
stores and restaurants, with available parking nearby. An important aspect of
Clearview's operating strategy is to provide a clean, comfortable and visually
appealing environment, which usually includes chandeliers, a decorative
fireplace and silk flower arrangements. 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, provide a courtesy phone so that patrons can make free local telephone
calls and selectively add digital sound. The concession stand at each theater
offers high-margin snack and food items, such as fruit, bottled water, ice
cream, cappuccino and Swiss chocolates (items designed to appeal to the
Company's generally upscale customer base), as well as more traditional theater
concession items such as soft drinks, popcorn and an assortment of candy items.
The Company has adopted a set of procedures designed to keep its theaters clean
and to ensure proper film presentation.
GROWTH STRATEGY
The Company intends to increase revenues and cash flow by: (i) selectively
acquiring theaters in its target markets; (ii) adding screens to its existing
theaters; (iii) developing new theaters; and (iv) increasing other sources of
high margin revenues.
Selectively Acquire Theater Operations. The Company believes that one of
its strengths is its ability to identify available theaters at attractive prices
in appropriate locations. Clearview identifies many of its potential
acquisitions from the following two sources: (i) major circuits seeking to
divest theaters which do not fit into their strategic plans and (ii) independent
theater operators finding it increasingly difficult to compete with larger
circuits. In addition, Clearview believes it is able to acquire these theaters
at favorable prices as compared with prices for acquisitions of theaters that
fit more closely into the strategic plans of many of the larger theater
circuits. Potential acquisition candidates typically exhibit the following
characteristics: (i) location that strengthens Clearview's position in an
existing market or, when combined with other available acquisitions or new
theater development, provides a sufficient entree into a new market; (ii)
position as the sole or a leading exhibitor in a film zone; (iii) demographics
consistent with the Company's other locations; and (iv) availability at
favorable prices. The Company believes that it has improved the profitability of
its acquired theaters by aggressively implementing cost controls and other
measures to enhance EBITDA margins.
Add Screens to Existing Theaters. The Company adds screens to existing
theaters when the Company believes that such additions will increase revenues
and cash flow and provide sufficient return on capital. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Depending on the configuration of an existing theater, the Company may
add screens without necessarily increasing the overall dimensions of the theater
by dividing an individual auditorium into two or more smaller auditoriums.
Dividing an auditorium in this fashion can create additional revenue with only a
marginal increase in expense. In certain instances, the Company may also add
screens by expanding into adjacent space for the buildout of additional screens.
The Company currently plans to add 26 screens to existing theaters by March 31,
1999. See '--Theater Expansion and Development.'
Develop New Theaters. The Company believes that it can successfully
identify locations in suitable communities that can be developed into theaters.
The Company currently plans to develop four theaters with a total of 45 screens
in the New York/New Jersey metropolitan area and the Philadelphia main line by
March 31, 1999. See '--Theater Expansion and Development.' From time to time,
opportunities are presented to Clearview by real estate developers who wish to
enhance the value of their properties with the presence of a movie theater.
These opportunities often require limited direct investment by the Company. In
addition, due to its
50
<PAGE>
reputation for operating community-based theaters, Clearview has been approached
by local governments or community development agencies of towns in the New
York/New Jersey metropolitan area and the Philadelphia main line that are
interested in revitalizing parts of their communities and believe that a movie
theater could provide an impetus to such redevelopment.
Increase Other Sources of Revenues. Clearview seeks to increase revenues
and cash flow from sources other than admissions and concessions, including
party, theater rental and on-screen advertising revenues. For the year ended
December 31, 1997, Clearview had other revenues of approximately $420,000, or
2.4% of total revenues, and for the three months ended March 31, 1998, had other
revenues of approximately $320,000, or 3.3% of total revenues. Clearview intends
to increase these high margin revenue sources in the future. For example, in May
1998 the Company initiated a children's party program designed to maximize use
of its theaters at times when they otherwise would not be operating. In
addition, the Company has recently renegotiated its advertising contracts to
increase the rates for on-screen advertising. See '--Other Sources of Revenue.'
EXISTING THEATERS AND PENDING ACQUISITIONS
Founded in 1994 with four theaters and eight screens, the Company has since
acquired 30 theaters, entered into agreements to operate or lease five theaters
and developed one theater, resulting in an increase in the number of Clearview
theaters to 40 and the number of Clearview screens to 193. A list of the
theaters currently operated by Clearview and the Company's pending theater
acquisitions is set forth in the following table:
<TABLE>
<CAPTION>
DATE OF NO. OF NATURE OF
ACQUISITION OR LEASE COMMUNITY/ THEATER NAME COUNTY/STATE SCREENS OCCUPANCY EXPIRATION
- --------------------- -------------------------------- ---------------- ------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Dec. 21, 1994 Bernardsville Somerset, NJ 3 Lease Dec. 31, 1999(1)
(Bernardsville Cinema 3)
Dec. 21, 1994 Chester Morris, NJ 6 Lease Jan. 31, 2008(1)
(Chester Cinema 6)
Dec. 21, 1994 Madison Morris, NJ 4 Lease Dec. 31, 2000(1)
(Madison Cinema 4)
Dec. 21, 1994 Manasquan Monmouth, NJ 1 Lease Jan. 14, 2002
(Algonquin Arts Theater)
Sept. 8, 1995 Baldwin Nassau, NY 2 Operating Aug. 31, 2015(2)
(Grand Avenue Cinema) Contract
Sept. 8, 1995 New Hyde Park Nassau, NY 2 Operating Aug. 31, 2022(2)
(Herricks Cinemas) Contract
Sept. 8, 1995 Port Washington Nassau, NY 7 Operating Jan. 31, 2010(2)
(Port Washington Cinemas) Contract
May 29, 1996 Clifton Passaic, NJ 6 Lease Jan. 14, 2007
(Allwood Cinemas)
May 29, 1996 Emerson Bergen, NJ 4 Lease Dec. 31, 2006
(Emerson Quad)
May 29, 1996 New City Rockland, NY 6 Lease Dec. 31, 2017
(New City Cinemas)
May 29, 1996 Washington Twp. Bergen, NJ 3 Lease Oct. 31, 2006
(Washington Twp. Cinemas)
July 18, 1996 Bedford Westchester, NY 2 Lease Dec. 31, 2011
(Bedford Cinemas)
July 18, 1996 Mount Kisco Westchester, NY 5 Lease Dec. 31, 2003
(Mt. Kisco Cinemas)
Dec. 13, 1996 Bergenfield Bergen, NJ 5 Own (3)
(Bergenfield Cinema 5)
Dec. 13, 1996 Closter Bergen, NJ 4 Lease Aug. 31, 1999(1)
(Closter Cinema 4)
Dec. 13, 1996 Tenafly Bergen, NJ 4 Own (3)
(Tenafly Cinema 4)
July 2, 1997 Summit Union, NJ 5 Lease Dec. 31, 2007(1)
(Beacon Hill 5)
Sept. 12, 1997 Bronxville Westchester, NY 3 Own (3)
(Bronxville Cinemas)
Sept. 12, 1997 Larchmont Westchester, NY 1 Lease Sep. 30, 2016(1)
(Larchmont Cinemas)
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
DATE OF NO. OF NATURE OF
ACQUISITION OR LEASE COMMUNITY/ THEATER NAME COUNTY/STATE SCREENS OCCUPANCY EXPIRATION
- --------------------- -------------------------------- ---------------- ------- ------------ ----------------
Sept. 12, 1997 Mamaroneck Westchester, NY 4 Own (3)
(Mamaroneck Playhouse)
<S> <C> <C> <C> <C> <C>
Sept. 12, 1997 New City Rockland, NY 2 Own (3)
(Cinema 304 New City)
Sept. 12, 1997 Wayne Passaic, NJ 4 Lease Nov. 2006(1)
(Wayne Preakness Cinemas)
Nov. 7, 1997 Roslyn Nassau, NY 4 Own (3)(5)
(Roslyn Cinemas)
Nov. 21, 1997 Parsippany Morris, NJ 12 Lease Dec. 2015 (1)
(Parsippany Cinema 12)
Nov. 21, 1997 Succasunna Morris, NJ 10 Lease Dec. 31, 2019(1)
(Succasunna Cinema 10)
Dec. 9, 1997 Edison Middlesex, NJ 8 Lease Dec. 31, 2004(1)
(Edison Cinemas)
Dec. 9, 1997 Woodbridge Middlesex, NJ 5 Lease Dec. 30, 2003
(Woodbridge Cinemas)
Dec. 12, 1997 Upper Montclair Essex, NJ 4 Lease Nov. 30, 2017(1)
(Bellevue Theaters)
Dec. 12, 1997 Cedar Grove Essex, NJ 5 Lease May 31, 2010
(Cinema 23)
Dec. 12, 1997 Kinnelon Morris, NJ 8 Lease Apr. 30, 2002(1)
(Kin Mall Cinemas)
Dec. 12, 1997 Middlebrook Monmouth, NJ 10 Lease Oct. 31, 1999(1)
(Middlebrook Galleria Cinemas)
Jan. 29, 1998 Millburn Essex, NJ 2 Operating July 31, 1998(4)
(Millburn Twin Cinemas) Contract
Feb. 13, 1998 Montclair Essex, NJ 6 Lease Dec. 31, 2016(1)
(Clairidge Cinemas)
Feb. 15, 1998 Montclair Essex, NJ 2 Lease Feb. 15, 2008
(The Screening Zone)
Mar. 6, 1998 Manhasset Nassau, NY 3 Own (3)
(Manhasset Cinemas)
Mar. 6, 1998 Babylon Suffolk, NY 3 Own (3)
(Babylon Cinemas)
Mar. 23, 1998 Cobble Hill Kings, NY 5 Lease Mar. 23, 2003(1)
(Cobble Hill Cinemas)
Jun. 17, 1998 Great Neck Nassau, NY 7 Lease May 31, 2021(1)
(Great Neck Squire Cinemas)
Jun. 17, 1998 Franklin Square Suffolk, NY 6 Lease Dec. 31, 2014(1)
(Franklin Square Cinemas)
Jun. 24, 1998 Morristown Morris, NJ 10 Lease July 31, 2007(1)
(Headquarters 10)
Pending Livingston Essex, NJ 3 Own (3)
(Colony Cinemas)
Pending West Milford Passaic, NJ 4 Lease Mar. 31, 2000(1)
(West Milford Cinemas)
</TABLE>
- ------------------
(1) Under these leases, the Company has one or more renewal options.
(2) The Company has an option expiring in September 2000 to acquire the
operations and leaseholds of these theaters. The Company's right to operate
these theaters will terminate if the option is not exercised.
(3) Not applicable because the theater is or, in the case of a Pending
Acquisition, would be, owned by the Company.
(4) The Company currently operates this theater under an agreement with the
owner and has an option to purchase the theater operation and leasehold,
which it intends to exercise with a portion of the net proceeds of the Notes
Offering.
(5) During the second quarter of 1998, the Company added a screen to their
theater to increase the number of screens from three to four.
52
<PAGE>
THEATER EXPANSION AND DEVELOPMENT
Part of Clearview's growth strategy is theater expansion and development.
When considering theater expansion and development opportunities, the Company
typically analyzes the demographics, including population density and household
income data, admissions revenue data for existing theaters within a 10 to 15
mile radius of the proposed site, and projected return on investment, to assess
a location's desirability for a new theater or additional screens. The Company
also researches existing and proposed development plans of its competitors for
this purpose.
Screen Additions. Since inception, the Company has added a total of seven
screens to three existing theaters. The following table sets forth the screens
which the Company currently plans to add to existing theaters. There can be no
assurance that all or any of such additions will be made.
PROJECTED SCREEN ADDITIONS
<TABLE>
<CAPTION>
PROJECTED NUMBER OF TOTAL
OPENING DATE COMMUNITY SCREENS TO BE ADDED RESULTING SCREENS
- ------------- -------------------- ------------------- -----------------
<S> <C> <C> <C>
Oct. 1998 Mamaroneck, NY 1 5
Nov. 1998 Cedar Grove, NJ 2 7
Nov. 1998 Millburn, NJ 2 4
Nov. 1998 Kinnelon, NJ 3 11
Aug. 1998 Larchmont, NY 2 3
Nov. 1998 Manhasset, NY 1 4
Dec. 1998 Succasunna, NJ 8 18
Oct. 1998 Bronxville, NY 1 4
Nov. 1998 New Hyde Park, NY 2 4
Jan. 1999 Baldwin, NY 2 4
Mar. 1999 Port Washington, NY 2 9
-- --
26 73
</TABLE>
New Theater Development. The Company has constructed one five-screen
theater in an existing building (the Beacon Hill 5 in Summit, New Jersey), and
currently plans to develop four theaters with a total of 45 screens in the New
York/New Jersey metropolitan area and the Philadelphia main line by March 31,
1999. The following table sets forth the Company's planned new theater
development. There can be no assurance that any or all of such projects will be
completed or, if completed, that the development ultimately will prove
profitable.
PLANNED NEW THEATER DEVELOPMENT
<TABLE>
<CAPTION>
PROJECTED
OPENING DATE COMMUNITY NUMBER OF THEATERS PROJECTED NUMBER OF SCREENS
- ------------- ------------------ ------------------ ---------------------------
<S> <C> <C> <C>
Nov. 1998 Anthony Wayne, PA 1 5
Nov. 1998 Mansfield, NJ 1 15
Dec. 1998 Carmel, NY 1 15
Mar. 1999 Bayonne, NJ 1 10
- --
4 45
</TABLE>
In April 1998, the Company issued approximately $1.5 million in Common
Stock to acquire the leasehold interest and related construction permit for the
Mansfield Theater. Construction began in May 1998 and is expected to be
completed by the end of October 1998. The estimated cost of development is $3.1
million. The Mansfield Theater will be located in Warren County, New Jersey and
currently is planned to be a 15-screen multiplex. The Company began paying 50%
of the monthly rental payments of $29,167 as of May 1, 1998 and will become
liable for the full monthly rent on the earlier of the opening of the theater
and January 1, 1999. Currently there is no multiplex in Warren County, New
Jersey, and the Company is not aware of any other proposed development in that
county.
53
<PAGE>
In March 1998, Clearview entered into an agreement with a public real
estate investment trust, subject to obtaining certain approvals, to develop a
new 15-screen multiplex theater in the Carmel ShopRite Center in Putnam County,
New York. The agreement provides that after the theater is constructed Clearview
will add the seats, projection equipment and a concession stand at a cost of
approximately $1.1 million. Monthly rental payments of $22,500 are payable
beginning on the earlier of 120 days after the landlord completes construction
and the date that Clearview begins operating the theater. Construction is
expected to be completed by the end of 1998.
In February 1997, the Company entered into an agreement with a private
developer to lease a new multiplex theater to be constructed by the landlord on
a 'turn key' basis. This theater project is currently planned to include at
least 10 screens in Bayonne, New Jersey. The landlord has agreed to install all
theater seats, projection and sound equipment, concession stands and final
finishes according to the Company's specifications. The Company does not expect
to incur any capital costs for this project. Currently there is no multiplex in
Bayonne, New Jersey, and the Company is not aware of any other proposed
development in that county. Construction is expected to be completed in early
1999, at which time a subsidiary of the Company would be obligated to make
monthly rental payments of $41,667. The construction contract for this theater
has not yet been signed.
In June 1998, the Company entered into an agreement with a private
developer to develop a new multiplex theater, subject to obtaining certain
approvals, in Anthony Wayne, Pennsylvania, along the Philadelphia main line. The
estimated cost of development is $750,000. The theater is expected to have five
screens, and construction is expected to be completed by November 1998. A
subsidiary of Clearview will be obligated to make monthly rental payments of
$4,500 on the earlier of 120 days after all permits have been obtained or the
date that Clearview begins operating the theater.
FILM LICENSING
The Company's success depends to a significant extent on its knowledge of
movie-viewing trends. To augment its resources in this aspect of its business,
the Company has recently hired Mr. Craig Zeltner to serve as its Vice
President-Film. Mr. Zeltner has more than 20 years of experience as a film
buyer, particularly in film buying for the Company's target market. Clearview
also employs two film 'bookers' to assist Mr. Zeltner. 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 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. 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.
Films are licensed either from film distributors owned by 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 suburban markets, depending primarily on population density. Of
Clearview's current theaters, approximately 70.0% are the sole exhibitors in
their film zones, permitting the Company to choose which films it wishes to
exhibit at these theaters, and approximately 18.0% are the leading exhibitors in
their film zones.
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 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.
54
<PAGE>
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 film rental fee. 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% to 40% of box office receipts for the licensed film and
often decline to 30% to 35% 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 are 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. Although many distributors provide first run
movies to the motion picture exhibition industry, distribution has been
dominated historically 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 it has good relationships with these distributors. 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
generally cooperated with the Company when it seeks to move prints, modify the
length of a film's run or change a film's rental fee. 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 15
distributors to the Company for 1996 and 1997, ranked by the number of films
shown.
55
<PAGE>
DISTRIBUTORS RANKED BY NUMBER OF FILMS EXHIBITED
<TABLE>
<CAPTION>
1996 1997
- ------------------------------- -------------------------------
NAME # OF FILMS NAME # OF FILMS
- ----------------- ---------- ----------------- ----------
<S> <C> <C> <C>
Buena Vista 31 Buena Vista 29
Sony 22 Sony 27
Warner Brothers 21 Warner Brothers 25
Miramax 20 Paramount 22
Paramount 17 20th Century Fox 21
20th Century Fox 16 Miramax 18
MCA/Universal 15 New Line 14
MGM/UA 13 MCA/Universal 11
New Line 9 MGM/UA 7
Gramercy 6 Gramercy 6
Fine Line 4 Sony Classic 5
Orion 4 October 5
Samuel Goldwyn 4 Fox Search Light 4
Sony Classic 4 Orion 3
October 3 Fine Line 3
Dream Works 3
</TABLE>
CONCESSIONS
Concession sales are generally the second largest source of revenue for the
Company after box office receipts, representing approximately 22.7% of the
revenue for the year ended December 31, 1997 and 23.6% of revenue for the three
months ended March 31, 1998. The Company has devoted considerable management
effort to increasing concession sales and improving concession margins. The
Company's concession margin was 83.8% for the year ended December 31, 1997 and
84.4% for the three months ended March 31, 1998. The Company's efforts include
implementing the following strategies:
Tailoring product mix to customer base. The Company's mix of concession
items reflects the preferences of its customer base. While Clearview's theaters
provide the traditional concession items such as popcorn, soda and candy, the
Company also offers items which appeal to more upscale moviegoers. Examples of
these products include cappuccino, Swiss chocolates, fruit and bottled water.
The Company varies its concessions by theater based on preferences of the
particular community. The Company believes its product mix further enhances the
appeal of its theaters to its patrons by differentiating its theaters from those
of larger circuits.
Cost control. The Company negotiates its concession supplies on a bulk
rate basis for all of its theaters. The Company often realizes improvements in
the concession margins of acquired theaters by integrating their concession
purchasing with the Company's existing theaters. The Company believes that
acquisitions of additional theaters would further increase the Company's ability
to obtain more favorable pricing from concession distributors.
56
<PAGE>
OTHER SOURCES OF REVENUE
Clearview also seeks to increase revenues and cash flow from sources other
than admissions and concessions, including party, theater rental and on-screen
advertising revenues. For the year ended December 31, 1997, Clearview had other
revenues of approximately $420,000, or 2.4% of total revenues, and for the three
months ended March 31, 1998 had other revenues of approximately $320,000, or
3.3% of total revenues. Clearview intends to increase these high margin revenue
sources in the future. For example, in May 1998 the Company initiated a
children's party program which is designed to maximize use of its theaters at
times when they otherwise would not be operating. The Company also rents certain
of its theaters to special interest groups, receiving a fixed payment for the
screen rental and incremental concession income. In addition, the special
interest groups supply the films and pay the film rental costs. With respect to
on-screen advertising, the Company sells advertising space on its screens prior
to the exhibition of films in both slide form, which typically promote local
area businesses, and rolling stock form, which focus more on national
promotions. The slide and rolling stock promotions are sold through third
parties. The Company has recently renegotiated its contracts to increase the
rates for slide and rolling stock promotions.
The following table shows the Company's other revenues for each of the last
three years and for the quarter ended March 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- QUARTER ENDED
1995 1996 1997 MARCH 31, 1998
------- -------- -------- --------------
<S> <C> <C> <C> <C>
Other Revenues $31,895 $141,420 $421,427 $319,631
Other Revenues as a
% of Total Revenues 1.4% 1.7% 2.4% 3.3%
</TABLE>
INDUSTRY OVERVIEW
Theatrical exhibition is the primary initial distribution channel for new
motion picture releases. The Company believes that the successful theatrical
release of a movie abroad and in 'downstream' distribution channels, such as
home video and pay-per-view, network, syndicated and satellite television, is
largely dependent upon its successful theatrical release in the United States.
The Company further believes that the emergence of new motion picture
distribution channels has not adversely affected attendance at theaters and that
these distribution channels do not provide an experience comparable to the
out-of-home experience of viewing a movie in a theater. The Company also
believes that the public will continue to recognize the advantages of viewing a
movie on a large screen with superior audio and visual quality, while enjoying a
variety of concessions and sharing the experience with a large audience. In
addition, when compared with other forms of entertainment, such as many sporting
events and cultural events, movies remain one of the best entertainment values
for families.
The theatrical exhibition industry is fragmented. Although the 10 largest
theater circuits operated approximately 60% of the screens at May 1, 1997, 268
of the remaining approximately 478 exhibitors operated four or fewer screens.
From 1987 through 1997, the net number of indoor screens increased from
approximately 21,048 to approximately 30,825. There is a strong trend toward
consolidation in the motion picture exhibition industry. Two recent major
transactions combined Cineplex (approximately 1,729 screens) with Sony/Loews
(approximately 1,020 screens), and combined Act III (approximately 832 screens)
with Regal (approximately 2,337 screens).
The multiplex theater was introduced to the moviegoing public in the 1960's
and multiplexes are now considered the industry standard. The advantages of a
multiplex format include the following: (i) the ability to play a range of
movies to fit the various tastes of the movie-going 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 or more auditoriums simultaneously, thereby effectively increasing the
viewing capacity for a popular film.
Revenues for the theatrical exhibition industry are a function of theater
attendance, ticket prices, trends in movie releases and concession sales.
According to data released by the Motion Picture Association of America, overall
movie theater attendance in the United States has grown from 1,089 million in
1987 to 1,388 million in 1997. The Company believes that the primary reason for
year-to-year variances in attendance is the overall
57
<PAGE>
audience appeal of the films released and, to a lesser extent, general economic
conditions. Admissions revenues increased from a total of approximately $4.3
billion in 1987 to approximately $6.4 billion in 1997, or a compound annual
growth rate of 4.1%. Over the same period, the average ticket price increased at
a compound annual growth rate of approximately 1.6%, whereas the U. S. Consumer
Price Index increased at a compound annual growth rate of approximately 3.4%.
The following table represents the results of a survey by the Motion Picture
Association of America outlining the historical trends in U. S. theater
attendance, average ticket prices and box office sales for the last eleven
years.
<TABLE>
<CAPTION>
AVERAGE TICKET PRICE U.S. BOX OFFICE SALES
YEAR ATTENDANCE (MILLIONS) -------------------- ---------------------
- ----- --------------------- (IN DOLLARS) (DOLLARS IN BILLIONS)
<S> <C> <C> <C>
1987 1,089 3.91 4.25
1988 1,085 4.11 4.46
1989 1,263 3.99 5.03
1990 1,189 4.23 5.02
1991 1,141 4.21 4.80
1992 1,173 4.15 4.87
1993 1,244 4.14 5.15
1994 1,292 4.18 5.40
1995 1,263 4.35 5.49
1996 1,339 4.42 5.91
1997 1,388 4.59 6.37
</TABLE>
- ------------------
Sources: MPAA; 1989-1997 figures for attendance and average ticket prices based
on Ernst & Young survey; previous years based on CPI-W index.
From 1987 to 1997, the number of movies released remained relatively
constant, and the Company expects that trend to continue, with some annual
variability. The Company also believes that movies generally are being released
to a wider number of screens as studios seek to recover higher costs.
Historically, the motion picture industry was somewhat seasonal, as major film
distributors generally released the films expected to have the greatest
commercial appeal during the summer and during the Thanksgiving through year-end
holiday season. The seasonality of motion picture exhibition has become less
pronounced in recent years as studios have begun to release major motion
pictures somewhat more evenly throughout the year.
The Company believes that certain demographic trends favor the theater
exhibition industry. Information obtained from the U.S. Bureau of Census
indicates that the number of 10 to 20 year olds in the United States, the
largest moviegoing segment of the population, was projected to grow an aggregate
of 5.8% from 1996 through the year 2000. Furthermore, of particular significance
for Clearview's target audiences, according to the Motion Picture Association of
America, the number of patrons over 40 years old as a percentage of the total
movie audience has increased from approximately 20% in 1987 to approximately 33%
in 1997. According to American Demographics, film attendance by the age groups
45-54 and 55-64 is expected to grow 14.5% and 12.2%, respectively, in years
1996-2000 and 14.1% and 28.5% in years 2000-2006. Also according to American
Demographics, based on 1996 data, the percentage of adults who attend movies at
least once a month rises with household income.
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, seating capacity, location and reputation of
an exhibitor's theaters, 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 489 domestic motion picture exhibitors as of May
1, 1997. Motion picture exhibitors vary substantially in size, from small
independent operators of single-screen theaters to large national
58
<PAGE>
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 of those markets 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 critical, as many of the Company's
potential theater locations are 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 assurance that existing or future delivery systems will not
have an adverse impact on attendance at movie theaters. The Company, however,
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 March 31, 1998, the Company had 810 employees, of whom 18 were
employed at the corporate headquarters, 6 were district managers, 17 were
salaried theater managers and 769 were hourly employees, including 216 theater
managers and/or projectionists. 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, the
Company's six district managers, each of whom also manages a theater within his
district, have 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 it has a positive working
relationship with the union.
REGULATORY ENVIRONMENT
The distribution of motion pictures is in large part regulated by U.S.
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 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 U.S. 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 currently does not anticipate that such compliance will require the
Company to expend substantial funds.
59
<PAGE>
The Company's theater operations are also subject to U.S. 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, 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 otherwise operates under contract all of its theaters
other than eight theaters located in Tenafly and Bergenfield, New Jersey, and
Bronxville, Mamaroneck, New City, Manhasset, Babylon and Roslyn, New York. Those
eight theaters are owned by the Company. The theaters located in Baldwin, New
Hyde Park and Port Washington, New York are being operated under agreements
pursuant to which the Company pays rent to the landlords and has the right to
acquire the underlying leaseholds and theater operations upon payment of an
amount to be calculated based on the operating cash flow of the theaters. This
option will expire in September 2000 if not exercised, and the Company's right
to lease the theaters would terminate in such event. The Company also leases a
theater located in Millburn, New Jersey, that it intends to purchase pursuant to
an option for approximately $1.1 million with a portion of the net proceeds of
the Notes Offering.
When Clearview develops a theater or negotiates directly with a landlord,
the term of the relevant lease, including all renewal options, is usually more
than 25 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 or an option to purchase the theater,
and that theater is not material to the Company's business and future
operations. All of Clearview's landlords are unaffiliated third parties. As of
March 31, 1998, the aggregate annual minimum lease payments for all of the
Company's theaters over the next five years are as follows: 1998: $2,976,584;
1999: $3,056,606; 2000: $2,991,443; 2001: $2,865,295; and 2002: $2,909,506.
After giving effect to the Pending Acquisitions, the AMC Acquisition and the
Great Neck/Franklin Square Acquisition, such aggregate annual minimum lease
payments would be: 1998: $3,991,672; 1999: $4,290,069; 2,000: $4,239,306; 2001:
$4,049,198; and 2002: $4,109,480.
The Company's corporate office is located in approximately 4,000 square
feet of space in Chatham, New Jersey, and is subject to a lease agreement, the
term of which expires on December 31, 2002.
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 management believes would have a material adverse effect upon
the Company.
60
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Under the Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws, the members of the Board of Directors are divided
into two groups; one group (the 'Common Directors') is elected by the holders of
the Common Stock and the other group (the 'Preferred Directors') is elected by
the holders of the Class A Preferred Stock. Further, the Common Directors are
divided into three classes, with the classes as equal in number as possible. At
each annual meeting of stockholders, Common Directors are elected for three-year
terms to succeed the Common Directors of the class whose terms are expiring. The
Preferred Directors are elected for one-year terms.
Set forth below is certain information 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 and Director
Paul Kay 57 Senior Vice President--Operations
Craig L. Zeltner 47 Vice President--Film, and President--Cinema Services
Division
Sueanne Hall Mayo 51 Vice President--Management Information Systems,
Assistant Secretary and Director
Joan M. Romine 46 Treasurer and Chief Financial Officer
Robert D. Lister 29 General Counsel and Secretary
Wayne L. Clevenger 54 Director
Robert G. Davidoff 70 Director
Philip M. Getter 61 Director
Brett E. Marks 36 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 in 1994.
He was the President of Clearview Cinema Corp. from 1987 to 1993. Mr. Mayo
founded and was President of Clearview Leasing Corporation, a lessor of computer
peripherals for larger scale computer systems, from 1981 to 1987. Mr. Mayo is a
member of the Foundation of Motion Picture Pioneers and the Motion Picture Club.
He is the spouse of Sueanne Hall Mayo. Mr. Mayo is a Class III Common Director,
with a term expiring in 2000.
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 through 1994.
PAUL KAY was appointed Senior Vice President--Operations on February 23,
1998 and had been the Vice President--Operations of the Company since its
incorporation. He was the vice president and general manager of Clearview Cinema
Corp. from 1987 to 1993. Prior to joining Clearview, Mr. Kay was an independent
theater owner and had held various management positions with Universal Pictures
and Paramount Pictures. Mr. Kay has over 30 years of experience in the film
industry.
CRAIG ZELTNER was appointed Vice President--Film and President of the
Company's Cinema Services Division on February 23, 1998. Prior to joining
Clearview, Mr. Zeltner was the President of Cinema Services, Inc., an
independent film buying service, for more than 20 years. Prior to that, Mr.
Zeltner held various positions as a film buyer and in the advertising and
publicity divisions of Loew's Theater, Esquire Theaters and Mid-States Theaters.
SUEANNE HALL MAYO has been the Vice President--Management Information
Systems and Assistant Secretary of the Company since 1997, and a director of the
Company since its incorporation. She joined the Company in 1994 as its Vice
President--Finance and Treasurer. Ms. Mayo was the Treasurer of Clearview Cinema
Corp. from 1987 to 1993. Ms. Mayo has more than 25 years of experience in
computerized accounting
61
<PAGE>
systems. She is married to A. Dale Mayo. Ms. Mayo is a Class II Common Director,
with a term expiring in 1999.
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 and Treasurer of Hanita Cutting Tools, Inc., a U.S. subsidiary of an
international metalworking company, from 1988 through 1994.
ROBERT D. LISTER has been the General Counsel and Secretary of the Company
since March 1998. From September 1993 through March 1996, Mr. Lister was an
attorney with Kelley Drye & Warren, a New York law firm, and served as associate
general counsel of Merit Behavioral Care Corporation, a behavioral healthcare
company, from March 1996 until his employment by the Company.
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. ('MidMark Associates'), the general partner of MidMark Capital,
L.P. ('MidMark'), a small business investment company registered with the Small
Business Administration, since 1994. Mr. Clevenger has been a managing director
of MidMark Management, Inc., ('MidMark Management') a private investment
management company, since 1989. Mr. Clevenger is a Preferred Director.
ROBERT G. DAVIDOFF has been a director of the Company since 1994. He has
been a managing director of Carl Marks & Co., Inc., a general partner of CMNY
Capital II, L.P. ('CMNY'), a small business investment company registered with
the Small Business Administration and a managing director of CMCO, Inc.
('CMCO'), a New York corporation, since 1982. 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 is a Class II Common
Director, with a term expiring in 1999.
PHILIP M. GETTER has been a director of the Company since October 1997. He
has been a Managing Director of Prime Charter Ltd. ('Prime Charter') since April
1996, and was Senior Vice President of Prime Charter for more than five years
prior thereto. Mr. Getter is a member of the League of American Theater Owners
and Producers. Mr. Getter is a Class III Common Director, with a term expiring
in 2000.
BRETT E. MARKS has been a director of the Company since its incorporation
and was its Vice President-- Department of Development from such date to 1997.
He has been an executive vice president of First New York, a realty brokerage
firm specializing in commercial leasing and investment sales, since 1987, and
the president of Marks Capital Management, a real estate management company,
since 1989. Mr. Marks is a Class I Common Director, with a term expiring in
1998.
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,
the general partner of MidMark, since 1994; and a managing director of MidMark
Management since 1989. Mr. Newman also serves on the Board of Directors of First
Brands Corporation. Mr. Newman is a Preferred Director.
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. See 'Certain
Transactions.'
THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997 ('Fiscal 1997'), the Board
of Directors met on one occasion and acted by unanimous written consent fourteen
times. The Board has an Audit Committee, but does not have standing compensation
or nominating committees.
The members of the Audit Committee are Messrs. A. Dale Mayo, Robert G.
Davidoff and Philip M. Getter. The Audit Committee reviews matters relating to
the quality of financial reporting and internal accounting
62
<PAGE>
controls and the nature, extent and results of the audits by the Company's
independent auditors, and maintains communications between the Company's
auditors and the Board of Directors. The Audit Committee held no meetings in
Fiscal 1997, and last met April 15, 1998.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chairman of the Board, President and Chief Executive Officer, the
only executive officer of the Company whose annual salary and bonus exceeded
$100,000 during Fiscal 1997.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for each of the two
fiscal years ended December 31, 1997 for the Company's Chief Executive Officer.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------------------------------- UNDERLYING ALL OTHER
NAME AND OTHER ANNUAL OPTIONS COMPENSATION
PRINCIPAL POSITION (1) YEAR SALARY ($) BONUS ($) COMPENSATION($) (3) ($)
- ---------------------------------- ---- ---------- --------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A. Dale Mayo(2)
Chairman of the Board, Chief
Executive Officer and President 1997 120,000 104,500 -- 50,000 --
1996 99,167 37,371 -- -- --
</TABLE>
- ------------------
(1) No other officer earned more than $100,000 in total annual salary and bonus
for either of the two fiscal years ended December 31, 1997.
(2) Since May 29, 1996, Mr. Mayo's compensation has been determined in
accordance with his 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
$5,000,000.
(3) Represents options granted pursuant to the Company's 1997 Stock Incentive
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information with respect to stock options
granted to Mr. Mayo during Fiscal 1997 under the Company's 1997 Stock Incentive
Plan. The options listed below are included in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN FISCAL PRICE EXPIRATION
NAME GRANTED(1) YEAR ($/SH) DATE
- ----------------------------- -------------------- ------------------- -------- ----------
<S> <C> <C> <C> <C>
A. Dale Mayo 50,000 40.8% 8.00 8/18/2007
</TABLE>
- ------------------
(1) The options were granted under the Company's 1997 Stock Incentive Plan. The
exercise price of the options was set at 100% of the fair market value of
the shares on the date of grant. The options have a ten-year term and become
exercisable over four years from the date of grant in installments of 5,000,
12,500, 15,000 and 17,500 shares, respectively, subject to earlier vesting
or termination in certain circumstances. In the event of a change in control
(as defined in the 1997 Stock Incentive Plan), options become fully
exercisable. The options will remain exercisable for one year following a
termination of employment by reason of death, disability or retirement but
will expire on the date of termination for any other reason. The exercise
price may be paid by delivery of cash or shares owned for more than six
months, and any income tax obligations related to exercise may be satisfied
by surrender of shares received upon exercise, subject to certain
conditions.
63
<PAGE>
The table below sets forth information with respect to the number of
unexercised options held by Mr. Mayo on December 31, 1997 on a pre-tax basis.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------- ------------------------------- -------------------------
<S> <C> <C>
A. Dale Mayo -0-/50,000 -0-/162,500
</TABLE>
- ------------------
(1) Computed as the difference between the aggregate fair market value of the
shares subject to the options on December 31, 1997, based on the closing
price of the Common Stock on the AMEX on that date, and the aggregate
exercise price of the options.
EMPLOYMENT AGREEMENT
Pursuant to an Employment Agreement by and between the Company and Mr. Mayo
dated May 29, 1996 (the 'Mayo 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
annual 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 Mayo Employment Agreement expires on May 29, 2003. Thereafter, the term of
the Mayo Employment Agreement will be automatically extended for successive
one-year periods ending on May 29 of each year, unless terminated by either
party upon at least six months' advance notice. The Mayo 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 50 mile radius of any theater owned or operated by the Company as of
the date of that termination.
64
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to a Contribution and Exchange Agreement dated December 21, 1994,
the Company issued to Mr. Mayo and Mr. 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 of the
Subsidiaries with an aggregate principal amount of $250,000. The principal
assets of the Subsidiaries were the leases for the Company's existing movie
theaters in Bernardsville, Chester, Madison and Manasquan, New Jersey and the
related leasehold improvements and equipment. Concurrent with that contribution
and pursuant to an Investment and Stockholders Agreement dated December 21, 1994
(the 'Investment Agreement'), the Company sold 150,000 shares of Common Stock of
the Company to CMNY for an aggregate purchase price of $500,000 in cash. Mr.
Davidoff, a Common Director, is a general partner of CMNY and a managing partner
of CMCO.
Mr. 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 for 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, Mr. Mayo had sold to Mr. 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, Mr. Marks had loaned CCC
Madison Triple Cinema Corp. $125,000 and received a promissory note in exchange.
In May 1994, Mr. Mayo had formed CCC Manasquan Cinema Corporation to be the
lessee of the Algonquin Theater in Manasquan, New Jersey.
No third party was retained by the Company, CMNY, Messrs. Mayo or Marks to
value the interests being exchanged by Messrs. 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 arm's length
negotiations between Messrs. Mayo and Marks and a representative of CMNY. Under
the Investment Agreement, CMNY had the right to sell its shares of Common Stock
to the Company during a 30-day period commencing in 2002 at a price based upon a
formula set forth therein and, if CMNY did not exercise that right, the Company
had the right to purchase those shares of Common Stock from CMNY during the
90-day period commencing after the expiration of such 30-day period at a price
based upon the same formula. CMNY and the Company terminated such repurchase and
sale rights in connection with the Common Stock Offering.
As of June 1, 1997, Mr. Marks and the Company entered into a consulting and
confidentiality agreement pursuant to which Mr. Marks agreed to assist the
Company as a consultant in the identification of possible locations for the
development of theaters and of potential acquisition candidates and provide
other services as requested by the Company. Mr. Marks is also an executive vice
president of First New York. To the extent, if any, that Mr. Marks identifies
any person who is interested in leasing a site to the Company 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 Mr. Marks could
then be entitled to a commission from First New York.
In connection with the acquisition of the UA I Theaters, First New York and
Mr. Marks received commissions of $259,500 and $77,850, respectively, paid by
United Artists. In connection with the Company's acquisition of a three-screen
theater in Roslyn, New York, the Nelson-Ferman Theaters, the CJM Theaters, a
six-screen theater in Montclair, New Jersey, two three-screen theaters in
Manhasset and Babylon, New York, the Cobble Hill Acquisition and the Great
Neck/Franklin Square Acquisition, NY, Mr. Marks received commissions of
approximately $10,000, $3,500, $5,000, $2,500, $34,200, $20,000, and $25,000,
respectively. In addition, in connection with the Company's lease of office
space in Chatham, New Jersey, Mr. Marks received a commission of approximately
$5,000. In order to formalize the relationships among the parties, First New
York, Mr. Marks and Clearview entered into an agreement on September 1, 1997. In
that agreement, First New York acknowledged that Mr. Marks, as a consultant to
Clearview, may from time to time engage in activities that may, under other
circumstances, result in commissions being earned by First New York and Mr.
Marks, but that Clearview has sole discretion to determine whether any such
activity will result in commissions being payable to First New York or Mr.
Marks.
65
<PAGE>
On August 31, 1995, CMNY, CMCO and Mr. Davidoff each purchased an 8% Note
in the principal amounts of $300,000, $50,000 and $50,000, respectively. In
connection with the sale of these 8% Notes, the Company issued to each purchaser
warrants ('A/B Warrants') to purchase 75 shares, 12.5 shares and 12.5 shares of
Common Stock, respectively. On October 11, 1995, Mr. Davidoff and CMCO each
purchased an additional 8% Note in the principal amount of $50,000. In
connection with the sale of these 8% Notes, the Company issued to each purchaser
A/B Warrants to purchase 12.5 shares of Common Stock. On December 13, 1996, Mr.
Davidoff and CMCO each purchased an additional 8% Note due December 13, 1998 in
the principal amount of $300,000. In connection with the sale of these 8% Notes,
the Company issued to each purchaser A/B Warrants to purchase 37.5 shares of
Common Stock. In connection with the Common Stock Offering, the holders of the
A/B Warrants exchanged 162.5 of the A/B Warrants for an aggregate of 66,000
shares of Common Stock.
In October 1997, the Company repaid the 8% Notes issued during 1995 from
borrowings under the Old Credit Facility. Pursuant to an agreement among the
Company, CMCO and Mr. Davidoff dated December 12, 1997, CMCO and Mr. Davidoff
each exchanged their 8% Notes issued in 1996 for 300 shares of Class B Preferred
Stock. In connection with this exchange, CMCO and Mr. Davidoff terminated the
remaining A/B Warrants.
The terms of the 8% Notes, the A/B Warrants and the agreements related to
the termination and exchange transactions described above were negotiated at
arm's length by Mr. Davidoff, for himself and as a representative of CMNY and
CMCO, and the Company.
Messrs. Clevenger and Newman, each a Preferred Director, are managing
directors of MidMark Associates, 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 (the 'Preferred Warrants') to purchase a total of 471
shares of Class A Preferred Stock in two transactions in 1996. Pursuant to the
Purchase Agreements under which MidMark acquired its shares of Class A Preferred
Stock and the Preferred Warrants, MidMark acquired the right to sell to the
Company, under certain circumstances, those shares of Class A Preferred Stock or
those shares of Common Stock into which those shares were converted (the 'Put
Right'). In connection with the Common Stock Offering, MidMark terminated the
Put Right in exchange for 60,000 shares of Common Stock of the Company and
exchanged its Preferred Warrants for a new Warrant ('Class A Warrant')
exercisable for 282,600 shares of Common Stock of the Company.
In accordance with a Consulting Agreement between 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 August 22, 2003, unless sooner terminated
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.
Mr. Getter, a Common Director, is a Managing Director of Prime Charter.
Prime Charter acted as the representative of the several underwriters
(collectively, the 'IPO Underwriters') who purchased an aggregate of 1,150,000
shares (including 150,000 shares purchased solely to cover over-allotments) of
the Common Stock in the Common Stock Offering.
Pursuant to the terms of the Underwriting Agreement between the Company and
Prime Charter dated August 18, 1997 (the 'IPO Underwriting Agreement'), the
Company paid Prime Charter on behalf of the IPO Underwriters $736,000 for
discounts and commissions and $276,940 for additional expenses incurred by Prime
Charter in connection with the Common Stock Offering. In addition, the Company
sold to Prime Charter for nominal consideration warrants to purchase an
aggregate of 100,000 shares of Common Stock (the 'IPO Underwriter Warrants').
The IPO Underwriter Warrants are exercisable for a four-year period commencing
on August 12, 1998. Also commencing on August 12, 1998, the Company will (i) be
obligated for five years to register, pursuant to the Securities Act, the shares
of Common Stock issued or issuable upon exercise of the IPO Underwriter Warrants
and (ii) be obliged for seven years to include shares of Common Stock in any
appropriate registration statement which may be filed by the Company.
Prime Charter has the right to send a representative to observe each
meeting of the Board of Directors until August 2002. At Prime Charter's
election, in lieu of such representative, Prime Charter may require the Company
66
<PAGE>
to use its reasonable best efforts to elect one designee of Prime Charter to the
Board of Directors for the longer of (i) two years following the consummation of
the Common Stock Offering or (ii) up to five years following consummation of the
Common Stock Offering. Mr. Getter is Prime Charter's designee on the Board of
Directors. Prime Charter and its affiliates are the beneficial owners of at
least 50% of the IPO Underwriter Warrants and/or the underlying shares of Common
Stock.
Prior to the Common Stock Offering, there was no public market for the
Common Stock. Accordingly, the Common Stock Offering price was determined by
negotiation between the Company and Prime Charter.
All of the transactions described above were negotiated at arm's length
among the various parties thereto and the Company believes that each of these
transactions has terms that would be appropriate in a transaction between
unaffiliated parties and that are fair to the Company as a whole. It is the
policy of the Company 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.
67
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the Common Stock
as of June 30, 1998 by each beneficial owner of more than 5% of the outstanding
Common Stock, each director, and all of the Company's directors and executive
officers as a group. All of the Class A Preferred Stock is owned by MidMark. All
of the Class C Preferred Stock is owned by Marshall Capital Management, Inc., an
affiliate of Credit Suisse First Boston Corporation. Unless otherwise indicated,
the holders of all shares shown in the table have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NAME AND ADDRESS(1) NUMBER PERCENT
- ------------------------------------------------------------------------ --------- -------
<S> <C> <C>
A. Dale Mayo(2) 878,802 38.1%
MidMark Capital, L.P.(3) 527,400 19.0%
Emerson Cinema, Inc.(2)(4) 208,200 9.0%
CMNY Capital II, L.P.(5) 184,080 8.0%
Marshall Capital Management, Inc.(6) 163,916 6.6%
Wayne L. Clevenger(3)(7) 527,400 19.0%
Robert G. Davidoff(5)(8) 216,000 9.4%
Philip M. Getter(9) -- --
Brett E. Marks(2)(10) 117,600 5.1%
Denis Newman(3)(7) 527,400 19.0%
Sueanne Hall Mayo(11) -- --
All directors and executive officers as a group(2) 1,622,202 58.5%
</TABLE>
- ------------------
(1) The address of each person set forth above is 97 Main Street, Chatham, New
Jersey 07928, except as otherwise noted.
(2) Mr. Mayo owns directly 318,000 shares of Common Stock. The other 560,802
shares are owned by other stockholders of the Company, including Emerson
Cinema, Inc. and Mr. Marks, 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 20
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 and Messrs. Clevenger and Newman is c/o MidMark
Associates, Inc., 466 Southern Boulevard, Chatham, New Jersey 07928. MidMark
beneficially owns 527,400 shares of Common Stock by means of its ownership
of (i) 60,000 shares of Common Stock and (ii) 779 shares of Class A
Preferred Stock, which represent all of the outstanding shares of Class A
Preferred Stock, and which are convertible into 467,400 shares of Common
Stock.
(4) The address for Emerson Cinema, Inc. is c/o Roxbury Cinemas, Inc., Route 10,
Succasunna, New Jersey 07054.
(5) The address for CMNY and Mr. Davidoff is c/o Carl Marks & Co., Inc., 135
East 57th Street, New York, New York 10022.
(6) Represents the shares of Common Stock into which the Class C Preferred Stock
was convertible at June 30, 1998. See 'Description of Capital Stock--Class C
Preferred Stock.' The address for Marshall Capital Management, Inc. is 11
Madison Avenue, New York, New York 10010.
(7) Comprises the shares owned by MidMark. Both Mr. Clevenger and Mr. Newman
disclaim beneficial ownership of the shares of Common Stock beneficially
owned by MidMark.
(8) Includes 184,080 shares owned by CMNY and 15,960 shares owned by CMCO. Mr.
Davidoff disclaims beneficial ownership of the shares of Common Stock owned
by either CMNY or CMCO.
(9) The address for Philip M. Getter is 810 Seventh Avenue, 9th Floor, New York,
New York 10019.
(10) The address for Mr. Marks is c/o First New York, 310 Madison Avenue, New
York, New York 10017.
(11) Ms. Mayo disclaims beneficial ownership of all of the shares beneficially
owned by Mr. Mayo.
68
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Old Notes were issued and the New Notes will be issued pursuant to an
Indenture (the 'Indenture') dated as of June 12, 1998 between the Company, the
Subsidiary Guarantors and The Bank of New York, as trustee (the 'Trustee'), a
copy of which is included as an exhibit to the Registration Statement of which
this Prospectus forms a part. The terms of the New Notes will be identical in
all material respects with the terms of the Old Notes, except for certain
transfer restrictions, registration rights and terms providing for an increase
in the interest rate on the Old Notes under certain circumstances relating to
the registration of the New Notes. The New Notes and the Old Notes are deemed
the same series of Notes under the Indenture and are entitled to the benefits
thereof. Accordingly, unless specifically stated to the contrary, the following
is a summary of certain provisions of the Indenture and the Notes that is
equally applicable to the Old Notes and the New Notes. Such summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture (including the definitions of
certain terms therein and those terms made apart thereof by the Trust Indenture
Act of 1939, as amended (the 'Trusted Indenture Act')) and the Notes.
Capitalized terms used in the following description and not otherwise defined
therein shall have the meanings assigned to them in the Indenture. Copies of the
Indenture and the Registration Rights Agreement are available as set fourth
above under 'Available Information.' The definitions of certain terms used in
the following summary are set forth below under '--Certain Definitions.' For
purposes of this summary, the term 'Company' refers only to Clearview Cinema
Group, Inc. and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Company and rank pari
passu in right of payment with all future senior indebtedness of the Company. As
of March 31, 1998, on a pro forma basis giving effect to the Transactions, the
Company would have had $80.0 million of indebtedness outstanding, all of which
is represented by the Notes, and would have had up to $15.0 million of secured
revolving credit borrowings available under the New Credit Facility. The
Indenture permits the incurrence of additional senior indebtedness in the
future.
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company is
able to designate future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries are subject to many of the restrictive covenants set forth in the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $80.0 million and
mature on June 1, 2008. Interest on the Notes accrues at the rate of 10 7/8% per
annum and is payable semi-annually in arrears on June 1 and December 1,
commencing on December 1, 1998, to Holders of record on the immediately
preceding May 15 and November 15. Interest on the Notes accrues from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months. Principal, premium, if any, and
interest and liquidated damages as set forth in the Indenture (the 'Liquidated
Damages') on the Notes are payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Notes at their respective addresses set forth
in the register of Holders of Notes; provided that all payments of principal,
premium, interest and Liquidated Damages with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Old Notes were, but the New Notes will be,
issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are fully and
unconditionally guaranteed, on a joint and several basis (the 'Subsidiary
Guarantees'), by the Subsidiary Guarantors. The Subsidiary Guarantors include
all of the Company's Subsidiaries in existence on the date of the Indenture,
each of which is currently
69
<PAGE>
wholly-owned by the Company. The Subsidiary Guarantee of each Subsidiary
Guarantor ranks pari passu with all senior indebtedness of such Subsidiary
Guarantor. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, 'Risk Factors--Fraudulent Conveyance Matters.'
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture and the
Registration Rights Agreement; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described above under the caption '--Incurrence of
Indebtedness and Issuance of Preferred Stock.' Notwithstanding the foregoing
clause (iii), each Subsidiary Guarantor may consolidate with or merge into the
Company or another Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See 'Repurchase at the Option of Holders--Asset Sales.'
As of March 31, 1998, on a pro forma basis after giving effect to the
Transactions, the Subsidiary Guarantors would have had no indebtedness
outstanding other than the Subsidiary Guarantees of the Notes and approximately
$39,000 of capital leases.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to June 1, 2003.
Thereafter, the Notes are subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
2003.......................................................... 105.4375%
2004.......................................................... 103.6250
2005.......................................................... 101.8125
2006 and thereafter........................................... 100.0000
</TABLE>
Notwithstanding the foregoing, at any time prior to June 1, 2001, the
Company may on any one or more occasions redeem up to 33% of the aggregate
principal amount of Notes originally issued under the Indenture at a redemption
price of 110.875% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of a public offering of common stock of the Company or the
net cash proceeds from a Strategic Equity Investment in the Company; provided
that at least $53.3 million in aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption (excluding Notes
held by the Company and its Subsidiaries); and provided, further, that such
redemption shall occur within 45 days of the date of the closing of such public
offering or Strategic Equity Investment.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee
70
<PAGE>
shall deem fair and appropriate; provided that no Notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. Notices of redemption may not
be conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes has the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the 'Change of Control Offer') at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
'Change of Control Payment'). Within ten days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
'Change of Control Payment Date'), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Change of Control, the Company will either repay all
outstanding indebtedness under the New Credit Facility or obtain the requisite
consents, if any, under the New Credit Facility to permit the repurchase of
Notes required by this covenant. The Company will publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility limits the ability of the Company to purchase any
Notes and provides that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to senior indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the
71
<PAGE>
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which
would, in turn, constitute a default under the New Credit Facility.
The Company is not required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
'Change of Control' means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any 'person' (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal (as defined below) or a Related Party
(as defined below) of the Principal, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that (A) any 'person' (as defined above), other than the
Principal and its Related Parties, becomes the 'beneficial owner' (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have 'beneficial ownership' of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 40% of the Voting Stock of the
Company (measured by voting power rather than number of shares) and (B) the
Principal and its Related Parties 'beneficially own' (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the Voting Stock
of the Company (measured by voting power rather than number of shares) than any
such 'person' (as defined above), (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors
(as defined below) or (v) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of 'all or substantially all'
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
'substantially all,' there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
'Continuing Directors' means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) is a designee of the Principal or was nominated
by the Principal.
'Principal' means A. Dale Mayo.
'Related Party' with respect to the Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of
72
<PAGE>
the Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration therefore received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the New Credit Facility, or (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, an entity that
is engaged in another Permitted Business and that becomes a Restricted
Subsidiary, the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Permitted Business ('Replacement
Assets'); provided, however, that in connection with any repayment of
Indebtedness under the New Credit Facility pursuant to clause (a), the Company
will retire such Indebtedness and will cause the related commitment to be
reduced in an amount equal to the principal amount so repaid. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute 'Excess Proceeds.' When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all Holders of Notes (an 'Asset Sale Offer') to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes tendered into such Asset Sale Offer surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Notwithstanding the immediately preceding paragraphs, the Company and its
Restricted Subsidiaries are permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) 100% of the consideration for
such Asset Sale constitutes either Replacement Assets or cash or Cash
Equivalents or any combination thereof and (ii) such Asset Sale is for fair
market value as determined in good faith by the Company's Board of Directors;
provided, that if the total consideration with respect to any such Asset Sale is
greater than $10.0 million (as determined in good faith by the Company's Board
of Directors), the Company shall obtain a fairness opinion from an independent
accounting, appraisal or investment banking firm of national standing; provided
further, that any consideration not constituting Replacement Assets received by
the Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph shall constitute Net
Proceeds subject to the provisions of the immediately preceding paragraph.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or to
the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or
73
<PAGE>
consolidation involving the Company) any Equity Interests of the Company or
other Affiliate of the Company (other than any such Equity Interests owned by
the Company or any Restricted Subsidiary); (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as 'Restricted Payments'), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption '--Incurrence of Indebtedness
and Issuance of Preferred Stock;' and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi) and (vii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) 50% of any
dividends received by the Company or a Restricted Subsidiary that is a
Subsidiary Guarantor after the date of the Indenture from an Unrestricted
Subsidiary of the Company, to the extent that such dividends were not
otherwise included in Consolidated Net Income of the Company for such
period, plus (v) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the Indenture,
the lesser of (A) the fair market value of the Company's Investment in such
Subsidiary as of the date of such redesignation or (B) such fair market
value as of the date on which such Subsidiary was originally designated as
an Unrestricted Subsidiary.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (ii)
of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of such Subsidiary's
common Equity Interests on a pro rata basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period; (vi) the redemption or repayment on the date of the
Indenture of (A) $1,350,000 aggregate liquidation
74
<PAGE>
preference of outstanding Series B Preferred Stock and (B) $6,000,000 aggregate
principal amount of outstanding subordinated promissory notes issued in
connection with the acquisition of the Nelson Ferman Theaters, in each case with
the net proceeds from the offering of the Notes; (vii) the payment of dividends
to holders of any class or series of Disqualified Stock of the Company issued or
incurred after the date of the Indenture in accordance with the covenant
'Incurrence of Indebtedness and Issuance of Preferred Stock,' provided that
after giving effect to any such dividend as a Fixed Charge on a pro forma basis,
the Company and its Restricted Subsidiaries would have had a Fixed Charge
Coverage Ratio of at least 2.0 to 1; and (viii) other Restricted Payments in an
aggregate amount not to exceed $500,000; provided, however, that at the time of,
and after giving effect to, any Restricted Payment permitted by clauses (ii),
(iii), (iv), (v), (vii) and (viii) of this paragraph, no Default or Event of
Default shall have occurred and be continuing.
The Board of Directors may designate any Restricted Subsidiary acquired or
created after the date of the Indenture (other than any Restricted Subsidiary
created to effect the Pending Acquisitions) to be an Unrestricted Subsidiary if
such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Upon such designation, the Subsidiary Guarantee, if any, of such
designated Unrestricted Subsidiary shall be automatically released.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant 'Restricted
Payments' were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, 'incur') any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of such incurrence or issuance, (i) the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
(ii) any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt),
in each case if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
'Permitted Debt'):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness outstanding under all Credit
Facilities under this clause (i) after giving effect to such
75
<PAGE>
incurrence does not exceed an amount equal to $15 million, less the
aggregate amount of all Net Proceeds of Asset Sales applied to repay
Indebtedness under a Credit Facility pursuant to the covenant described
above under the caption '--Asset Sales;'
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and by the Subsidiary Guarantors of Indebtedness represented by the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of the Subsidiary Guarantors
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary Guarantor, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to be incurred under the first paragraph hereof or clauses (ii) and (iv) of
this paragraph;
(vi) the incurrence by the Company or any Subsidiary Guarantor of
intercompany Indebtedness between or among the Company and any Subsidiary
Guarantor; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Subsidiary Guarantor thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Subsidiary Guarantor thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary Guarantor, as the case may be, that was not permitted by this
clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant;
(ix) the incurrence by the Company or any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $10.0
million; and
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x).
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest or accretion or
amortization of original issue discount will not be deemed to be an incurrence
of Indebtedness for purposes of this covenant; provided, in each such case, that
the amount thereof is included in Fixed Charges of the Company as accrued.
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
76
<PAGE>
LIENS
The Indenture provides that the Company will not and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing Indebtedness
or trade payables (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under the
Indenture, the Notes and the Subsidiary Guarantees are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole (as determined in good faith by the Company), than those contained in
the agreements governing the Indebtedness being refinanced, (i) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption '--Liens' that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (j)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements and other similar agreements entered into in the
ordinary course of business and (k) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater
77
<PAGE>
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
'--Incurrence of Indebtedness and Issuance of Preferred Stock.'
The entity or the Person formed by or surviving any consolidation or merger
(if other than the Company) will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an 'Affiliate Transaction'),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an independent accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) any employment agreement approved by
the Board of Directors and entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees to Persons who are not otherwise Affiliates of the
Company and (iv) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption '--Restricted Payments.'
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption '--Incurrence of
Indebtedness and Issuance of Preferred Stock' and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
'--Liens,' (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
'--Asset Sales.'
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests owned by the
78
<PAGE>
Company in such Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption '--Repurchase at the Option
of Holders--Asset Sales,' and (ii) will not permit any Restricted Subsidiary of
the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Restricted Subsidiary of the Company,
except that any Restricted Subsidiary acquired or created after the date of the
Indenture in connection with an acquisition of a theater (other than any
Restricted Subsidiary created to effect the Pending Acquisitions) may issue
Equity Interests representing not more than 20% of the aggregate Voting Stock of
such Restricted Subsidiary to the seller of such theater as part of the
consideration for the acquisition thereof.
BUSINESS ACTIVITIES
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Restricted Subsidiary after the date of the Indenture,
then such newly acquired or created Restricted Subsidiary shall become a
Subsidiary Guarantor and execute a Supplemental Indenture and deliver an Opinion
of Counsel, in accordance with the terms of the Indenture.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K (or 10-QSB or 10-KSB, as applicable) if the
Company were required to file such Forms, including a 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto the financial condition and
results of operations of the Company and its Restricted Subsidiaries separate
from the financial condition and results of operations of the Unrestricted
Subsidiaries of the Company) and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of the Exchange Offer, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Subsidiary Guarantors have agreed that, for so long as any Notes
remain outstanding, they will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
79
<PAGE>
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes ; (ii) default in payment when due
of the principal of or premium, if any, on the Notes (including, without
limitation, pursuant to the provisions described under the captions
'--Repurchase at the Option of Holders--Change of Control' and '--Repurchase at
the Option of Holders--Asset Sales'); (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions described under the caption
'--Merger, Consolidation or Sale of Assets'; (iv) failure by the Company or any
of its Subsidiaries for 30 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a 'Payment Default') or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Significant Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Subsidiary Guarantor, or any Person acting
on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture and if the maturity of the Notes
is accelerated, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the Notes.
If an Event of Default occurs prior to June 1, 2003 and if the maturity of the
Notes is accelerated, by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to June 1, 2003, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
80
<PAGE>
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ('Legal
Defeasance') except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
('Covenant Defeasance') and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under 'Events of Default' will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 123rd day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 123rd day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the
81
<PAGE>
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
'--Repurchase at the Option of Holders'), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption '--Repurchase at the Option of Holders') or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to add additional Subsidiary Guarantees or release any Subsidiary
Guarantees in accordance with the terms of the Indenture, to make any change
that would provide any additional rights or benefits to the Holders of Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be
82
<PAGE>
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to Clearview Cinema
Group, Inc., 97 Main Street, Chatham, NJ 07928, Attention: Chief Financial
Officer.
BOOK-ENTRY, DELIVERY AND FORM
Rule 144A Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the 'Rule 144A
Global Notes'). Regulation S Notes initially will be represented by one or more
Notes in registered, global form without interest coupons (collectively, the
'Regulation S Global Notes' and, together with the Rule 144A Global Notes, the
'Global Notes'). The Global Notes will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ('DTC'), in New York, New
York, and registered in the name of DTC or its nominee, Cede & Co. (the 'Global
Note Holder'), in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
'--Exchange of Book-Entry Notes for Certificated Notes.' Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Certificated
Securities (as defined).
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
DTC PROCEDURES
The following description of the operations and procedures of the DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them from time to time. The
Company takes no responsibility for these operations and procedures and urges
investors to contact the system or their participants directly to discuss these
matters.
The DTC has advised the Company that the DTC is a limited-purpose trust
company created to hold securities for the Participants and to facilitate the
clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers (including
the Initial Purchaser), banks, trust companies, clearing corporations and
certain other organizations. Access to the DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the 'Indirect Participants'). Persons who are not
Participants may beneficially own securities held by or on behalf of the DTC
only through the Participants or the Indirect Participants. The ownership
interests in, and transfers of ownership interests in, each security held by or
on behalf of the DTC are recorded on the records of the Participants and
Indirect Participants.
The DTC has also advised the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Notes, the DTC will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interest in the Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through the DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are
83
<PAGE>
Participants in such system. Investors in the Regulation S Global Notes must
initially hold their interests therein through Euroclear or Cedel, if they are
participants in such systems, or indirectly through organizations that are
participants in such systems. After the expiration of the Restricted Period (but
not earlier), investors may also hold interests in the Regulation S Global Notes
through Participants in the DTC system other than Euroclear and Cedel. Euroclear
and Cedel will hold interests in the Regulation S Global Notes on behalf of
their participants through customers' securities accounts in their respective
names on the books of their respective depositories, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of Cedel. All interests in a Global Note, including
those held through Euroclear or Cedel, may be subject to the procedures and
requirements of the DTC. Those interests held through Euroclear or Cedel may
also be subject to the procedures and requirements of such systems. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because the DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
'HOLDERS' THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of the DTC
or its nominee will be payable to the DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company, the Trustee nor any agent of the Company or the Trustee has
or will have any responsibility or liability for (i) any aspect of the DTC's
records or any Participant's or Indirect Participant's records relating to or
payments made on account of beneficial ownership interest in the Global Notes,
or for maintaining, supervising or reviewing any of the DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to the
actions and practices of the DTC or any of its Participants or Indirect
Participants. The DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of the DTC unless the DTC has reason
to believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of the DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by the DTC or any of its
Participants in identifying the beneficial owners of the Notes, and the Company
and the Trustee may conclusively rely on and will be protected in relying on
instructions from the DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Notes are expected to be eligible to trade in the DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will, therefore, settle in immediately available funds, subject in all cases to
the rules and procedures of the DTC and its Participants. See '--Same Day
Settlement and Payment.'
The DTC has advised the Company that it will take any action permitted to
be taken by a Holder of Notes only at the direction of one or more Participants
to whose account the DTC has credited the interests in the Global Notes and only
in respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, the DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form, and
to distribute such Notes to its Participants.
Although the DTC, Euroclear and Cedel have agreed to the foregoing
procedures to facilitate transfers of interests in the Regulation S Global Notes
and in the Rule 144A Global Notes among Participants in the DTC,
84
<PAGE>
Euroclear and Cedel, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee nor any of their respective agents will have
any responsibility for the performance by the DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED SECURITIES
A Global Note is exchangeable for definitive Certificated Securities if (i)
the DTC (x) notifies the Company that it is unwilling or unable to continue as
the depositary for the Global Notes and the Company thereupon fails to appoint a
successor depositary or (y) has ceased to be a clearing agency registered under
the Exchange Act, (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Certificated Securities or
(iii) there shall have occurred and be continuing a Default or Event of Default
with respect to the Notes. In addition, beneficial interests in a Global Note
may be exchanged for Certificated Securities upon request but only upon prior
written notice given to the Trustee by or on behalf of the DTC in accordance
with the Indenture. In all cases, Certificated Securities delivered in exchange
for any Global Note or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the DTC (in accordance with its customary procedures) and will bear the
applicable restrictive legend referred to in 'Notice to Investors,' unless the
Company determines otherwise in compliance with applicable law.
EXCHANGE OF CERTIFICATED SECURITIES FOR BOOK-ENTRY NOTES
Notes issued in certificated form may not be exchanged for beneficial
interests in any Global Note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions applicable
to such Notes. See 'Notice to Investors.'
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in the DTC's Same-Day Funds
Settlement System, and any permitted market trading activity in such Notes will,
therefore, be required by the DTC to be settled in immediately available funds.
The Company expects that secondary trading in any Certificated Securities will
also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
the DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of the DTC. The DTC has advised the
Company that cash received in Euroclear or Cedel as a result of sales of
interests in a Global Note by or through a Euroclear or Cedel participant to a
Participant in the DTC will be received with value on the settlement date of the
DTC but will be available in the relevant Euroclear or Cedel cash account only
as of the business day for Euroclear or Cedel following the DTC's settlement
date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser are parties to the Registration
Rights Agreement, pursuant to which the Company agreed to file with the
Commission the Registration Statement and to make the Exchange Offer. If (i) the
Company is not permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Company after consummation of the
Exchange Offer and on or prior to the 20th day following consummation of the
Exchange Offer that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer
85
<PAGE>
or (B) that it may not resell the New Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus contained in
the Registration Statement is not appropriate or available for such resales or
(C) that it is a broker-dealer and owns Notes acquired directly from the Company
or an affiliate of the Company, the Company will use its best efforts to file
with the Commission a Shelf Registration Statement to cover resales of the Notes
by the Holders thereof who satisfy certain conditions relating to the provision
of information in connection with the Shelf Registration Statement and to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, 'Transfer Restricted
Securities' means each Note until the earliest to occur of (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for a New
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of a Note for a New Note, the date on which such New Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Registration Statement,
(iii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will use its best efforts to issue on or prior to 30 business days after the
date on which the Registration Statement was declared effective by the
Commission, New Notes in exchange for all Notes tendered prior thereto in the
Exchange Offer and (ii) if obligated to file the Shelf Registration Statement,
the Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 60 days after such filing obligation arises
and to cause the Shelf Registration to be declared effective by the Commission
on or prior to 150 days thereafter. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the 'Effectiveness Target Date'), or (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Registration Statement, or (d) the
Shelf Registration Statement or the Registration Statement is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (other than during a specified suspension period) (each such
event referred to in clauses (a) through (d) above a 'Registration Default'),
then the Company will pay Liquidated Damages to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Notes held by such Holder. The amount of
the Liquidated Damages will increase by an additional $.05 per week per $1,000
in principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued Liquidated Damages will be
paid by the Company on each Interest Payment Date by depositing with the Trustee
for the benefit of the Holders entitled thereto immediately available funds in
sums sufficient to pay such Liquidated Damages. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
'Acquired Debt' means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common
86
<PAGE>
control with'), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control.
'Asset Sale' means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption '--Change of Control' and/or the
provisions described above under the caption '--Merger, Consolidation or Sale of
Assets' and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $500,000 or (b) for net proceeds in
excess of $500,000. Notwithstanding the foregoing, the following items shall not
be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary that is a Subsidiary Guarantor or by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary that is a
Subsidiary Guarantor, (ii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary, (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption '--Restricted Payments' and (iv) dispositions of Cash Equivalents.
'Attributable Debt' in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
'Capital Lease Obligation' means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
'Capital Stock' means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses, of, or distributions of assets of,
the issuing Person.
'Cash Equivalents' means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of 'B' or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) - (v) of this definition.
'Consolidated Cash Flow' means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs
87
<PAGE>
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income, minus
(v) non-cash items increasing such Consolidated Net Income for such period
(other than any item that was accrued in the ordinary course of business), in
each case, on a consolidated basis and determined in accordance with GAAP.
'Consolidated Net Income' means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
'Consolidated Net Tangible Assets' means, with respect to the Company and
its Restricted Subsidiaries, the total amount of consolidated assets of the
Company and its Restricted Subsidiaries (less applicable reserves and other
properly deductible items), determined on a consolidated basis and in accordance
with GAAP, after deducting therefrom (i) all current liability items and (ii)
all goodwill, trade names, trademarks, service marks, patents, unamortized debt
discount and expense, and all other intangibles.
'Consolidated Net Worth' means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
'Credit Facilities' means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) of the definition of Permitted Debt.
88
<PAGE>
'Default' means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
'Disqualified Stock' means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
'--Certain Covenants--Restricted Payments.'
'Equity Interests' means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
'Existing Indebtedness' means up to $1.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
'Fixed Charge Coverage Ratio' means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the 'Calculation Date'), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (and Consolidated Cash Flow related to any
such acquisition shall be calculated on a pro forma basis giving effect to any
pro forma expense and cost reductions as determined by the Company in accordance
with Article 11 of Regulation S-X under the Securities Act), and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
'Fixed Charges' means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs (other than debt
issuance costs in respect of the Notes and the execution of the New Credit
Facility on the date of the Indenture) and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries
89
<PAGE>
(whether or not such Guarantee or Lien is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock) or to the Company or a Restricted Subsidiary of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
'Guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
'Hedging Obligations' means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
'Indebtedness' means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
'Investments' means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption '--Restricted Payments.'
'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
'Net Income' means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback
90
<PAGE>
transactions) or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (ii) any extraordinary gain or
loss, together with any related provision for taxes on such extraordinary gain
or loss.
'Net Proceeds' means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
'New Credit Facility' means that certain Credit Agreement, dated as of June
12, 1998, by and among the Company and The Provident Bank, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time (including, without limitation,
involving any increase in amount or replacement lender).
'Non-Recourse Debt' means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
'Obligations' means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
'Pending Acquisitions' means the proposed acquisitions of the Colony
Cinemas in Livingston, N.J. and the West Milford Cinemas in West Milford, N.J.
movie theaters.
'Permitted Business' means the business being operated by the Company and
its Restricted Subsidiaries on the date of the Indenture and any other business
related, ancillary or complementary to any such business as determined in good
faith by the Board of Directors from time to time.
'Permitted Investments' means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Subsidiary Guarantor, (ii) any
Investment in Cash Equivalents; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary of the Company and a
Subsidiary Guarantor or (B) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is a
Subsidiary Guarantor; (iv) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption '--Repurchase at
the Option of Holders--Asset Sales;' (v) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (vi) loans or advances to employees made in the ordinary course of
business not to exceed $250,000 at any one time outstanding; and (vii) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (vii) that are at the time outstanding, not to exceed the greater
of $2.5 million or 5% of the Company's Consolidated Net Tangible Assets
determined at the time of each such Investment without giving effect to
subsequent changes in value.
'Permitted Liens' means (i) Liens securing Indebtedness under the New
Credit Facility that was permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of the Company; (iii) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
91
<PAGE>
the Company; (iv) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, provided that such Liens were
in existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of the covenant
entitled 'Incurrence of Indebtedness and Issuance of Preferred Stock' covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) Liens of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary and (x) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries.
'Permitted Refinancing Indebtedness' means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable (as determined in good faith by the
Company) to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Restricted Subsidiary' of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
'Significant Subsidiary' means any Restricted Subsidiary that would be a
'significant subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
'Stated Maturity' means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
'Strategic Equity Investment' means an Investment in the Company by a
Strategic Equity Investor.
'Strategic Equity Investor' means, as of any date, any Person (other than
an Affiliate of the Company) engaged in a Permitted Business which has a Total
Equity Market Capitialization of at least $1 billion.
'Subsidiary' means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of
92
<PAGE>
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such Person
(or any combination thereof).
'Subsidiary Guarantors' means (i) each Subsidiary in existence on the date
of the Indenture and (ii) any other Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
'Total Equity Market Capitalization' means the product of (i) the average
of the reported closing share prices of the referent Person as of the five
trading days immediately preceding the date of any Strategic Equity Investment
and (ii) the total number of shares outstanding of the referent Person as
reported in the last document publicly filed with the Commission by such Person.
'Unrestricted Subsidiary' means (i) any Subsidiary acquired or created
after the date of the Indenture that is designated by the Board of Directors as
an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (c) is a Person
with respect to which neither the Company nor any of its Restricted Subsidiaries
has any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption 'Certain Covenants--Restricted
Payments.' If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption 'Incurrence of Indebtedness and Issuance of Preferred Stock,' the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption 'Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock,' calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
'Voting Stock' of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
'Wholly Owned Restricted Subsidiary' of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
93
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock and 2,500,000 shares of Preferred Stock. The following is a
summary description of the Common Stock, Preferred Stock and Class A Warrants.
This summary description does not purport to be complete and is qualified in its
entirety by reference to the Certificate and the Warrant Agreement dated as of
May 23, 1997 by and between the Company and MidMark.
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 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, Class B Preferred Stock
and Class C 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 following is a description of the two Classes of Preferred
Stock that are currently outstanding.
Class A Preferred Stock
In May 1996, the Company authorized 1,303 shares and issued 779 shares of
Class A Preferred Stock. Each share of Class A Preferred Stock is convertible at
any time at the option of the holders into 600 shares of the Common Stock. Upon
the occurrence of certain events, the shares of Class A Preferred Stock will
automatically convert into shares of Common Stock of the Company. 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 $2,558.85,
subject to certain adjustments, 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.
Generally, the holders of the Class A Preferred Stock 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
94
<PAGE>
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.
Class B Preferred Stock
In December 1997, the Company authorized 20,000 shares and issued 600
shares of its Class B Preferred Stock to Mr. Robert Davidoff and CMCO, Inc. in
exchange for 8% subordinated promissory notes in the aggregate principal amount
of $600,000. The Company repurchased such shares in June 1998 with a portion of
the proceeds of the Notes Offering. In March 1998, the Company issued 750 shares
of Class B Preferred Stock as a portion of the purchase price in connection with
the acquisition of the CJM Theaters, which remain outstanding.
The shares of Class B Preferred Stock do not have voting rights except that
the affirmative vote of the holders of more than 50% of the outstanding Class B
Preferred Stock, voting as a separate class, is required to authorize any
amendment to the Company's Certificate of Incorporation that would adversely
affect the powers, preferences or rights of the Class B Preferred Stock. The
shares of Class B Preferred Stock pay a cumulative quarterly dividend equal to
$.291667 per share for each day during which such share was outstanding, subject
to certain restrictions. The Class B Preferred Stock is redeemable at any time
at the option of the Company upon giving written notice and is redeemable at the
option of the holder upon the occurrence of certain events, at a redemption
price of $1,000 per share plus an amount equal to all unpaid dividends thereon,
including accrued dividends, to the redemption date. Upon certain liquidation
events, holders of shares of Class B Preferred Stock are entitled to receive a
liquidation value equal to $1,000 per share, subject to adjustment in certain
circumstances.
Class C Preferred Stock
The Company has authorized and issued 3,000 shares of Class C Preferred
Stock. Each share of Class C Preferred Stock is convertible at any time at the
option of the holder after the earlier of (i) July 21, 1998 and (ii) the date on
which a registration statement covering the shares of Common Stock into which
the Class C Preferred Stock is convertible has been declared effective, into a
number of shares of the Common Stock based on a conversion price equal to the
lesser (i) $21.95 per share or (ii) 87.5% of the average of the fourth, fifth
and sixth lowest closing prices of the Common Stock during the 20-day period
immediately prior to such conversion, subject to certain limitations and
adjustments. On April 23, 2000, the shares of Class C Preferred Stock will
automatically convert into shares of Common Stock on the basis of the conversion
price then in effect, subject to certain conditions. The holders of the Class C
Preferred Stock are entitled to receive cumulative preferential dividends, when
and as declared by the Board of Directors, in a per share amount equal to, on an
annualized basis, 5% of the stated value of the Class C Preferred Stock ($1,000
per share), payable in cash or in shares of Common Stock, at the Company's
option. 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
holder of the Class C Preferred Stock will be entitled to receive a liquidation
preference of $1,000 per share (subject to adjustment in the event of any stock
split, combination or reclassification of the Class C Preferred Stock or other
similar event) plus any accrued and unpaid dividends thereon. Upon the
occurrence of certain events, as described below, the Class C Preferred Stock
will be mandatorily redeemable at the option of the holder of the Class C
Preferred Stock, at a redemption price equal to the greater of (i) 125% of the
liquidation preference of the shares being redeemed and (ii) an amount
determined by dividing the liquidation preference of the shares being redeemed
by the conversion price in effect on the date of such redemption multiplied by
the closing trading price for the Common Stock on the five trading days
immediately preceding the date of such redemption. Events giving rise to
mandatory redemption include, among other things, (i) the Company's failure to
issue and deliver the shares of Common Stock upon conversion due to voluntary
action by the Company or a failure by the Company to take action, (ii) the
material breach by the Company, due to voluntary action taken by the Company or
a failure by the Company to take action, of any covenant or other material term
or condition of any agreement entered into in connection with such issuance,
(iii) materially inaccurate or misleading representations or warranties by the
Company in connection with the issuance and sale of the Class C Preferred Stock,
due to voluntary action taken by the Company or a failure by the Company to take
action, (iv) the required registration statement not being declared effective
within the required period of time or if the registration statement lapses for
any reason or is
95
<PAGE>
unavailable to the holder for the sale of the conversion shares, provided that
the cause of such lapse or unavailability is not due to factors solely within
the control of the holder, and provided further that the failure or lapse or
unavailability is due to a voluntary action by the Company or a failure by the
Company to take action, (v) the Common Stock not being listed on the AMEX, New
York Stock Exchange or the National Association of Securities Dealers, Inc.
National Market System due to voluntary action by the Company or a failure by
the Company to take action, or (vi) a change in control of the Company, which
results in prior stockholders of the Company failing to own at least 50% of the
surviving entity, other than a transaction which is not approved by the Board of
Directors of the Company.
CLASS A WARRANT
The Class A Warrant is initially exercisable for 282,600 shares of Common
Stock, at an initial exercise price of $.01 per share, subject to adjustment in
certain events. The Class A Warrant is 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 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 Warrant is 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 Exchange Act, and the Fair Market
Value (as defined below) of the Common Stock is greater than the Floor Price
(currently 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 Warrant). 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 Warrant 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 (currently $17.25), could result in the Class A Warrant not being
exercisable for any shares. The Floor Price and the number of shares of Common
Stock that the Class A Warrant 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 reorganizations and reclassifications,
mergers and consolidations.
CERTAIN PROVISIONS OF THE CERTIFICATE AND THE BY-LAWS
The Certificate and the 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 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 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
96
<PAGE>
day after the first public disclosure of the date of the meeting. The By-laws
provide that special meetings of stockholders may be called only by certain
officers of the Company or the Board of Directors.
The 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 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.
The 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 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 By-laws further provide that any amendment of the 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 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 By-laws may be amended by a majority of the Board of Directors, subject
to the right of the stockholders to amend the 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 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.
DESCRIPTION OF NEW CREDIT FACILITY
Clearview Cinema Group, Inc. (the 'Borrower') has entered into a Senior
Bank Credit Facility with The Provident Bank (the 'New Credit Facility'). The
following is a summary of certain provisions of the New Credit Facility and does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the definitive terms of the New Credit Facility.
The New Credit Facility provides for revolving credit loans in an aggregate
principal amount not to exceed $15.0 million, with all outstanding indebtedness
thereunder repayable on the fifth anniversary of the closing of the New Credit
Facility. Revolving credit loans will be available for general corporate
purposes, including working capital and theater acquisitions. Amounts borrowed
under the New Credit Facility may be repaid and reborrowed, provided that the
Borrower is in compliance with all covenants under the New Credit Facility, and
if, following consummation of such borrowing, the ratios of senior indebtedness
under the New Credit Facility to consolidated EBITDA, determined on a pro forma
basis with adjustments acceptable to The Provident Bank, does not exceed 3.5 to
1. Availability under the New Credit Facility is $15.0 million.
In addition, the New Credit Facility provides for mandatory prepayments
equal to (i) the net proceeds of certain extraordinary dispositions (unless the
Borrower reasonably intends to reinvest the proceeds in specified
97
<PAGE>
assets within six months or other exceptions are applicable) and (ii) certain
unused condemnation and insurance proceeds.
The Borrower's obligations under the New Credit Facility are guaranteed by
all of the Borrower's present direct and indirect subsidiaries, and secured by
the pledge of the stock of all direct and indirect subsidiaries of the Borrower.
The subsidiary guarantees are secured by substantially all of the assets of each
such subsidiary.
Loans under the New Credit Facility will bear interest at a rate equal to
The Provident Bank's prime rate. Following the occurrence and during the
continuation of an event of default under the New Credit Facility, the loans
will bear interest at the applicable rate plus 2%.
The New Credit Facility ranks pari passu in right of payment with the
Notes, except that the Notes are unsecured. The New Credit Facility contains
covenants that, among other things, restrict the ability of the Borrower and its
subsidiaries to materially change the nature of their business, consolidate with
or merge with or into other entities, make payments of principal or interest on
contractually subordinated debt (in each case subject to certain exceptions),
incur lease obligations, pay management compensation in excess of specified
amounts, dispose of assets or businesses, make investments, grant liens,
mortgages or other encumbrances, agree to restrictions on payments of dividends
or intercompany indebtedness, incur indebtedness, enter into sale-leaseback
transactions, enter into transactions with affiliates except on an arm's length
basis, incur capital expenditures in excess of specified amounts and otherwise
restrict corporate activities. In addition, the New Credit Facility requires
compliance with certain financial covenants, including requiring the Borrower
and its subsidiaries to maintain a minimum interest coverage ratio, a minimum
debt service coverage ratio, and a minimum senior secured indebtedness under the
New Credit Facility to consolidated EBITDA ratio. The Borrower does not expect
that such covenants will materially impact the ability of the Borrower and its
subsidiaries to operate their respective businesses.
The terms of the New Credit Facility permit the Borrower to make payments
on pari passu debt (including the Notes). There are no limitations in the New
Credit Facility on the ability of the subsidiaries of the Borrower to make
distributions to the Borrower.
The New Credit Facility contains customary events of default, including the
failure to pay principal when due or any interest or other amount that becomes
due within three days after the due date thereof, any representation or warranty
being made by the Borrower that is incorrect in any material respect on or as of
the date made, a default in the performance of any negative covenants or a
default in the performance of certain other covenants or agreements for a period
of thirty days, default in certain other indebtedness, certain insolvency
events, rendering of judgments against the Borrower in specified amounts and
failure to satisfy such judgments within specified periods, occurrence of a
material adverse effect (i.e. an event which will, or is reasonably likely to,
have a material adverse effect on the collateral under the New Credit Facility
or upon the financial condition, operations, assets or prospects in the
aggregate of the Borrower) and certain change of control events (including a
Change of Control as defined in the Indenture). In addition, the New Credit
Facility provides that a default under the Indenture will result in a default
under the New Credit Facility.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain of the material U.S.
federal income tax consequences of the Exchange Offer to holders of the Old
Notes. This discussion is a summary for general information only and does not
consider all aspects of U.S. federal income tax that may be relevant to a holder
of the Old Notes in light of such holder's personal circumstances. This
discussion also does not address the U.S. federal income tax consequences to
holders subject to special treatment under the U.S. federal income tax laws,
such as dealers in securities or foreign currency, tax-exempt entities, banks,
thrifts, insurance companies, persons that hold the Old Notes as part of a
'straddle,' a 'hedge' against currency risk or a 'conversion transaction,'
persons that have a 'functional currency' other than the U.S. dollar, and
investors in pass-through entities. In addition, this discussion does not
describe any tax consequences arising out of the tax laws of any state, local or
foreign jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, Internal Revenue Service ('IRS') rulings and pronouncements and
judicial decisions now in effect, all of which are subject to change (possibly
on a retroactive basis). The Company has not and will not seek any rulings or
opinions from the
98
<PAGE>
IRS or counsel with respect to the matters discussed below. There can be no
assurance that the IRS will not take positions concerning the tax consequences
of the Exchange Offer which are different from those discussed herein.
HOLDERS OF OLD NOTES SHOULD CONSULT THEIR OWN ADVISORS CONCERNING THE
APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION, TO THE EXCHANGE OFFER IN LIGHT OF THEIR
PARTICULAR SITUATIONS.
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a taxable exchange. As a result, (i) a holder should not
recognize taxable gain or loss as a result of exchanging Old Notes for New Notes
pursuant to the Exchange Offer; (ii) the holding period of the New Notes should
include the holding period of the Old Notes exchanged therefor and (iii) the
adjusted tax basis of the New Notes should be the same as the adjusted tax basis
of the old Notes exchanged therefor immediately before the exchange
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes if such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 90 days after the date of this Prospectus, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer that requests such
documents in the Letter of Transmittal, for use in connection with any such
resale. In addition, until (90 days after the
date of this Prospectus), all dealers effecting transactions in the New Notes
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account in
connection with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Notes may be deemed to be an 'underwriter' within the
meaning of the Securities Act, and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Kirkpatrick & Lockhart LLP.
EXPERTS
The consolidated financial statements of Clearview Cinema Group, Inc. and
its subsidiaries as of December 31, 1997 and for the year then ended included in
this Prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein.
The consolidated financial statements of Clearview Cinema Group, Inc. and
its subsidiaries as of December 31, 1996 and for each of the two years in the
period then ended, the the combined financial statements of the UA I Theaters as
of December 31, 1996 and for each of the two years in the period then ended, the
combined financial statements of the Nelson Ferman Theaters as of September 30,
1997 and for the nine months
99
<PAGE>
then ended and the year ended December 31, 1996, and the combined financial
statements of the CJM Theaters as of September 30, 1997 and for the nine months
then ended and for the year ended December 31, 1996 have been audited by Wiss &
Company, LLP, independent auditors, as set forth in their respective reports
appearing herein.
100
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
made in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any security other than the Notes offered hereby
nor does it constitute an offer to sell, or a solicitation of an offer to buy,
any of the Notes to any person in any jurisdiction in which it would be unlawful
to make such an offer or solicitation to such person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has not been any change in the facts set forth
in this Prospectus or in the affairs of the Company since the date hereof.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Available Information.......................... iv
Prospectus Summary............................. 1
Risk Factors................................... 13
The Exchange Offer............................. 19
Use of Proceeds................................ 25
Capitalization................................. 25
Unaudited Pro Forma Combined Financial
Information.................................. 27
Selected Financial Data........................ 38
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 40
Business....................................... 48
Management..................................... 61
Certain Transactions........................... 65
Principal Stockholders......................... 68
Description of Notes........................... 69
Description of Capital Stock................... 94
Description of New Credit Facility............. 97
Certain United States Federal Income Tax
Consequences................................. 98
Plan of Distribution........................... 99
Legal Matters.................................. 99
Experts........................................ 99
Index to Financial Statements.................. F-1
</TABLE>
================================================================================
================================================================================
---------------------
10 7/8% SENIOR NOTES
DUE 2008
------------------
PROSPECTUS
------------------
================================================================================
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLEARVIEW CINEMA GROUP, INC.
Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998................................... F-2
Consolidated Statements of Operations for the Three Months Ended March 31, 1997 and 1998................. F-3
Consolidated Statement of Changes in Stockholders' Equity for the Three Months Ended
March 31, 1998........................................................................................ F-4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1998................. F-5
Notes to Consolidated Financial Information.............................................................. F-6
CLEARVIEW CINEMA GROUP, INC.
Report of Independent Accountants (Price Waterhouse LLP)................................................. F-9
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-10
Consolidated Balance Sheet as of December 31, 1996 and 1997.............................................. F-11
Consolidated Statement of Operations for the Years Ended December 31, 1995, 1996 and 1997................ F-12
Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1995, 1996 and
1997.................................................................................................. F-13
Consolidated Statement of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997................ F-14
Notes to Consolidated Financial Statements............................................................... F-15
THEATERS ACQUIRED FROM UNITED ARTISTS
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-28
Combined Balance Sheets at December 31, 1996 and March 31, 1997 (unaudited).............................. F-29
Combined Statements of Income and Divisional Equity for the Years Ended December 31, 1995 and 1996 and
the Three Months Ended March 31, 1996 and 1997 (unaudited)............................................ F-30
Combined Statements of Cash Flows for the Years Ended December 31, 1995 and 1996 and the Three Months
Ended March 31, 1996 and 1997 (unaudited)............................................................. F-31
Notes to Combined Financial Statements................................................................... F-32
THEATERS ACQUIRED FROM NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-35
Combined Balance Sheet at September 30, 1997............................................................. F-36
Combined Statements of Income and Changes in Retained Earnings for the Year Ended December 31, 1996 and
the Nine Months Ended September 30, 1997.............................................................. F-37
Combined Statements of Cash Flows for the Year Ended December 31, 1996 and Nine Months Ended September
30, 1997.............................................................................................. F-38
Notes to Combined Financial Statements................................................................... F-39
THEATERS ACQUIRED FROM CJM THEATERS AT KIN-MALL, MIDDLEBROOK, CEDAR GROVE AND BELLEVUE
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-42
Combined Balance Sheet, September 30, 1997............................................................... F-43
Combined Statements of Income and Changes in Retained Earnings for the Year Ended December 31, 1996 and
the Nine Months Ended September 30, 1997.............................................................. F-44
Combined Statements of Cash Flow for the Year Ended December 31, 1996 and the Nine Months Ended September
30, 1997.............................................................................................. F-45
Notes to Combined Financial Statements................................................................... F-46
</TABLE>
F-1
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
1998
DECEMBER 31, ------------
1997
------------ (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 1,647,176 $ 1,470,083
Inventories..................................................................... 116,655 163,163
Other current assets............................................................ 341,273 433,257
------------ ------------
Total current assets......................................................... 2,105,104 2,066,503
Property, equipment and leaseholds, net........................................... 34,488,714 36,549,295
Intangible assets, net............................................................ 19,931,555 23,877,269
Other non-current assets.......................................................... 827,019 915,198
------------ ------------
$ 57,352,392 $ 63,408,265
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................ $ 2,876,607 $ 5,205,205
Subordinated notes payable--short term.......................................... 2,000,000
Accounts payable and accrued expenses........................................... 4,562,633 5,282,702
------------ ------------
Total current liabilities.................................................... 7,439,240 12,487,907
Long-term debt, less current maturities........................................... 32,234,955 35,697,369
Subordinated notes payable--long term............................................. 6,000,000 4,000,000
Commitments and contingencies (Notes 5 and 6)
Class B Redeemable Preferred Stock................................................ 1,350,000 1,350,000
Stockholders' equity:
Undesignated preferred stock:
2,478,697 shares authorized..................................................
Class A Preferred Stock, par value $.01, 1,303 shares authorized; 779 shares
issued and outstanding....................................................... 8 8
Common Stock, par value $.01, 10,000,000 shares authorized; 2,213,097 and
2,227,879 shares issued and outstanding...................................... 22,131 22,279
Additional paid-in capital...................................................... 12,214,515 12,414,367
Accumulated deficit............................................................. (1,908,457) (2,563,665)
------------ ------------
Total stockholders' equity................................................... 10,328,197 9,872,989
------------ ------------
$ 57,352,392 $ 63,408,265
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial information.
F-2
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31,
-------------------------
1997 1998
---------- ----------
<S> <C> <C>
Theater Revenues:
Box office....................................................................... $2,712,210 $7,077,119
Concession....................................................................... 743,986 2,284,059
Other............................................................................ 49,255 319,631
---------- ----------
3,505,451 9,680,809
---------- ----------
Operating Expenses:
Film rental and booking fees..................................................... 1,196,126 3,060,197
Cost of concession sales......................................................... 108,605 357,465
Theater operating expenses....................................................... 1,226,799 3,455,314
General and administrative expenses.............................................. 191,806 1,009,744
Depreciation and amortization.................................................... 413,011 1,262,625
---------- ----------
3,136,347 9,145,345
---------- ----------
Operating Income................................................................... 369,104 535,464
Interest expense, net.............................................................. 358,482 1,160,747
---------- ----------
Net Income (Loss).................................................................. $ 10,622 $ (625,283)
---------- ----------
---------- ----------
Basic Income (Loss) Per Share...................................................... $ 0.01 $ (0.30)
---------- ----------
---------- ----------
Diluted Income (Loss) Per Share.................................................... $ 0.01 $ (0.30)
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial information.
F-3
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ --------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997.......... 779 $8 2,213,097 $22,131 $12,214,515 $(1,908,457) $10,328,197
Issuance of common stock for
assets acquired................ 14,782 148 199,852 200,000
Preferred stock dividend.......... (29,925) (29,925)
Net loss.......................... (625,283) (625,283)
--
------ --------- ------- ----------- ----------- -----------
Balance, March 31, 1998............. 779 $8 2,227,879 $22,279 $12,414,367 $(2,563,665) $ 9,872,989
--
--
------ --------- ------- ----------- ----------- -----------
------ --------- ------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial information.
F-4
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................................... $ 10,622 $ (625,283)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization of property, equipment & leaseholds................ 339,415 842,486
Amortization of intangible assets................................................ 73,596 420,139
Amortization of debt discount and issuance costs................................. 47,493 74,004
Changes in operating assets and liabilities:
Inventories.................................................................... (2,522) (46,508)
Other current assets........................................................... (126,141) (91,984)
Other non-current assets....................................................... (10,075) (88,179)
Accounts payable and accrued expenses.......................................... 448,067 690,144
---------- ----------
Net cash provided by operating activities................................... 780,455 1,174,819
---------- ----------
Cash Flows From Investing Activities:
Purchase of property, equipment and leaseholds...................................... (305,347) (765,067)
Acquisitions of theaters............................................................ (5,750,000)
Acquisition costs................................................................... (93,181) (88,548)
---------- ----------
Net cash used in investing activities....................................... (398,528) (6,603,615)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of long term debt............................................ 625,000 5,800,000
Payments on long term debt.......................................................... (261,311) (8,988)
Debt issuance costs................................................................. (539,309)
Deferred offering costs............................................................. (65,179)
---------- ----------
Net cash provided by financing activities................................... 298,510 5,251,703
---------- ----------
Net Change in Cash and Cash Equivalents............................................... 680,437 (177,093)
Cash and Cash Equivalents, Beginning of Period........................................ 751,345 1,647,176
---------- ----------
Cash and Cash Equivalents, End of Period.............................................. $1,431,782 $1,470,083
---------- ----------
---------- ----------
Supplemental Cash Flow Information:
Interest paid....................................................................... $ 235,371 $1,108,979
---------- ----------
---------- ----------
Non-cash investing and financing activities:
Issuance of common stock as consideration for theater acquired................... $ -- $ 200,000
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial information.
F-5
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 1--BASIS OF PRESENTATION
The balance sheet as of December 31, 1997 has been derived from the audited
balance sheet contained in the Form 10-KSB of Clearview Cinema Group, Inc. (the
'Company'), and is presented for comparative purposes. All other financial
information is unaudited. In the opinion of management, all adjustments, which
include only normal recurring adjustments necessary to present fairly the
financial position, results of operations and cash flows for all periods
presented, have been made. Results of operations for interim periods are not
necessarily indicative of the operating results for a full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. The financial information presented in this report should
be read in conjunction with the annual financial statements included in the
Annual Report on Form 10-KSB.
Income (Loss) Per Share--In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards 128, Earnings Per Share
('SFAS 128') which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Prior period amounts have been
restated to conform to the requirements of SFAS 128.
For the three months ended March 31, 1998, the net loss available to common
stockholders was $655,208, after giving effect to the preferred stock dividend.
For the three months ended March 31, 1997, the net income available to common
stockholders was $10,622. For the three months ended March 31, 1998 the weighted
average number of shares outstanding used in the computation of basic and
diluted loss per share was 2,220,816. For the three months ended March 31, 1997,
the weighted average number of shares outstanding used in the computation of
basic income per share was 832,800 and for diluted income per share was
1,728,000 including all potentially dilutive common stock.
Reclassification--Certain amounts previously reported have been reclassified to
conform to current year presentation.
NOTE 2--STOCK BASED COMPENSATION
During the three months ended March 31, 1998 the Company granted 61,000
incentive stock options, under the 1997 Stock Incentive Plan with exercise
prices equal to the quoted market price of the Company's Common Stock on the
date of grant.
NOTE 3--LONG-TERM DEBT
In February 1998, the Company amended and restated its Credit Facility by
obtaining a third term note ('Term Note C') totaling $5.8 million which was used
to acquire four additional theaters. The aggregate availability under the Credit
Facility was $41.8 million at March 31, 1998, of which $40.8 million is
outstanding at the date hereof. The Credit Facility expires in September 2002.
The Credit Facility includes a revolving credit line of $1 million which can be
used for refinancing existing debt, financing working capital, financing
acquisitions and for general corporate purposes. As of March 31, 1998, principal
payments under the term loans are due in April 1998, July 1998, October 1998 and
January 1999 and totalled $5.28 million. There were no amounts outstanding under
the revolving credit line at March 31, 1998.
The Credit Facility is collateralized by substantially all of the assets of the
Company and contains various restrictive covenants, including maintenance of
specified levels of net worth and debt coverage ratios. In February 1998, the
senior debt coverage ratio under the Credit Facility was amended from 3.7:1 to
4.5:1.
F-6
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 3--LONG-TERM DEBT--(CONTINUED)
As a result of the February 1998 amendment, all loans under the Credit Facility
bear interest at a rate based on the prime rate plus (x) a margin based upon the
ratio of the Company's borrowings under the Credit Facility plus capital leases
to the Company's EBITDA, and (y) a 'Margin Adjustment Rate'. The Margin
Adjustment Rate is defined initially as 0%, increases to 2% on November 10,
1998, and increases by 0.5% every 180 days thereafter. The interest rate at
March 31, 1998 was 10%.
NOTE 4--THEATER ACQUISITIONS
During the first three months of 1998, the Company acquired a total of four
theaters and twenty one screens 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 based on the estimated fair value of identifiable tangible
and intangible assets (principally property, equipment and leasehold interest)
of the respective theaters with the excess purchase price, together with
acquisition costs being allocated to goodwill. The results of operations of the
acquired theaters are included in the accompanying consolidated financial
statements from the respective acquisition dates.
Clairidge Acquisition--In February 1998 the Company acquired substantially all
the assets, including leasehold interest, equipment and various operating
contracts of one theater from Clairidge Cinemas, Inc. (the 'Clairidge
Acquisition') for a total purchase price of $2.3 million. The Company paid $2.1
million in cash from borrowings under the Credit Facility and issued 14,782
shares of common stock with an aggregate market value of $200,000 based on the
closing price of the Company's stock on the ten trading days preceding the
acquisition. Leasehold interests acquired are to be amortized over the theater
lease which has a remaining lease term through December 31, 2016. The purchase
price has been allocated as follows:
<TABLE>
<S> <C>
Leasehold interest.......................................... $ 104,500
Equipment................................................... 345,000
Goodwill.................................................... 1,850,500
----------
$2,300,000
----------
----------
</TABLE>
UA II Acquisition--In March 1998 the Company acquired substantially all the
assets, including land, building, equipment and various operating contracts of
two theaters from United Artists Theater Circuit, Inc. (the 'UA II Acquisition')
for a total purchase price of $1.5 million paid in cash from borrowings under
the Credit Facility. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Land........................................................ $ 252,000
Building.................................................... 1,008,000
Equipment................................................... 240,000
----------
$1,500,000
----------
----------
</TABLE>
Cobble Hill Acquisition--In March 1998 the Company acquired substantially all
the assets, including equipment and various operating contracts of one theater
from Cobble Hill Cinemas, Inc. (the 'Cobble Hill Acquisition') for a total
purchase price of $2.15 million, paid in cash from borrowings under the Credit
Facility. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Equipment................................................... $ 188,500
Non-compete................................................. 14,000
Goodwill.................................................... 1,947,500
----------
$2,150,000
----------
----------
</TABLE>
F-7
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 5--COMMITMENTS AND CONTINGENCIES
In February 1998, the Company entered into a lease agreement to operate a
theater facility in Montclair, N.J. for ten years with four 5-year renewal
options. The lease provides for base rent of $37,500 and is adjusted upward each
year based on a formula.
In January 1998, the Company entered into an agreement providing for the lease
of a theater in Millburn, N.J. with the option to purchase certain assets of the
theater for $1.15 million in cash. The lease period is three months with an
option to extend for an additional three months, at $9,000 per month, during
which time the Company can exercise its option to purchase the theater. It is
the Company's intention to exercise this option within the lease period.
In connection with the CJM Acquisition consummated in 1997, the Company agreed
to provide to the seller additional consideration of 750 shares of Class B
redeemable preferred stock valued at $750,000 if another competing theater is
not opened in the operating vicinity of the purchased theaters within two years
of the date of the agreement or December 12, 1999. However, such consideration
is deemed to be contingent and, as such, will only be recorded on December 12,
1999 if no competing theater has opened.
During September 1995, the Company entered into an agreement providing for the
lease of three New York theater locations with annual rent of approximately
$300,000 and the option to purchase certain assets of the three theaters through
September 2000. Until exercise of the option, the Company is required to make
annual payments which are recorded as interest expense. It is the Company's
intention to exercise this option.
NOTE 6--SUBSEQUENT EVENTS
Class C Preferred Stock--In April 1998 the Company designated a new series,
consisting of 3,000 shares of its preferred stock, $.01 par value, as Class C
Convertible Preferred Stock (the 'Class C Preferred Stock'). Concurrently, the
Company entered into a Securities Purchase Agreement and issued the 3,000 shares
of its Class C Preferred Stock for $3.0 million in cash. The conversion feature
grants the holder of the Class C Preferred Stock the right to convert to common
stock based on a formula any time after the earlier to occur of (1) the 90th day
following the issue date or (2) the date on which the underlying security is
registered. The Class C Preferred Stock will be automatically converted two
years following the issue date. The Securities Purchase Agreement included a
registration rights agreement, which requires the Company to prepare and file
with the Securities and Exchange Commission a registration statement covering
the resale of at least 150% of the number of shares of common stock then
issuable upon conversion of the Class C Preferred Stock no later than July 15,
1998.
Theater Transaction--In November 1997, the Company entered into an agreement to
merge with Warren County Cinemas contingent upon Warren County Cinemas obtaining
a certain construction permit. During 1998, the construction permit was approved
and on April 30, 1998, the Company completed the merger, through the issuance of
76,923 shares of common stock having a fair market value of approximately $1.5
million in exchange for all the outstanding stock of Warren County Cinemas. In
addition, the shareholders of Warren County Cinemas have the right to receive
additional consideration, dependent upon future earnings of the theater for the
next two years, of up to $500,000. The shares of common stock issued are
unregistered shares and are subject to a Voting Trust Agreement whereby the
President and Chief Executive Officer of the Company has the right to exercise
all rights as an owner of the shares, including the right to vote, until the
shares are sold or registered. In May 1998, the Company entered into an
agreement and began to construct a 15-screen multiplex theater in Mansfield, NJ
with a total estimated cost of $3.15 million with a planned opening in November
1998.
F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Clearview Cinema Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of Clearview Cinema Group, Inc. and its subsidiaries (the 'Company') at December
31, 1997, and the results of their operations and their cash flows for the year
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
New York, New York
March 19, 1998
F-9
<PAGE>
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
the stock split described in Note 7
and as to Note 12, for which the dates
are August 7, 1997 and February 3, 1998)
F-10
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..................................................... $ 751,345 $ 1,647,176
Inventories................................................................... 45,102 116,655
Other current assets.......................................................... 34,866 341,273
----------- -----------
Total current assets....................................................... 831,313 2,105,104
Property, equipment and leaseholds, net......................................... 11,412,217 34,488,714
Intangible assets, net.......................................................... 2,711,518 19,931,555
Other non-current assets........................................................ 805,496 827,019
----------- -----------
$15,760,544 $57,352,392
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt.......................................... $ 835,650 $ 2,876,607
Current maturities of subordinated notes payable.............................. 479,986
Accounts payable and accrued expenses......................................... 1,226,502 4,562,633
----------- -----------
Total current liabilities.................................................. 2,542,138 7,439,240
Long-term debt, less current maturities......................................... 7,742,611 32,234,955
Subordinated notes payable, less current maturities............................. 1,193,882 6,000,000
Commitments and contingencies (Note 10)
Class A redeemable preferred stock at redemption price.......................... 2,132,294
Class B redeemable preferred stock.............................................. 1,350,000
Redeemable common stock at redemption price..................................... 357,305
Stockholders' equity
Undesignated preferred stock 2,498,697 and 2,478,697 shares authorized,
respectively
Class A preferred stock, par value $.01, 1,303 shares authorized; 779 shares
issued and outstanding..................................................... 8 8
Common stock, par value $.01, 10,000,000 shares authorized; 832,800 and
2,213,097 shares issued and outstanding, respectively...................... 8,328 22,131
Additional paid-in-capital.................................................... 4,827,096 12,214,515
Accumulated deficit........................................................... (553,519) (1,908,457)
Less: Redemption price of redeemable stock.................................... (2,489,599)
----------- -----------
Total stockholders' equity................................................. 1,792,314 10,328,197
----------- -----------
$15,760,544 $57,352,392
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Theater revenues
Box office........................................................... $1,759,131 $6,195,399 $12,926,134
Concession........................................................... 554,671 1,861,155 3,914,416
Other................................................................ 31,895 141,420 421,427
---------- ---------- -----------
2,345,697 8,197,974 17,261,977
---------- ---------- -----------
Operating expenses
Film rental and booking fees......................................... 823,791 3,022,377 6,168,380
Cost of concession sales............................................. 99,261 279,549 634,395
Theater operating expenses........................................... 1,078,370 3,297,825 6,590,703
General and administrative expenses.................................. 375,262 589,822 1,130,855
Depreciation and amortization........................................ 99,632 635,007 2,051,163
---------- ---------- -----------
2,476,316 7,824,580 16,575,496
---------- ---------- -----------
Operating income (loss).............................................. (130,619) 373,394 686,481
Interest expense, net.................................................. 85,697 591,722 2,015,419
---------- ---------- -----------
Net loss............................................................. $ (216,316) $ (218,328) $(1,328,938)
---------- ---------- -----------
---------- ---------- -----------
Basic and diluted loss per share....................................... $ (.36) $ (.29) $ (1.03)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------- --------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994.......... 600,000 $ 6,000 $ 765,200 $ (78,875 ) $ 692,325
Dividends paid.................... (30,000 ) (30,000)
Issuance of warrants in connection
with subordinated debt.......... 19,610 19,610
Net loss.......................... (216,316 ) (216,316)
------ ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1995.......... 600,000 6,000 784,810 (325,191 ) 465,619
Proceeds from sale of preferred
stock, net of related costs of
$154,911........................ 779 $ 8 2,345,081 2,345,089
Dividends paid.................... (10,000 ) (10,000)
Issuance of common stock
For cash........................ 12,600 126 69,874 70,000
Upon conversion of debt......... 12,000 120 79,880 80,000
For assets acquired............. 208,200 2,082 1,107,918 1,110,000
Issuance of warrants in connection
with
Subordinated debt............... 23,532 23,532
Bank financing.................. 416,001 416,001
Net loss.......................... (218,328 ) (218,328)
------ ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1996.......... 779 8 832,800 8,328 4,827,096 (553,519 ) 4,281,913
Repurchase of warrants held by
lender.......................... (1,000,000) (1,000,000)
Sale of underwriter warrants...... 1,000 1,000
Issuance of common stock
At initial public offering, net
of costs...................... 1,150,000 11,500 7,055,597 7,067,097
Upon termination of preferred
stock redemption right........ 60,000 600 25,400 (26,000 )
In exchange for warrants
surrendered................... 66,000 660 103,340 104,000
In exchange for assets
acquired...................... 104,297 1,043 1,202,082 1,203,125
Net loss.......................... (1,328,938 ) (1,328,938)
------ ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1997.......... 779 $ 8 2,213,097 $22,131 $12,214,515 $(1,908,457) $10,328,197
------ ------- --------- ------- ----------- ----------- -----------
------ ------- --------- ------- ----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss............................................................... $ (216,316) $ (218,328) $(1,328,938)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization of property, equipment and
leaseholds......................................................... 95,445 526,182 1,675,856
Amortization of intangible assets.................................... 4,187 108,825 375,307
Amortization of debt discount and debt issuance costs................ 5,320 42,715 281,190
Interest expense recognized upon surrender of warrants............... 104,000
Changes in operating assets and liabilities
Inventories........................................................ (4,938) (28,455) (71,553)
Other current assets............................................... (62,014) 32,954 (306,407)
Other non-current assets........................................... (9,600) (48,063) (131,382)
Accounts payable and accrued expenses.............................. 306,736 731,232 3,336,131
----------- ----------- -----------
Net cash provided by operating activities....................... 118,820 1,147,062 3,934,204
----------- ----------- -----------
Cash flows from investing activities
Purchase of property, equipment and leaseholds......................... (630,675) (317,946) (3,486,123)
Acquisitions of theaters............................................... (6,499,000) (29,875,000)
Acquisition costs and other............................................ (608,315) (477,906) (285,499)
----------- ----------- -----------
Net cash used in investing activities........................... (1,238,990) (7,294,852) (33,646,622)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of long-term debt............................... 400,000 4,317,228 30,386,108
Payments on long-term debt............................................. (17,448) (136,543) (4,995,054)
Proceeds from issuance of subordinated notes payable................... 580,000 600,000
Payments on subordinated notes payable................................. (1,100,000)
Debt issuance costs.................................................... (342,842) (750,902)
Proceeds from issuance of common stock upon initial public offering.... 9,200,000
Initial public offering costs.......................................... (2,132,903)
Proceeds from issuance of common stock................................. 70,000
Proceeds from issuance of preferred stock.............................. 2,500,000
Preferred stock issuance costs......................................... (154,911)
Dividends paid......................................................... (30,000) (10,000)
Proceeds from issuance of underwriter warrants......................... 1,000
Payments on option..................................................... (80,000) (120,000)
----------- ----------- -----------
Net cash provided by financing activities....................... 852,552 6,722,932 30,608,249
----------- ----------- -----------
Net change in cash and cash equivalents.................................. (267,618) 575,142 895,831
Cash and cash equivalents, beginning of year............................. 443,821 176,203 751,345
----------- ----------- -----------
Cash and cash equivalents, end of year................................... $ 176,203 $ 751,345 $ 1,647,176
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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 was incorporated November 23, 1994 and is a
regional motion picture exhibitor that acquires and operates in-town multiplex
theaters primarily located in affluent suburban communities in the New York/New
Jersey metropolitan area. As of December 31, 1997, the Company's 31 theaters
with 148 screens show a mix of first-run commercial, art and family-oriented
films. The Company licenses films from distributors on a film-by-film and
theater-by-theater basis. The Company's business is seasonal with a substantial
portion of its revenue and operating income being derived during the summer
months (June through August) and the holiday season (November and December).
Use of Estimates--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.
Film rental costs owed to distributors are estimated as a percentage of the
film's box office receipts and the length of a film's run and are ultimately
settled with distributors within a period approximating three months.
Revenue Recognition--The Company recognizes revenues from box office admissions
and concession sales at the time of sale.
Cash Equivalents--Cash equivalents include commercial paper investments
purchased with original maturities of three months or less.
Inventories--Inventories consist of concession products and are stated at the
lower of cost (first-in, first-out method) or market.
Property, Equipment and Leaseholds--Property, equipment and leaseholds are
stated at cost less accumulated depreciation and amortization. Buildings and
improvements, furniture and equipment are depreciated using the straight line
method over the estimated useful lives of the assets as follows: buildings and
improvements-- 40 years; furniture and equipment--5 to 7 years. Leasehold
interests represent acquired rights to operate theatres under previously
existing operating leases. The fair value assigned to these leasehold interests
and lease improvements are capitalized and amortized using the straight-line
method over the shorter of the term of the lease or the estimated useful life of
the assets.
In 1996, the Company adopted Statement of Financial Accounting Standards 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of ('SFAS 121'). SFAS 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be reviewed
for impairment whenever there is an indication that the carrying amount of the
asset may not be recoverable. Recoverability of these assets is determined by
comparing the forecasted undiscounted net cash flows of the operation to which
the assets relate, to the carrying amount, including associated intangible
assets, of such operation. The adoption of SFAS 121 did not have a significant
effect on the consolidated financial position or results of operations.
Intangible Assets--Intangible assets consist of cost in excess of the tangible
and identifiable intangible assets of the theaters acquired (goodwill), debt
issuance costs, covenants not to compete, and organization costs. Costs are
amortized on a straight line basis over the following lives: goodwill--15 years,
covenants not to compete--3 to 5 years, organization costs--5 years. The Company
evaluates the recoverability of goodwill on an ongoing basis in light of changes
in any business conditions, events or circumstances that may indicate the
potential impairment of intangibles. Debt issuance costs are amortized as
interest expense over the term of the related debt.
F-15
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
Stock-Based Compensation--The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ('APB
25') and related interpretations in accounting for stock-based compensation. The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ('SFAS
123').
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 Loss Per Share--In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards 128, Earnings Per Share
('SFAS 128') which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Prior period amounts have been
restated to conform to the requirements of SFAS 128.
Disclosure of Fair Value of Financial Instruments--The carrying amounts reported
for cash and cash equivalents and accounts payable and accrued expenses
approximate fair value due to the short maturities of these assets and
liabilities. The fair value of the long term debt, subordinated notes payable
and Class B redeemable preferred stock are estimated based on discounted future
cash flows using rates currently available for debt and equity instruments with
similar terms. At December 31, 1997, the fair values approximate carrying
values.
NOTE 2--THEATER ACQUISITIONS
During 1997, the Company acquired a total of fourteen theaters and 79 screens
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 based on
the estimated fair value of identifiable tangible and intangible assets
(principally property, equipment and leasehold interest) of the respective
theaters with the excess purchase price, together with acquisition costs
approximating $285,000 being allocated to goodwill. The results of operations of
the acquired theaters are included in the accompanying consolidated financial
statements from the respective acquisition dates.
UA Acquisition--In September 1997 the Company acquired substantially all the
assets, including land, building, leasehold interests, equipment and various
operating contracts of five theaters from United Artists Theater Circuit, Inc.
(the 'UA Acquisition') for a total purchase price of $8.65 million in cash from
proceeds of the initial public offering (Note 7) and borrowings under the Credit
Facility (Note 6). Leasehold interests acquired
F-16
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
are to be amortized over the related theater leases which have remaining lease
terms through December 31, 2019. The purchase price has been allocated as
follows:
<TABLE>
<S> <C>
Land.................................................................. $1,527,000
Buildings............................................................. 3,665,000
Leasehold interests................................................... 2,641,000
Equipment............................................................. 695,000
Goodwill.............................................................. 122,000
----------
$8,650,000
----------
----------
</TABLE>
Nelson Ferman Acquisition--In November 1997 the Company acquired substantially
all the assets, including leasehold interests, equipment and various operating
contracts of two theaters from F&N Cinema, Inc. (the 'Nelson Ferman
Acquisition') for a total purchase price of $18.5 million. The Company paid $12
million in cash from borrowings under the Credit Facility, issued $6 million in
subordinated notes payable (Note 6) and issued 41,797 shares of common stock
with an aggregate market value of $500,000 based on the closing price of the
Company's stock on the ten days preceding the acquisition. Leasehold interests
acquired are to be amortized over the related theater leases which have
remaining lease terms through December 31, 2016. The purchase price has been
allocated as follows:
<TABLE>
<S> <C>
Leasehold interests.................................................. $ 6,500,000
Equipment............................................................ 1,270,000
Non-compete.......................................................... 10,000
Goodwill............................................................. 10,720,000
-----------
$18,500,000
-----------
-----------
</TABLE>
CJM Acquisition--In December 1997 the Company executed four separate agreements
to acquire certain assets, including leasehold interests and equipment of four
theaters from CJM Enterprises (the 'CJM Acquisition') for a total purchase price
of approximately $8.7 million. Pursuant to the agreements, the Company paid
$7.25 million in cash from borrowings under the Credit Facility, issued 62,500
shares of common stock with an aggregate market value of approximately $703,000
(based on the closing price of the Company's stock on the date of acquisition)
and agreed to issue either 750 shares of Class B redeemable preferred stock
(Note 7) by March 31, 1998 or pay $750,000 in cash in lieu of stock if the
Company consummated a private placement offering by such date. As the private
placement offering is not likely to occur by March 31, 1998, the 750 shares of
Class B redeemable preferred stock will be issued and have been reflected as
such in the accompanying financial statements. The agreements also provide for
additional consideration of 750 additional shares of Class B redeemable
preferred stock valued at $750,000 to be paid to the seller if another competing
theater is not opened in the operating vicinity of the purchased theaters within
two years. However, such consideration is deemed to be contingent and, as such,
will only be recorded on December 12, 1999 if no competing theater has opened.
Leasehold interests acquired in the CJM Acquisition are to be amortized over the
related theater leases which have remaining lease terms through November 30,
2017. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Leasehold interests.................................................. $ 1,503,000
Equipment............................................................ 1,510,400
Non-compete.......................................................... 60,000
Goodwill............................................................. 5,629,725
-----------
$ 8,703,125
-----------
-----------
</TABLE>
F-17
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
The shares of common stock issued in the Nelson Ferman Acquisition and the CJM
Acquisition are unregistered shares and are subject to Voting Trust Agreements
whereby the President and Chief Executive Officer has the right to vote the
shares until the shares are sold or registered.
The Company acquired three additional theaters during 1997 in two separate
transactions for $1,975,000 in cash from borrowings under the Credit Facility
and working capital.
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1996 and 1997 assumes the UA Acquisition, the Nelson
Ferman Acquisition and the CJM Acquisition, along with the Company's 1996
acquisitions, had occurred on January 1, 1996 giving effect to purchase
accounting adjustments and financing. The pro forma results have been prepared
for informational purposes only and do not reflect any benefit from economies
which might be achieved from combined operations. The pro forma results do not
represent results which would have occurred if the acquisition had taken place
on the basis assumed above, nor are they indicative of the results of future
combined operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Revenues....................................................... $28,960,499 $32,105,444
Net loss....................................................... (3,692,950) (3,692,996)
Basic and diluted loss per share............................... $ (1.68) $ (1.67)
</TABLE>
During 1996, the Company acquired the leaseholds of seven theaters and two
theaters with the underlying real estate, all located in New Jersey and New York
(the '1996 Acquisitions'). The 1996 Acquisitions have also been accounted for
under the purchase method of accounting. The results of operations of the
acquired theaters are included in the accompanying consolidated financial
statements from their respective acquisition dates. The 1996 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. 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 assume the 1996 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
F-18
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
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,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues........................................................................... $10,754,531 $13,182,481
Net loss........................................................................... $(1,658,987) $(1,268,766)
Basic and diluted loss per common share............................................ $ (2.05) $ (1.55)
</TABLE>
NOTE 3--PROPERTY, EQUIPMENT AND LEASEHOLDS
Property, equipment and leaseholds are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Land............................................................................... $ 400,000 $ 1,927,848
Buildings and improvements......................................................... 1,302,098 5,491,183
Leasehold interest and improvements................................................ 8,095,097 21,704,639
Furniture and equipment............................................................ 2,347,117 7,772,995
----------- -----------
12,144,312 36,896,665
Less: Accumulated depreciation and amortization.................................... 732,095 2,407,951
----------- -----------
$11,412,217 $34,488,714
----------- -----------
----------- -----------
</TABLE>
NOTE 4--INTANGIBLE ASSETS
Intangible assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Goodwill........................................................................... $ 2,151,437 $19,004,450
Debt issuance costs................................................................ 378,264 1,129,166
Covenants not to compete........................................................... 210,000 305,000
Organization costs................................................................. 36,362 42,234
----------- -----------
2,776,063 20,480,850
Less: Accumulated amortization..................................................... 64,545 549,295
----------- -----------
$ 2,711,518 $19,931,555
----------- -----------
----------- -----------
</TABLE>
F-19
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Film rental and booking fees payable.............................. $ 699,444 $1,613,834
Accounts payable.................................................. 243,278 1,936,552
Accrued interest.................................................. 55,351 369,874
Accrued payroll................................................... 68,632 254,538
Sales taxes payable............................................... 49,228 100,688
Other accrued expenses............................................ 110,569 287,147
---------- ----------
$1,226,502 $4,562,633
---------- ----------
---------- ----------
</TABLE>
NOTE 6--LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
DESCRIPTION INTEREST RATE 1996 1997
- ---------------------------------------------------- ------------------------- ----------- -----------
<S> <C> <C> <C>
Term notes A & B under Credit Facility, interest
payable in monthly installments, principal due in
quarterly installments through September 2002, net 10% at December 31, 1997
of unamortized debt discount of $384,976 and (floating rate of 1.5%
$242,729, respectively............................ above prime) $ 3,790,024 $34,757,271
Notes payable--Seller, refinanced as described
below............................................. 4,400,000
Note payable to bank, in monthly installments of
principal and interest of $5,029, due October
2005.............................................. 11 1/4% 337,009 313,096
Other............................................... 51,228 41,195
----------- -----------
8,578,261 35,111,562
Less: Current maturities............................ 835,650 2,876,607
----------- -----------
$ 7,742,611 $32,234,955
----------- -----------
----------- -----------
</TABLE>
Credit Facility--In September 1997 the Company entered into an amended and
restated credit agreement with Provident Bank (the 'Credit Facility') consisting
of a revolving credit line of $1.0 million, Term Note A of $12 million and Term
Note B of $17 million, the proceeds of which were used to refinance existing
term loans with the same bank of $10.4 million and finance acquisitions (Note
2). In December 1997 the Company further increased its Credit Facility to $36
million by increasing the availability under Term Note B to $23 million through
the participation of an additional bank, the proceeds of which were used to
finance acquisitions (Note 2). In February 1998, the Company increased its
Credit Facility by obtaining a $5.8 million Term Note C (Note 14).
The revolving credit line of $1 million bears interest at prime + 1.5%,
terminates on September, 2002 and can be used for refinancing existing debt,
financing working capital, financing acquisitions and for general corporate
purposes. There were no amounts outstanding on the revolving credit line at
December 31, 1997.
F-20
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 6--LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE--(CONTINUED)
The Credit Facility is collateralized by substantially all of the assets of the
Company and 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, 1997 and 1996. The Credit
Facility also restricts certain payments by the Company including the payment of
dividends, retirement of equity securities or retirement of any subordinated
debt through premium payments.
In accordance with the provisions of the Credit Facility, the Company maintains
a $2.5 million key-man life insurance policy on its President and Chief
Executive Officer.
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. Accordingly, the note payable at December 31, 1996 was classified in
accordance with the terms of this new bank term note.
Subordinated Notes--In November 1997, the Company issued $6 million in
subordinated notes payable to the seller in connection with the Nelson Ferman
Acquisition (Note 2). The notes bear interest at 10 1/2% which is payable
monthly. The principal and any unpaid interest on one note in the amount of $2
million is due on the earlier of the consummation of a private debt offering or
January 1999. The principal on the $4 million note is due the earlier of the
consummation of a private debt offering or November 2002.
During 1995 and 1996, the Company sold 8% subordinated notes totalling
$1,100,000 to certain related parties. In October 1997, the Company repaid
$500,000 of these subordinated notes payable and in December 1997, the Company
converted the remaining $600,000 of subordinated notes payable into 600 shares
of Class B redeemable preferred stock valued at $600,000 (Note 7).
The Company had a $600,000 12% subordinated note payable which was issued in
connection with its acquisition of certain theaters in December 1996. Such note
was repaid in August 1997 upon consummation of the Company's initial public
offering.
Long-term debt and subordinated notes payable at December 31, 1997 mature
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------------
<S> <C>
1998................................................................. $ 2,876,607
1999................................................................. 8,984,318
2000................................................................. 6,989,036
2001................................................................. 7,024,619
2002................................................................. 15,091,387
2003 and thereafter.................................................. 145,595
-----------
$41,111,562
-----------
-----------
</TABLE>
NOTE 7--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.
Initial Public Offering--In August 1997, the Company consummated an initial
public offering (the 'Offering') through the sale of 1,150,000 shares of its
common stock, $.01 par value for total proceeds of approximately $7.1 million,
net of offering costs of approximately $2.1 million.
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
F-21
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 7--STOCKHOLDERS' EQUITY--(CONTINUED)
one or more series and to establish and designate any such series and to
determine the number of shares and the relative conversion rights, voting
rights, terms of redemption and liquidation.
Class A Preferred Stock and Warrant--In May and July 1996, the Company issued
779 shares of Class A preferred stock and warrants in exchange for $2,500,000.
Each share of Class A preferred stock is convertible at any time at the option
of the holders into 600 shares of common stock. Upon the occurrence of certain
events, the shares of Class A preferred stock will automatically convert into
shares of common stock. The warrants, which entitled the holder to purchase up
to 471 shares of Class A preferred stock were exchanged at the time of the
offering for a new warrant exercisable for 282,600 shares of common stock.
The warrant is not exercisable until June 1, 2001 unless, prior to that date,
the Company sells all or substantially all of its assets, liquidates, dissolves
or merges with another corporation in a transaction which results in a change in
control of the Company's voting stock. The number of shares of common stock for
which the warrant is exercisable is subject to reduction, including not being
exercisable into any shares, based on a formula and the fair value of the
Company's stock as defined, upon the occurrence of certain events.
Class B Redeemable Preferred Stock--During 1997 the Company authorized 20,000
shares and issued 1,350 shares of Class B non-voting, 10 1/2% cumulative
redeemable preferred stock with a liquidation value of $1,000 per share. The
holders of the Class B redeemable preferred stock are entitled to receive
preferential dividends, when and as declared by the Board of Directors. So long
as any shares of Class B redeemable preferred stock are outstanding, unless all
dividends on the Class B redeemable preferred stock have been paid, no dividend
or other distribution may be paid or made on the common stock, Class A preferred
stock or any other capital stock of the Company ranking junior as to dividends
to the Class B redeemable 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 B redeemable preferred
stock will be entitled to receive an amount per share equal to a liquidation
value ($1,000) plus all unpaid dividends per share on the Class B redeemable
preferred stock, prior to any distribution to holders of the common stock, Class
A preferred stock or any other capital stock of the Company ranking junior upon
liquidation or dissolution. The holder of Class B redeemable preferred stock can
redeem upon the earlier to occur of dissolution of the Company, within ten
business days after the date of closing of a private placement offering with
aggregate proceeds of $70 million, or five years after the date of issuance of
such shares. The Company can redeem these shares at any time.
Warrants--In consideration of services provided at the time of the Offering, the
Company issued to the underwriter of the Offering, for a nominal amount of
$1,000, warrants to purchase 100,000 shares of common stock with an initial
exercise price of $9.60 per share. As provided in the warrant agreement, the
exercise price and the number of shares that may be purchased upon the exercise
of the warrants are subject to modification and adjustment upon the occurrence
of certain events, as defined in the warrant agreement. The warrants are
exercisable for a four year period commencing on August 12, 1998. The fair value
of services provided of approximately $200,000 has been determined based on the
fair value of the warrants using an option pricing model in accordance with SFAS
123 and has no impact on stockholders' equity as the services provided are
considered additional offering costs.
During 1995 and 1996, the Company issued 200 warrants, convertible into 120,000
shares of common stock, together with the issuance of certain subordinated debt.
Concurrent with the consummation of the Offering, holders of warrants to
purchase 97,500 shares of common stock (at exercise prices ranging from $3.33 to
$6.67 per share) exchanged such warrants for 66,000 shares of common stock and
also amended the terms of certain subordinated notes payable. The fair value of
the common stock issued, less the value of the warrants surrendered, was
recorded as interest expense of $104,000 in the accompanying financial
statements. The remaining warrants were canceled upon retirement of the
subordinated debt on December 12, 1997 (Note 6) in accordance with the terms of
the debt and warrant agreement.
F-22
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 7--STOCKHOLDERS' EQUITY--(CONTINUED)
In connection with the bank financing as described in Note 6 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 Company's common stock, respectively, at an
exercise price of $.01 per share. In June 1997, the Company repurchased those
warrants for $1 million which approximated the put price at that time. As a
result, the repurchase has been recorded as a charge to additional
paid-in-capital.
Terminated Redemption Rights--A certain common stockholder had the right to sell
its shares of common stock at a redemption price based upon a formula. If such
stockholder did not exercise that right, the Company had the right to purchase
those shares of common stock from such stockholder at a price based upon the
same formula. Such stockholder and the Company terminated those rights upon
consummation of the Offering.
The holder of the outstanding shares of the Company's Class A preferred stock,
$.01 par value had the right to sell to the Company all of those shares or the
shares of common stock into which those shares had been converted at a
redemption price determined in accordance with a specified formula. Such holder
terminated that right upon consummation of the Offering in exchange for the
issuance of 60,000 shares of common stock. The fair value of the 60,000 shares
of common stock issued, less the estimated value of the redemption right
terminated, was recorded as a preferred stock dividend of $26,000 during 1997.
As of December 31, 1996, the Company reported the Class A redeemable
preferred stock and the redeemable common stock at the current redemption value
separately between liabilities and stockholders' equity, since redemption was
outside of the Company's control. A corresponding reduction was made to
stockholders' equity, as the equivalent of treasury stock. The per share
redemption value of the Class A redeemable preferred stock was 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 was based on book
value per share computed on a fully diluted basis.
NOTE 8--INCOME TAXES
Deferred income taxes reflect the tax consequences on future years of
differences between the bases of assets and liabilities for financial reporting
purposes and income tax purposes. A valuation allowance is provided when it is
more likely than not that some portion of the deferred tax assets will not be
realized. The Company has determined, based on its recurring net losses since
inception, that a full valuation allowance of $85,000, $172,000 and $621,000 is
appropriate at December 31, 1995, 1996 and 1997.
F-23
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 8--INCOME TAXES--(CONTINUED)
The income tax effect of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred tax assets
Net operating loss carryforwards..................................... $ 678,000
Other................................................................ 46,000
---------
Gross deferred tax assets.............................................. 724,000
Deferred tax liabilities
Property, equipment and leaseholds................................... (103,000)
---------
621,000
Valuation allowance.................................................... (621,000)
---------
Net deferred tax assets.............................................. $
---------
---------
</TABLE>
A reconciliation between the statutory federal income tax rate of 34% and the
effective rate of income tax expense for the years ended December 31, 1995, 1996
and 1997 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Income tax benefit at federal statutory rate............. $(72,000) $(74,000) $(452,000)
State income tax benefit, net of federal tax effect...... (13,000) (13,000) (79,000)
Increase in net operating loss carryforwards............. 85,000 87,000 531,000
-------- -------- ---------
Provision (benefit) for income taxes..................... $ $ $
-------- -------- ---------
-------- -------- ---------
</TABLE>
The Company has available at December 31, 1997 net operating loss
carryforwards totaling approximately $1,698,000 that may be applied against
future consolidated federal and state taxable income of the respective
subsidiary companies. The loss carryforwards will expire through 2012.
Certain losses are subject to limitation by the provisions of Section 382 of the
Internal Revenue Code due to a more than 50% change in ownership which occurred
upon the consummation of the Company's Offering.
NOTE 9--STOCK BASED COMPENSATION
In August 1997, the Company adopted the Stock Incentive Plan (the 'Plan') which
provides for the granting of awards to purchase shares of the Company's common
stock to officers, directors and key employees and non-employees at the
discretion of a committee of the Board of Directors. Awards granted under the
Plan may be in the form of Non-Qualified Stock Options, Incentive Stock Options,
Stock Appreciation Rights, Restricted Shares and Performance Awards. The
exercise price of each share of stock awarded under the Plan shall be determined
by the committee; provided however, that the exercise price shall in all cases
be equal to or greater than the quoted market price of the Company's common
stock on the date of grant. At December 31, 1997, 200,000 shares of common stock
are reserved for issuance under the Plan. Awards granted under the Plan become
fully vested upon a change in control of the Company.
During 1997, the Company granted 122,500 incentive stock options with exercise
prices ranging from $8 to $12 and with a weighted average exercise price of
$8.40 per share. No options became exercisable or were forfeited during 1997.
The awards granted during 1997 terminate in 10 years and have a graded vesting
schedule that provides for 100% vesting in four years as follows: Year 1--10%,
Year 2--35%, Year 3--65%, Year 4--100%.
F-24
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 9--STOCK BASED COMPENSATION--(CONTINUED)
Pro forma information, as required by SFAS 123, has been determined as if the
Company had accounted for stock options awarded under the Plan under the fair
value method as defined by SFAS 123. The fair value of these options was
estimated at the date of grant using the Black Scholes option pricing model with
the following weighted-average assumptions: risk-free rate of 6.5%; expected
common stock market price volatility factor of 30%; and an average expected life
of the options of six years. The weighted average fair value of each option on
the date of grant using the option pricing model was $3.26. If fair value based
accounting in accordance with SFAS 123 had been used to measure stock based
compensation cost, the Company's consolidated net loss would have increased by
$40,000 or $0.03 per share for the year ended December 31, 1997. This pro forma
impact only takes into account options granted since January 1, 1997 and is
likely to increase in future years as additional options are granted and
amortized ratably over the vesting period.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Theater Leases--A substantial portion of the Company's theaters and the
corporate office are operated under lease arrangements with initial lease terms
and renewal options. Future minimum rental payments for all non-cancellable
operating leases having initial or remaining lease terms in excess of one year
as of December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------------
<S> <C>
1998................................................................. $ 2,685,334
1999................................................................. 2,699,106
2000................................................................. 2,646,440
2001................................................................. 2,557,795
2002................................................................. 2,602,006
2003 and thereafter.................................................. 17,837,239
-----------
$31,027,920
-----------
-----------
</TABLE>
Certain theaters operated by the company have operating leases that contain
escalating clauses. For these leases, the aggregate rent payments over the lease
term are 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. In addition, leases require additional
amounts to be paid for common area maintenance and/or contingent rental payments
based on a percent of net revenues of the theater in excess of a predetermined
amount. Total rent expense for the years ended December 31, 1995, 1996 and 1997
was approximately $209,000, $802,000 and $1,287,000, respectively.
Acquisition Commitments--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 of the three theaters through
September 2000. In consideration of the option granted, the Company made an
initial $200,000 payment which was financed by the seller. Until exercise of the
option, the Company is required to make annual payments which are recorded as
interest expense in the accompanying financial statements. It is the Company's
intention to ultimately exercise this option.
In November 1997, the Company entered into an agreement to acquire a theater
upon completion of construction of such theater for a price of $1 million to be
paid in common stock of the Company; provided however, that in no event shall
the common shares to be issued be greater than 90,909 or less than 76,923
shares. The closing date under this agreement will occur within ten business
days after receipt of a valid construction permit, but in no event later than
January 1999. Neither the Company nor the seller is obligated to close on this
agreement if a valid construction permit is not obtained by June 1998.
F-25
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 10--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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, provided that such total does not to
exceed $750,000.
NOTE 11--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid for interest.................................................. $ 42,877 $ 623,656 $1,179,000
Non-cash investing and financing activities
Issuance of common stock as consideration for theaters acquired....... 1,110,000 1,203,125
Issuance of subordinated notes payable as consideration for theaters
acquired........................................................... 5,000,000 6,000,000
Issuance of Class B redeemable preferred stock as consideration for
theaters acquired.................................................. 750,000
Conversion of subordinated notes payable into Class B redeemable
preferred
stock.............................................................. 600,000
Repurchase of warrants................................................ 1,000,000
Common stock issued upon termination of preferred stock redemption
right.............................................................. 26,000
Fair value of warrants issued in connection with subordinated debt and
bank financing..................................................... 19,610 439,533
Conversion of subordinated note payable (related party) into common
stock.............................................................. 80,000
Project acquisition costs in exchange for option payable.............. 200,000
</TABLE>
NOTE 12--SUPPLEMENTAL DISCLOSURE OF LOSS PER SHARE
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Net Loss................................................................. $(216,316) $(218,328) $(1,328,938)
Less: Preferred stock dividends.......................................... (26,000)
--------- --------- -----------
Loss available to common stockholders.................................... $(216,316) $(218,328) $(1,354,938)
--------- --------- -----------
--------- --------- -----------
Weighted average shares outstanding...................................... 600,000 744,038 1,312,865
--------- --------- -----------
--------- --------- -----------
Basic and diluted loss per share......................................... $ (.36) $ (0.29) $ (1.03)
--------- --------- -----------
--------- --------- -----------
</TABLE>
The Class A preferred stock and warrant, underwriter warrants and incentive
stock options outstanding are potentially convertible into 972,500 shares of
common stock and have not been included in the computation of diluted loss per
share as the effect would have been antidilutive. The Company's loss per share
for the years ended December 31, 1995 and 1996 have been restated in accordance
with SFAS 128, as described in Note 1.
NOTE 13--RELATED PARTY TRANSACTIONS
In June 1997 the Company entered into a consulting and confidentiality agreement
with a director and stockholder of the Company to assist the Company in the
identification of theater acquisition candidates and provide other services as
requested by the Company. The director/stockholder is also an executive vice
president of First New York Realty Co., Inc. ('First New York'). To the extent,
if any, that the director/stockholder identifies any person who is interested in
leasing a site to the Company in his capacity as an employee of First New York
and the Company determines to lease that site, First New York could be entitled
to a commission from
F-26
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 13--RELATED PARTY TRANSACTIONS--(CONTINUED)
that person and the director/stockholder would then be entitled to a commission
from First New York. During the years ended December 31, 1995, 1996 and 1997 the
Company incurred $0, $12,000 and $17,000, respectively in consulting fees to the
director/stockholder.
In May 1997 the Company renewed its agreement with an affiliated entity who is a
preferred stockholder and whose managing directors are directors of the Company,
to provide business strategy and financial and investment management services
for a fee equal to $60,000 per year. The Company incurred fees for such services
of $30,000 and $50,000 in 1996 and 1997, respectively. No such fees were paid in
1995.
A director of the Company is an officer of the entity that served as the
underwriter for the Offering. The director was appointed to the Company's board
of directors subsequent to consummation of the Offering. Amounts paid to the
underwriter for services provided at the time of the Offering were $1,013,000.
NOTE 14--SUBSEQUENT EVENTS
In February 1998, the Company extended its existing Credit Facility through the
issuance of a Term Note C in the amount of $5.8 million to be used for
additional acquisitions. Interest is due quarterly at prime plus 1.5%. Principal
payments are to be paid quarterly commencing October 1, 1998 with final payment
due September 2002. The Company borrowed $3.8 million under Term Note C to fund
the acquisition of three theaters subsequent to December 31, 1997. The Company
continues to pursue the acquisition of additional theaters, the development of
new theaters and the addition of screens to existing theaters.
In March 1998, the Company adopted the Clearview Cinema Group 401(K) Plan (the
'401(K) Plan') that covers all employees of the Company who have reached the age
of 21 and have completed one year of service, as defined. The 401(K) Plan
provides for employee elective contributions up to 15% of annual compensation,
with matching contributions by the Company of 50% of the first 6% of the
employees' compensation contributed. Additionally, the Company, at its
discretion may make profit-sharing contributions to the 401(K) Plan. Employees
vest 100% in the Company's matching contributions and profit sharing
contributions after three years of service.
F-27
<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-28
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
1997
DECEMBER 31, ------------
1996
------------ (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-29
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF INCOME AND DIVISIONAL EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 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-30
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED 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-31
<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.
F-32
<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 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
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.
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> <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
F-33
<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 5--RELATED PARTY TRANSACTIONS:--(CONTINUED)
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-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the Nelson Ferman Theaters at
Parsippany and Roxbury (the 'NF Theaters'), as of September 30, 1997 and the
related combined statements of income and changes in retained earnings and cash
flows for the nine months ended September 30, 1997 and the year ended December
31, 1996. These combined financial statements are the responsibility of the
management of Nelson Ferman, 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 financials 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 NF Theaters at
September 30, 1997, and the results of their operations and their cash flows for
of the nine months ended September 30, 1997 and the year ended December 31,
1996, in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
October 22, 1997
F-35
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................................ $ 37,017
Other current assets................................................................ 84,415
----------
Total current assets............................................................. $ 121,432
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION................................. 3,828,748
OTHER ASSETS:
Due from affiliate.................................................................. 125,488
Other assets........................................................................ 36,403 161,891
---------- ----------
$4,112,071
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................................................ $ 302,917
Current portion of deferred income.................................................. 100,000
Accounts payable and accrued expenses............................................... 723,674
----------
Total current liabilities........................................................ $1,126,591
LONG-TERM LIABILITIES:
Long-term debt, less current maturities............................................. 1,633,333
Deferred income, net of current portion............................................. 625,000
----------
2,258,333
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock........................................................................ 504,000
Additional paid-in capital.......................................................... 27,000
Retained earnings................................................................... 196,147
----------
Total Stockholders' Equity....................................................... 727,147
----------
$4,112,071
----------
----------
</TABLE>
See accompanying notes to combined financial statements.
F-36
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF INCOME
AND CHANGES IN RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
THEATER REVENUES:
Box office........................................................................ $4,812,495 $ 4,015,770
Concession........................................................................ 1,129,729 989,484
Other............................................................................. 39,167 35,979
------------ -------------
5,981,391 5,041,233
------------ -------------
OPERATING EXPENSES:
Film rental and booking fees...................................................... 2,373,986 1,925,740
Theater operating expenses........................................................ 1,848,016 1,354,756
General and administrative expenses............................................... 1,103,057 819,520
Depreciation and amortization..................................................... 403,075 298,980
------------ -------------
5,728,134 4,398,996
------------ -------------
OPERATING INCOME.................................................................... 253,257 642,237
INTEREST EXPENSE.................................................................... 250,156 188,963
------------ -------------
NET INCOME.......................................................................... 3,101 453,274
RETAINED EARNINGS (DEFICIT), BEGINNING OF PERIOD.................................... (260,228) (257,127)
------------ -------------
RETAINED EARNINGS (DEFICIT), END OF PERIOD.......................................... $ (257,127) $ 196,147
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................ $ 3,101 $ 453,274
Adjustments to reconcile net income (loss) to net cash flows from operating
activities:
Depreciation and amortization.................................................. 403,075 298,980
Recognition of deferred revenue................................................ (100,000) (75,000)
Amortization of accrued rent................................................... 25,146 18,860
Changes in operating assets and liabilities:
Other current assets......................................................... (28,286) 32,466
Other assets................................................................. 10,000 12,000
Accounts payable and accrued expenses........................................ 19,681 (157,215)
------------ -------------
Net cash flows from operating activities.................................. 332,717 583,365
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................................ (114,423) --
Advances to parent and affiliate.................................................. (89,878) (494,209)
------------ -------------
Net cash flows from investing activities.................................. (204,301) (494,209)
------------ -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on long-term debt........................................................ (156,604) (151,250)
------------ -------------
NET CHANGE IN CASH.................................................................. (28,188) (62,094)
CASH, BEGINNING OF PERIOD........................................................... 127,299 99,111
------------ -------------
CASH, END OF PERIOD................................................................. $ 99,111 $ 37,017
------------ -------------
------------ -------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................................................... $ 250,156 $ 188,963
------------ -------------
------------ -------------
Income taxes paid................................................................. $ -- $ --
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of two theater affiliates of Nelson Ferman, Inc. ('Nelson Ferman') at
Parsippany and Roxbury (the 'NF Theaters'). All significant inter-location
balances and transactions have been eliminated in combination.
Nature of the Business--The NF Theaters operated multi-screen theaters in
Morris County, New Jersey.
Revenues and Film Rental Costs--The NF Theaters recognize revenues from box
office admissions at the time of sale. Concession sales are recognized as a
commission from a third party, when earned. Film rental costs are based on a
film's box office receipts and length of a film's run.
Seasonality--The NF 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.
Property and Equipment--Property and equipment are stated at cost. Theater
equipment and office furniture and equipment are depreciated using straight line
and accelerated methods over the estimated useful lives of the assets of 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 NF Theaters included in the combined financial statements
are operated under leases that contain predetermined increases in the rentals
payable during the term of such leases. For these leases, the aggregate rental
expense over the lease terms is recognized on a straight-line basis over the
lease terms. 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 terms.
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 and 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 of financial instruments with similar characteristics available to
management.
Income taxes--The NF Theaters have elected under Section 1361 of the
Internal Revenue Code and under New Jersey corporate statutes to be taxed as
small business corporations. Under these provisions, all earnings and losses of
the NF Theaters are reported on the tax returns of the shareholders.
Accordingly, no provision has been made for federal income taxes and the NF
Theaters are subject to state taxes at a nominal rate.
Impairment of Long-Lived Assets--In 1996, Nelson Ferman 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.'
The effect of the adoption of that statement did not have a material effect on
the financial statements.
F-39
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements................................................ $4,063,081
Furniture and equipment............................................... 1,563,084
----------
5,626,165
Less: Accumulated depreciation and amortization....................... 1,797,417
----------
$3,828,748
----------
----------
</TABLE>
NOTE 3--LONG-TERM DEBT:
Long-Term Debt--A summary of long-term debt at September 30, 1997 follows:
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION RATE
- --------------------------------------------------------------------------------------- ---------
<S> <C> <C>
Notes payable, due in monthly installments of $14,583 plus interest, through November
2000 with the remaining balance of $1,239,583 due in Prime
January 2001......................................................................... plus .25% $1,808,333
Other.................................................................................. Various 127,917
----------
1,936,250
Less: Current maturities............................................................... 302,917
----------
$1,633,333
----------
----------
</TABLE>
The above debt is secured by the leasehold interest and other operating
assets of the NF Theaters and is guaranteed by all affiliates of Nelson Ferman,
including its stockholders.
Long-term debt matures as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
- ----------------------------------------------------------------------
<S> <C>
1998.................................................................. $ 302,917
1999.................................................................. 175,000
2000.................................................................. 175,000
2001.................................................................. 1,283,333
----------
$1,936,250
----------
----------
</TABLE>
NOTE 4--DEFERRED INCOME:
The NF Theaters entered into an agreement with the concession vendor of the
Parsippany location in November, 1994, wherein the concessionaire paid
$1,000,000 as advance commissions. The commissions are being recognized as
income ratably over the term of the concession agreement, which expires in
November 2004. At September 30, 1997, the unamortized deferred commission
amounted to approximately $725,000.
The agreement stipulates that if the NF Theater at Parsippany cancels the
agreement prior to its expiration, the remaining unamortized balance must be
refunded to the concessionaire.
F-40
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5--COMMON STOCK:
Common stock consists of the following at September 30, 1997:
<TABLE>
<S> <C>
Parsippany:
No par value, authorized and issued 100 shares........................ $500,000
Roxbury:
No par value, authorized and issued 100 shares........................ 4,000
--------
$504,000
--------
--------
</TABLE>
NOTE 6--COMMITMENTS AND CONTINGENCIES:
Theater Leases--The following is a schedule of future minimum rental
payments required for all non-cancelable operating leases (for theater
facilities) that have initial or remaining lease terms in excess of one year at
September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- ----------------------------------------------------------------------
<S> <C>
1997.................................................................. $ 353,805
1998.................................................................. 353,805
1999.................................................................. 361,523
2000.................................................................. 361,523
2001.................................................................. 375,478
2002 and thereafter................................................... 5,954,209
----------
$7,760,343
----------
----------
</TABLE>
Rent expense for theater operating leases for the year ended December 30,
1996 and the nine months ended September 30, 1997 was approximately $570,000 and
$384,000, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS:
Operating Expenses, Management Fees and Interest Expense--The NF Theaters'
operations through the date of sale were significantly controlled by Nelson
Ferman. In that regard, the cash deposited to the NF Theaters' operating
accounts was transferred to Nelson Ferman, which used the funds to pay operating
expenses, along with the funds from other Nelson Ferman affiliated theaters, on
a company-wide basis using an integrated system.
Interest expense represents an allocation of interest costs incurred by
Nelson Ferman and is charged to the NF Theaters based on each theater's
respective net assets.
NOTE 8--SUBSEQUENT EVENT (UNAUDITED):
In November 1997, Nelson Ferman sold substantially all of the assets,
including leasehold interests, equipment and various operating contracts of the
NF Theaters at Parsippany and Roxbury to Clearview Cinema Group, Inc.
('Clearview') for $18.5 million; $11.6 million in cash, 10 1/2% subordinated
notes aggregating $6.0 million, and common stock of Clearview valued at
$500,000, with an additional $400,000 held in escrow until the satisfaction of
certain obligations of Nelson Ferman.
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the CJM Theaters at Kin-Mall,
Middlebrook, Cedar Grove and Bellevue (the 'CJM Theaters') as of September 30,
1997 and the related combined statements of income and retained earnings and
cash flows for the nine months ended September 30, 1997 and the year ended
December 31, 1996. These combined financial statements are the responsibility of
the management of CJM Entertainment, 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 CJM Theaters at
September 30, 1997, and the results of their operations and their cash flows for
the nine months ended September 30, 1997 and the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
December 4, 1997
F-42
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................................ $1,030,467
Inventories......................................................................... 15,657
Other current assets................................................................ 31,668
----------
Total current assets............................................................. $1,077,792
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION............................... 2,479,993
OTHER ASSETS.......................................................................... 30,280
----------
$3,588,065
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES................................................. $ 377,445
AMOUNTS DUE TO OFFICER................................................................ 2,313,489
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock........................................................................ $ 19,000
Retained earnings................................................................... 878,131
----------
Total stockholders' equity....................................................... 897,131
----------
$3,588,065
----------
----------
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
THEATER REVENUES:
Box office........................................................................ $3,774,264 $ 3,532,934
Concession........................................................................ 1,211,383 1,015,434
Other............................................................................. 10,008 12,300
------------ -------------
4,995,655 4,560,668
------------ -------------
OPERATING EXPENSES:
Film rental and booking fees...................................................... 1,703,429 1,608,263
Cost of concessions............................................................... 248,766 194,289
Theater operating expenses........................................................ 1,823,464 1,695,748
General and administrative expenses............................................... 181,116 114,834
Depreciation and amortization..................................................... 314,976 191,781
------------ -------------
4,271,751 3,804,915
------------ -------------
OPERATING INCOME.................................................................... 723,904 755,753
INTEREST EXPENSE.................................................................... 182,296 151,409
------------ -------------
INCOME BEFORE PROVISION FOR INCOME TAXES............................................ 541,608 604,344
PROVISION FOR INCOME TAXES.......................................................... 18,761 25,500
------------ -------------
NET INCOME.......................................................................... 522,847 578,844
RETAINED EARNINGS, BEGINNING OF PERIOD.............................................. 326,579 643,381
DISTRIBUTIONS TO STOCKHOLDERS....................................................... (206,045) (344,094)
------------ -------------
RETAINED EARNINGS, END OF PERIOD.................................................... $ 643,381 $ 878,131
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 522,847 $ 578,844
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization.................................................. 314,976 191,781
Changes in operating assets and liabilities:
Inventories.................................................................. 40 (2,795)
Other current assets......................................................... 2,060 (10,553)
Other assets................................................................. (29,668) 1,501
Accounts payable and accrued expenses........................................ 28,296 (148,958)
------------ -------------
Net cash flows from operating activities.................................. 838,551 609,820
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................................ (398,904) (293,327)
------------ -------------
Net cash flows from investing activities.................................. (398,904) (293,327)
------------ -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Distributions to stockholders..................................................... (206,045) (344,094)
Net advances from officer......................................................... 58,418 30,666
Proceeds from issuance of common stock............................................ 2,000
------------ -------------
Net cash flows from financing activities.................................. (145,627) (313,428)
------------ -------------
NET CHANGE IN CASH.................................................................. 294,020 3,065
CASH, BEGINNING OF PERIOD........................................................... 733,382 1,027,402
------------ -------------
CASH, END OF PERIOD................................................................. $1,027,402 $ 1,030,467
------------ -------------
------------ -------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................................................... $ 182,296 $ 151,409
------------ -------------
------------ -------------
Income taxes paid................................................................. $ 8,500 $ 18,000
------------ -------------
------------ -------------
</TABLE>
See accompanying notes to combined financial statements.
F-45
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of certain theater affiliates of CJM Entertainment, Inc. ('CJM') at
Kin-Mall, Middlebrook, Cedar Grove and Bellevue (the 'CJM Theaters'). All
significant inter-location balances and transactions have been eliminated in
combination.
Nature of the Business--The CJM Theaters operated multi-screen theaters
located in Morris, Essex and Monmouth Counties, New Jersey.
Revenues and Film Rental Costs--The CJM Theaters recognize 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 CJM 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.
Property and Equipment--Property and equipment are stated at cost. Theater
equipment and office furniture and equipment are depreciated using straight line
and accelerated methods over the estimated useful lives of the assets of 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, which
ever is less.
Rent Expense--The CJM Theaters included in the combined financial
statements are operated under leases that contain predetermined increases in the
rentals payable during the term of such leases. For these leases, the aggregate
rental expense over the lease terms is recognized on a straight-line basis over
the lease terms. 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 and 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 of financial instruments with similar characteristics available to
management.
Income Taxes--The CJM Theaters have elected under Section 1361 of the
Internal Revenue Code and under New Jersey corporate statutes to be taxed as
small business corporations. Under these provisions, all earnings and losses of
the CJM Theaters are reported on the tax returns of the shareholders.
Accordingly, no provision has been made for federal income taxes and the CJM
Theaters are subject to state taxes at a nominal rate.
Impairment of Long-Lived Assets--In 1996, the CJM Theaters 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'. The effect of adoption of the statement did not have a material effect on
the financial statements.
F-46
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE--(CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements................................................ $2,323,240
Furniture and other equipment......................................... 1,480,472
----------
3,803,712
Less: Accumulated depreciation and amortization....................... 1,323,719
----------
$2,479,993
----------
----------
</TABLE>
NOTE 3--COMMON STOCK:
Common stock consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Kin-Mall:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. $ 2,000
Middlebrook:
No par value, authorized 2500 shares, issued and outstanding 100
shares.............................................................. 10,000
Cedar Grove:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. 5,000
Bellevue:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. 2,000
-------
$19,000
-------
-------
</TABLE>
NOTE 4--COMMITMENTS AND CONTINGENCIES:
Theater Leases--The following is a schedule of future minimum rental
payments required for all non-cancellable operating leases that have initial or
remaining lease terms in excess of one year at September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- ----------------------------------------------------------------------
<S> <C>
1998.................................................................. $ 712,112
1999.................................................................. 668,135
2000.................................................................. 448,250
2001.................................................................. 470,325
2002.................................................................. 430,326
2003 and thereafter................................................... 2,249,744
----------
$4,978,892
----------
----------
</TABLE>
Rent expense for theater operating leases for the nine months ended
September 30, 1997 and the year ended December 31, 1996, was approximately
$608,000 and $750,000, respectively.
NOTE 5--RELATED PARTY TRANSACTIONS:
Due to Officer--The amount due to officer represent advances made to each
of the respective CJM Theaters' since their inception. No specified payment
terms have been determined.
F-47
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE--(CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6--SUBSEQUENT EVENT (UNAUDITED):
In December 1997, CJM sold substantially all of the assets, including
leasehold interests, equipment and various operating contracts of the CJM
Theaters at Kin-Mall, Middlebrook, Cedar Grove and Bellevue to Clearview Cinema
Group, Inc. ('Clearview').
CJM received 62,500 shares of common stock of Clearview in exchange for
certain furniture, fixtures, equipment, and personal property related to the
operation of its Bellevue theater, a four-screen theater located in Upper
Montclair, New Jersey and a leasehold interest in the real property on which
that theater is located.
Pursuant to three separate asset purchase agreements, CJM sold the
respective leasehold interests and furniture, fixtures, equipment and personal
property related to the operation of its eight-screen Kin-Mall theater located
in Kinnelon, New Jersey; its five-screen theater located in Cedar Grove, New
Jersey; and its ten-screen Middlebrook theater located in Ocean Township, New
Jersey. The aggregate purchase price of these three acquisitions totaled $8.75
million; $7.25 million in cash and the right to receive 1,500 shares of
Clearview's Class B Non-Voting Cumulative Redeemable Preferred Stock (the 'Class
B Preferred Stock'). CJM will receive cash of $1.5 million (plus interest
accrued at 10 1/2%) in lieu of the Class B Preferred Stock if Clearview
consummates a specified debt offering by certain prescribed dates. In addition,
the right to receive 750 of the 1,500 shares of Clearview's Class B Preferred
Stock will also terminate if, prior to December 12, 1999, any other party
receives all material governmental approvals for the construction of a new
theater complex in a specified location.
F-48
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 that 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 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 form 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 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 no 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 redemption's 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 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<C> <S> <C>
2.01 Agreement of Purchase and Sale by and among United Artists Theatre Exhibit 2.01 to Registration
Circuit, Inc., United Artists Properties I Corp., Mamaroneck Statement on Form SB-2 filed May
Playhouse Holding Corporation and CCC Bronxville Cinema Corp., CCC 27, 1997
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
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<C> <S> <C>
3.01 Amended and Restated Certificate of Incorporation of Clearview Exhibit 3.01 to Quarterly Report
Cinema Group, Inc. on Form 10-QSB for the Quarter
ended June 30, 1997
3.02 Amended and Restated By-laws of Clearview Cinema Group, Inc. Exhibit 3.02 to Quarterly Report
on Form 10-QSB for the Quarter
ended June 30, 1997
4.01 Specimen Common Stock Certificate Exhibit 4.01 to Registration
Statement on Form SB-2 filed May
27, 1997
4.02 Certificate of Designations, Preferences, Rights and Limitations of Exhibit 4.02 to Annual Report on
Class B Nonvoting Cumulative Redeemable Preferred Stock of Clearview Form 10-KSB for the year ended
Cinema Group, Inc. December 21, 1998
4.03 Certificate of Designation of Class C Convertible Preferred Stock of Exhibit 4.01 to Current Report on
Clearview Cinema Group, Inc., dated April 23, 1998 Form 8-K filed April 23, 1998
4.04 Indenture dated as of June 12, 1998 by and among Clearview Cinema Exhibit 4.04 to Registration
Group, Inc., its subsidiaries as guarantors, and The Bank of New Statement on Form SB-2 filed July
York 2, 1998
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the Filed Herewith
securities being registered
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Exhibit 9.01 to Registration
Mayo as Voting Trustee, dated December 21, 1994 Statement on Form SB-2 filed May
27, 1997
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Exhibit 9.02 to Registration
Mayo as Voting Trustee, dated June 20, 1995 Statement on Form SB-2 filed May
27, 1997
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Exhibit 9.03 to Registration
Dale Mayo as Voting Trustee, dated May 29, 1996 Statement on Form SB-2 filed May
27, 1997
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Exhibit 9.04 to Registration
Mayo as Voting Trustee, dated July 31, 1996 Statement on Form SB-2 filed May
27, 1997
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Exhibit 9.05 to Registration
Mayo as Voting Trustee, dated August 30, 1996 Statement on Form SB-2 filed May
27, 1997
9.06 Voting Trust Agreement dated as of November 21, 1997 by and among Exhibit 9.01 to Current Report on
F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Dale Mayo, as Trustee Form 8-K filed November 21, 1997
9.07 Voting Trust Agreement dated as of December 12, 1997 by and among Exhibit 9.01 to Current Report on
The New Bellevue Theater Corp., Jesse Sayegh and A. Dale Mayo, as Form 8-K filed December 12, 1997
Trustee
9.08 Voting Trust Agreement dated as of February 13, 1998 by and between Exhibit 9.08 to Registration
Clairidge Cinemas, Inc. and A. Dale Mayo, as Trustee Statement on Form SB-2 filed July
2, 1998
9.09 Voting Trust Agreement dated as of April 30, 1998 by and among John Exhibit 9.09 to Registration
Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and A. Dale Statement on Form SB-2 filed July
Mayo, as Trustee 2, 1998
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.01 Employment Agreement by and between the Company and A. Dale Mayo, Exhibit 10.08 to Registration
dated May 29, 1996 Statement on Form SB-2 filed May
27, 1997
<C> <S> <C>
10.02 Collective Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.36 to Registration
Movies at Port Washington, Inc. and the Company, CCC Grand Avenue Statement on Form SB-2 filed May
Cinema Corp., CCC Port Washington Cinema Corp., dated September 8, 27, 1997
1995
10.03 Management Agreement by and among Cinema Herricks, Inc., the Exhibit 10.37 to Registration
Company, and CCC Herricks Cinema Corp. dated September 8, 1995 Statement on Form SB-2 filed May
27, 1997
10.04 Letter modifying Management Agreement and Collective Agreement dated Exhibit 10.38 to Registration
November 17, 1995 Statement on Form SB-2 filed May
27, 1997
10.05 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.39 to Registration
Movies at Port Washington, Inc., the Company, CCC Grand Avenue Statement on Form SB-2 filed May
Cinema Corp. and CCC Port Washington Cinema Corp., dated September 27, 1997
8, 1995
10.06 Escrow Agreement by and among Cinema Herricks, Inc., the Company and Exhibit 10.40 to Registration
CCC Cinema Herricks Corp., dated September 8, 1995 Statement on Form SB-2 filed May
27, 1997
10.07 Non-Competition Agreement, by and among the Company, CCC Emerson Exhibit 10.46 to Registration
Cinema, Inc., and John Nelson, Pamela Ferman and Seth Ferman, dated Statement on Form SB-2 filed May
May 29, 1996 27, 1997
10.08 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Exhibit 10.47 to Registration
Cinema Corp., CCC Bergenfield Cinema Corp., CCC Closter Cinema Corp. Statement on Form SB-2 filed May
and the Company, dated December 13, 1996 27, 1997
10.09 Assignment of Real Estate Lease, by and between Allwood Clifton Exhibit 10.48 to Registration
Cinema, Inc. and CCC Allwood Cinema Corp., dated May 29, 1996, Statement on Form SB-2 filed May
assigning that certain lease dated November 5, 1986 by and between 27, 1997
96 Market Associates, as lessor and Assignor, as amended pursuant to
the Lease Modification Agreement dated October 10, 1989
10.10 Assignment of Real Estate Lease by and between New City Cinemas, Exhibit 10.49 to Registration
Inc. and CCC New City Cinema Corp., dated May 29, 1996, assigning Statement on Form SB-2 filed May
that certain lease dated January 18, 1965, by and between Bridon 27, 1997
Realty Co., as lessor, and Irving Sherman and David Sanders, as
assigned by Irving Sherman and David Sanders to New City Town
Theatre, 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 Theatre,
Inc. to Assignor pursuant to an Assignment and Assumption of Lease
dated November 14, 1990
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.11 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. Exhibit 10.50 to Registration
and CCC Emerson Cinema Corp., dated May 29, 1996, assigning that Statement on Form SB-2 filed May
certain lease by and between Robert Nelson, Bernat Nelson and Leo 27, 1997
Zucker doing business as Robert Lee Realty Co., a partnership 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
<C> <S> <C>
10.12 Form of Lock-up Agreement Exhibit 10.52 to Registration
Statement on Form SB-2 filed May
27, 1997
10.13 Consent and Waiver Agreement dated May 23, 1997 by and among the Exhibit 10.53 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul 27, 1997
and Cindy Kay and Louis G. Novick
10.14 Termination Agreement for Stockholders and Registration Rights Exhibit 10.54 to Registration
Agreement dated May 23, 1997 by and among the Company, CMNY Capital Statement on Form SB-2 filed May
II, L.P., MidMark Capital, L.P., A. Dale Mayo, Brett E. Marks, 27, 1997
Michael C. Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis
G. Novick
10.15 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.55 to Registration
the Company, MidMark Capital, L.P., and A. Dale Mayo Statement on Form SB-2 filed May
27, 1997
10.16 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.56 to Registration
the Company, CMNY Capital II, L.P., CMCO, Inc., Robert G. Davidoff, Statement on Form SB-2 filed May
A. Dale Mayo, Brett E. Marks and Michael C. Rush 27, 1997
10.17 Registration Rights Agreement dated May 23, 1997 by and among the Exhibit 10.58 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul 27, 1997
and Cindy Kay and Louis G. Novick
10.18 Form of Consulting Agreement by and between the Company and MidMark Exhibit 10.59 to Registration
Associates, Inc. Statement on Form SB-2 filed May
27, 1997
10.19 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan Exhibit 10.63 to Registration
Statement on Form SB-2 filed May
27, 1997
10.20 Consulting and Confidentiality Agreement by and between the Company Exhibit 10.64 to Registration
and Brett E. Marks Statement on Form SB-2 filed May
27, 1997
10.21 Second Amended and Restated Credit Agreement by and between Exhibit 10.21 to Registration
Clearview Cinema Group, Inc. and The Provident Bank, dated June 12, Statement on Form SB-2 filed July
1998 2, 1998
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.22 Agreement, dated as of September 1, 1997, by among Clearview Cinema Exhibit 10.02 to Quarterly Report
Group, Inc., First New York Reality Co. Inc., and Brett Marks on Form 10-QSB for the Quarter
ended June 30, 1997
<C> <S> <C>
10.23 Registration Rights Agreement dated as of November 21, 1997 by and Exhibit 10.03 to Current Report on
among Clearview Cinema Group, Inc., F&N Cinema, Inc. and Roxbury Form 8-K filed November 21, 1997
Cinema, Inc.
10.24 Assignment by F&N Cinema, Inc. dated November 7, 1997 assigning to Exhibit 10.04 to Current Report on
CCC Parsippany Cinema Corp. that certain Ground Lease between The Form 8-K filed November 21, 1997
Trustees of Net Realty Holding Trust and F&N Cinema, Inc. dated May
12, 1993, as amended by the First Amendment to Ground Lease dated
July 11, 1994, and as further amended by Second Amendment to Ground
Lease dated December 19, 1994
10.25 Assignment, Acceptance of Assignment and Consent to Assignment of Exhibit 10.05 to Current Report on
Lease between Roxbury Cinema Inc. and CCC Succasunna Cinema Corp., Form 8-K filed November 21, 1997
dated November 21, 1997, assigning that certain Lease between First
Roxbury Company and Roxbury Cinema Inc. dated May 24, 1989, as
amended by Lease Modification Agreement dated May 2, 1990, and as
further amended by Second Lease Modification Agreement dated
December 20, 1994
10.26 Lease dated December 1997 between Jesse Y. Sayegh and CCC Bellevue Exhibit 10.01 to Current Report on
Cinema Corp. together with Rider to Lease, as amended by Rider Form 8-K filed December 12, 1997
Attachment to Lease dated December 12, 1997
10.27 Registration Rights Agreement dated as of December 12, 1997 by and Exhibit 10.02 to Current Report on
among Clearview Cinema Group, Inc., The New Bellevue Theater Corp. Form 8-K filed December 12, 1997
and Jesse Sayegh
10.28 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.03 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Cedar Grove Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and Leonard Diener Investment
Company, assigning that certain Lease Agreement by and between
Beatrice Diener d/b/a/ Leonard Diener Investment Company and Jesse
Sayegh dated May 29, 1990, as amended by letter dated March 26, 1997
10.29 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.04 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Kin Mall Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and C.J.M. Enterprises, Inc.,
assigning that certain Lease by and between Lester M. Entin
Associates and C.J.M. Enterprises, Inc. dated December 17, 1991, as
amended by First Amendment to lease dated December 31, 1996
10.30 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.05 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Middlebrook Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc., Westwood Oaks, Inc. and
Westwood Oaks Associates, assigning that certain Lease by and
between Westwood Oaks, Inc. and Jesse Sayegh dated September 28,
1993, together with Rider LC to Lease
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.31 Securities Purchase Agreement dated as of April 23, 1998, by and Exhibit 10.01 to Current Report on
between Clearview Cinema Group, Inc. and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc.
<C> <S> <C>
10.32 Registration Rights Agreement dated as April 23, 1998, by and Exhibit 10.02 to Current Report on
between Clearview Cinema Group, Inc., and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc. (n/k/a Marshall Capital Management, Inc.)
10.33 Registration Rights Agreement dated as of February 13, 1998 by and Exhibit 10.33 to Registration
between Clairidge Cinemas, Inc. and Clearview Cinema Group, Inc. Statement on Form SB-2 filed July
2, 1998
10.34 Registration Rights Agreement dated as of April 30, 1998 by and Exhibit 10.34 to Registration
among John Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and Statement on Form SB-2 filed July
Clearview Cinema Group, Inc. 2, 1998
10.35 Registration Rights Agreement dated as of June 12, 1998 by and among Exhibit 10.35 to Registration
Clearview Cinema Group, Inc., its subsidiaries as guarantors, and Statement on Form SB-2 filed July
Lehman Brothers, Inc. 2, 1998
16.02 Letter regarding change in certifying accountants Exhibit 16.01 to Current Report on
Form 8-K filed December 16, 1997
21.01 Significant Subsidiaries Exhibit 10.39 to Annual Report on
Form 10-KSB for the year ended
December 31, 1998
23.01 Consent of PricewaterhouseCoopers LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
24.01 Powers of Attorney (included on signature page of this registration Filed Herewith
statement)
25.01 Statement of Eligibility under the Trust Indenture Act of 1939 of Filed Herewith
The Bank of New York, as trustee, on Form T-1
99.01 Form of letter of Transmittal Filed Herewith
99.02 Form of Notice of Guaranteed Delivery Filed Herewith
</TABLE>
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because the
required information is contained in the financial statements or notes thereto
included in this Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
II-7
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 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, the registrant will, unless in the opinion of its counsel the matter
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 Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this its exchange offer registration
statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Chatham, State of New Jersey, on July __, 1998.
CLEARVIEW CINEMA GROUP, INC.
By: __________________________________
A. Dale Mayo
Chairman of the Board,
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints A. Dale Mayo, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documentation in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in or about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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>
Chairman of the Board, President, Chief July __, 1998
- --------------------------------------- Executive Officer (Principal Executive Officer) and
A. Dale Mayo Director
Treasurer and Chief Financial Officer (Principal July __, 1998
- --------------------------------------- Financial and Accounting Officer)
Joan M. Romine
Director July __, 1998
- ---------------------------------------
Sueanne H. Mayo
Director July __, 1998
- ---------------------------------------
Wayne Clevenger
Director July __, 1998
- ---------------------------------------
Robert Davidoff
Director July __, 1998
- ---------------------------------------
Brett E. Marks
Director July __, 1998
- ---------------------------------------
Denis Newman
Director July __, 1998
- ---------------------------------------
Philip M. Getter
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<C> <S> <C>
2.01 Agreement of Purchase and Sale by and among United Artists Theatre Exhibit 2.01 to Registration
Circuit, Inc., United Artists Properties I Corp., Mamaroneck Statement on Form SB-2 filed May
Playhouse Holding Corporation and CCC Bronxville Cinema Corp., CCC 27, 1997
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 Amended and Restated Certificate of Incorporation of Clearview Exhibit 3.01 to Quarterly Report
Cinema Group, Inc. on Form 10-QSB for the Quarter
ended June 30, 1997
3.02 Amended and Restated By-laws of Clearview Cinema Group, Inc. Exhibit 3.02 to Quarterly Report
on Form 10-QSB for the Quarter
ended June 30, 1997
4.01 Specimen Common Stock Certificate Exhibit 4.01 to Registration
Statement on Form SB-2 filed May
27, 1997
4.02 Certificate of Designations, Preferences, Rights and Limitations of Exhibit 4.02 to Annual Report on
Class B Nonvoting Cumulative Redeemable Preferred Stock of Clearview Form 10-KSB for the year ended
Cinema Group, Inc. December 21, 1998
4.03 Certificate of Designation of Class C Convertible Preferred Stock of Exhibit 4.01 to Current Report on
Clearview Cinema Group, Inc., dated April 23, 1998 Form 8-K filed April 23, 1998
4.04 Indenture dated as of June 12, 1998 by and among Clearview Cinema Exhibit 4.04 to Registration
Group, Inc., its subsidiaries as guarantors, and The Bank of New Statement on form SB-2 filed July
York 2, 1998
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the Filed Herewith
securities being registered
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Exhibit 9.01 to Registration
Mayo as Voting Trustee, dated December 21, 1994 Statement on Form SB-2 filed May
27, 1997
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Exhibit 9.02 to Registration
Mayo as Voting Trustee, dated June 20, 1995 Statement on Form SB-2 filed May
27, 1997
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Exhibit 9.03 to Registration
Dale Mayo as Voting Trustee, dated May 29, 1996 Statement on Form SB-2 filed May
27, 1997
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Exhibit 9.04 to Registration
Mayo as Voting Trustee, dated July 31, 1996 Statement on Form SB-2 filed May
27, 1997
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Exhibit 9.05 to Registration
Mayo as Voting Trustee, dated August 30, 1996 Statement on Form SB-2 filed May
27, 1997
9.06 Voting Trust Agreement dated as of November 21, 1997 by and among Exhibit 9.01 to Current Report on
F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Dale Mayo, as Trustee Form 8-K filed November 21, 1997
9.07 Voting Trust Agreement dated as of December 12, 1997 by and among Exhibit 9.01 to Current Report on
The New Bellevue Theater Corp., Jesse Sayegh and A. Dale Mayo, as Form 8-K filed December 12, 1997
Trustee
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
9.08 Voting Trust Agreement dated as of February 13, 1998 by and between Exhibit 9.08 to Registration
Clairidge Cinemas, Inc. and A. Dale Mayo, as Trustee Statement on Form SB-2 filed July
2, 1998
<C> <S> <C>
9.09 Voting Trust Agreement dated as of April 30, 1998 by and among John Exhibit 9.09 to Registration
Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and A. Dale Statement on Form SB-2 filed July
Mayo, as Trustee 2, 1998
10.01 Employment Agreement by and between the Company and A. Dale Mayo, Exhibit 10.08 to Registration
dated May 29, 1996 Statement on Form SB-2 filed May
27, 1997
10.02 Collective Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.36 to Registration
Movies at Port Washington, Inc. and the Company, CCC Grand Avenue Statement on Form SB-2 filed May
Cinema Corp., CCC Port Washington Cinema Corp., dated September 8, 27, 1997
1995
10.03 Management Agreement by and among Cinema Herricks, Inc., the Exhibit 10.37 to Registration
Company, and CCC Herricks Cinema Corp. dated September 8, 1995 Statement on Form SB-2 filed May
27, 1997
10.04 Letter modifying Management Agreement and Collective Agreement dated Exhibit 10.38 to Registration
November 17, 1995 Statement on Form SB-2 filed May
27, 1997
10.05 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.39 to Registration
Movies at Port Washington, Inc., the Company, CCC Grand Avenue Statement on Form SB-2 filed May
Cinema Corp. and CCC Port Washington Cinema Corp., dated September 27, 1997
8, 1995
10.06 Escrow Agreement by and among Cinema Herricks, Inc., the Company and Exhibit 10.40 to Registration
CCC Cinema Herricks Corp., dated September 8, 1995 Statement on Form SB-2 filed May
27, 1997
10.07 Non-Competition Agreement, by and among the Company, CCC Emerson Exhibit 10.46 to Registration
Cinema, Inc., and John Nelson, Pamela Ferman and Seth Ferman, dated Statement on Form SB-2 filed May
May 29, 1996 27, 1997
10.08 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Exhibit 10.47 to Registration
Cinema Corp., CCC Bergenfield Cinema Corp., CCC Closter Cinema Corp. Statement on Form SB-2 filed May
and the Company, dated December 13, 1996 27, 1997
10.09 Assignment of Real Estate Lease, by and between Allwood Clifton Exhibit 10.48 to Registration
Cinema, Inc. and CCC Allwood Cinema Corp., dated May 29, 1996, Statement on Form SB-2 filed May
assigning that certain lease dated November 5, 1986 by and between 27, 1997
96 Market Associates, as lessor and Assignor, as amended pursuant to
the Lease Modification Agreement dated October 10, 1989
10.10 Assignment of Real Estate Lease by and between New City Cinemas, Exhibit 10.49 to Registration
Inc. and CCC New City Cinema Corp., dated May 29, 1996, assigning Statement on Form SB-2 filed May
that certain lease dated January 18, 1965, by and between Bridon 27, 1997
Realty Co., as lessor, and Irving Sherman and David Sanders, as
assigned by Irving Sherman and David Sanders to New City Town
Theatre, 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 Theatre,
Inc. to Assignor pursuant to an Assignment and Assumption of Lease
dated November 14, 1990
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.11 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. Exhibit 10.50 to Registration
and CCC Emerson Cinema Corp., dated May 29, 1996, assigning that Statement on Form SB-2 filed May
certain lease by and between Robert Nelson, Bernat Nelson and Leo 27, 1997
Zucker doing business as Robert Lee Realty Co., a partnership 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
<C> <S> <C>
10.12 Form of Lock-up Agreement Exhibit 10.52 to Registration
Statement on Form SB-2 filed May
27, 1997
10.13 Consent and Waiver Agreement dated May 23, 1997 by and among the Exhibit 10.53 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul 27, 1997
and Cindy Kay and Louis G. Novick
10.14 Termination Agreement for Stockholders and Registration Rights Exhibit 10.54 to Registration
Agreement dated May 23, 1997 by and among the Company, CMNY Capital Statement on Form SB-2 filed May
II, L.P., MidMark Capital, L.P., A. Dale Mayo, Brett E. Marks, 27, 1997
Michael C. Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis
G. Novick
10.15 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.55 to Registration
the Company, MidMark Capital, L.P., and A. Dale Mayo Statement on Form SB-2 filed May
27, 1997
10.16 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.56 to Registration
the Company, CMNY Capital II, L.P., CMCO, Inc., Robert G. Davidoff, Statement on Form SB-2 filed May
A. Dale Mayo, Brett E. Marks and Michael C. Rush 27, 1997
10.17 Registration Rights Agreement dated May 23, 1997 by and among the Exhibit 10.58 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul 27, 1997
and Cindy Kay and Louis G. Novick
10.18 Form of Consulting Agreement by and between the Company and MidMark Exhibit 10.59 to Registration
Associates, Inc. Statement on Form SB-2 filed May
27, 1997
10.19 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan Exhibit 10.63 to Registration
Statement on Form SB-2 filed May
27, 1997
10.20 Consulting and Confidentiality Agreement by and between the Company Exhibit 10.64 to Registration
and Brett E. Marks Statement on Form SB-2 filed May
27, 1997
10.21 Second Amended and Restated Credit Agreement by and between Exhibit 10.21 to Registration
Clearview Cinema Group, Inc. and The Provident Bank, dated June 12, Statement on Form SB-2 filed July
1998 2, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.22 Agreement, dated as of September 1, 1997, by among Clearview Cinema Exhibit 10.02 to Quarterly Report
Group, Inc., First New York Reality Co. Inc., and Brett Marks on Form 10-QSB for the Quarter
ended June 30, 1997
<C> <S> <C>
10.23 Registration Rights Agreement dated as of November 21, 1997 by and Exhibit 10.03 to Current Report on
among Clearview Cinema Group, Inc., F&N Cinema, Inc. and Roxbury Form 8-K filed November 21, 1997
Cinema, Inc.
10.24 Assignment by F&N Cinema, Inc. dated November 7, 1997 assigning to Exhibit 10.04 to Current Report on
CCC Parsippany Cinema Corp. that certain Ground Lease between The Form 8-K filed November 21, 1997
Trustees of Net Realty Holding Trust and F&N Cinema, Inc. dated May
12, 1993, as amended by the First Amendment to Ground Lease dated
July 11, 1994, and as further amended by Second Amendment to Ground
Lease dated December 19, 1994
10.25 Assignment, Acceptance of Assignment and Consent to Assignment of Exhibit 10.05 to Current Report on
Lease between Roxbury Cinema Inc. and CCC Succasunna Cinema Corp., Form 8-K filed November 21, 1997
dated November 21, 1997, assigning that certain Lease between First
Roxbury Company and Roxbury Cinema Inc. dated May 24, 1989, as
amended by Lease Modification Agreement dated May 2, 1990, and as
further amended by Second Lease Modification Agreement dated
December 20, 1994
10.26 Lease dated December 1997 between Jesse Y. Sayegh and CCC Bellevue Exhibit 10.01 to Current Report on
Cinema Corp. together with Rider to Lease, as amended by Rider Form 8-K filed December 12, 1997
Attachment to Lease dated December 12, 1997
10.27 Registration Rights Agreement dated as of December 12, 1997 by and Exhibit 10.02 to Current Report on
among Clearview Cinema Group, Inc., The New Bellevue Theater Corp. Form 8-K filed December 12, 1997
and Jesse Sayegh
10.28 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.03 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Cedar Grove Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and Leonard Diener Investment
Company, assigning that certain Lease Agreement by and between
Beatrice Diener d/b/a/ Leonard Diener Investment Company and Jesse
Sayegh dated May 29, 1990, as amended by letter dated March 26, 1997
10.29 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.04 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Kin Mall Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and C.J.M. Enterprises, Inc.,
assigning that certain Lease by and between Lester M. Entin
Associates and C.J.M. Enterprises, Inc. dated December 17, 1991, as
amended by First Amendment to lease dated December 31, 1996
10.30 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.05 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Middlebrook Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc., Westwood Oaks, Inc. and
Westwood Oaks Associates, assigning that certain Lease by and
between Westwood Oaks, Inc. and Jesse Sayegh dated September 28,
1993, together with Rider LC to Lease
10.31 Securities Purchase Agreement dated as of April 23, 1998, by and Exhibit 10.01 to Current Report on
between Clearview Cinema Group, Inc. and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
10.32 Registration Rights Agreement dated as April 23, 1998, by and Exhibit 10.02 to Current Report on
between Clearview Cinema Group, Inc., and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc. (n/k/a Marshall Capital Management, Inc.)
<C> <S> <C>
10.33 Registration Rights Agreement dated as of February 13, 1998 by and Exhibit 10.33 to Registration
between Clairidge Cinemas, Inc. and Clearview Cinema Group, Inc. Statement on Form SB-2 filed July
2, 1998
10.34 Registration Rights Agreement dated as of April 30, 1998 by and Exhibit 10.34 to Registration
among John Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and Statement on Form SB-2 filed July
Clearview Cinema Group, Inc. 2, 1998
10.35 Registration Rights Agreement dated as of June 12, 1998 by and among Exhibit 10.35 to Registration
Clearview Cinema Group, Inc., its subsidiaries as guarantors, and Statement on Form SB-2 filed July
Lehman Brothers, Inc. 2, 1998
16.02 Letter regarding change in certifying accountants Exhibit 16.01 to Current Report on
Form 8-K filed December 16, 1997
21.01 Significant Subsidiaries Exhibit 10.39 to Annual Report on
Form 10-KSB for the year ended
December 31, 1998
23.01 Consent of PricewaterhouseCoopers LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
24.01 Powers of Attorney (included on signature page of this registration Filed Herewith
statement)
25.01 Statement of Eligibility under the Trust Indenture Act of 1939 of Filed Herewith
The Bank of New York, as trustee, on Form T-1
99.01 Form of Letter of Transmittal Filed Herewith
99.02 Form of Notice of Guaranteed Delivery Filed Herewith
</TABLE>
EXHIBIT 5.01
July 21, 1998
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We are acting as counsel to Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), in connection with the filing by the
Company of a Registration Statement on Form S-4 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission. The Registration Statement relates to the
proposed issuance of up to $80,000,000 aggregate principal amount of the
Company's 10 7/8% Senior Notes due 2008 (the "New Notes") in exchange for the
Company's outstanding 10 7/8% Senior Notes due 2008 (the "Old Notes"). The New
Notes are issuable, and the Old Notes were issued, under an Indenture dated as
of June 12, 1998 (the "Indenture") among the Company, the Subsidiary Guarantors
(as defined therein) and The Bank of New York, as trustee (the "Trustee").
We have examined the Registration Statement, the Indenture,
resolution of the Company's Board of Directors dated as of June 9, 1998, the
Company's Amended and Restated Certificate of Incorporation and the Company's
Amended and Restated 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 set forth below.
In making such examinations and rendering our opinion on the
matters set forth below, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as 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.
<PAGE>
Clearview Cinema Group, Inc.
July 21, 1998
Page 2
To the extent relevant to the opinion set forth below, we have
assumed that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
qualified and eligible under the terms of the Indenture to act as trustee under
the Indenture; that the Indenture was duly authorized, executed and delivered by
the Trustee; that the Indenture is a valid and binding obligation of the
Trustee; and that the Trustee has the requisite organizational and legal power
and authority to perform its obligations under the Indenture.
We express no opinion as to any laws of any jurisdiction other
than the laws of the state of New York, the General Corporation Law of the State
of Delaware and the United States Securities Act of 1933, as amended.
Based upon the foregoing, and subject to the effectiveness of
the Registration Statement under the Securities Act and the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, we are of the
opinion that, when the New Notes are duly executed, attested, issued and
delivered by duly authorized officers of the Company and duly authenticated by
the Trustee all in accordance with the terms of the Indenture, the New Notes
will constitute legally issued and binding obligations of the Company.
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,
Kirkpatrick & Lockhart LLP
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report dated March 19, 1998 relating
to the consolidated financial statements of Clearview Cinema Group, Inc., and
its subsidiaries which appears in such Prospectus. We also consent to the
references to us under the headings "Experts," "Summary Historical and Pro Forma
Financial Data" and "Selected Financial Data" in such Prospectus. However, it
should be noted that PricewaterhouseCoopers LLP has not prepared or certified
such "Summary Historical and Pro Forma Financial Data" and "Selected Financial
Data."
PricewaterhouseCoopers LLP
New York, New York
July 20, 1998
Exhibit 23.02
CONSENT OF INDEPENDANT AUDITORS
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-4 of our reports dated February 10, 1997
relating to the consolidated financial statements of Clearview Cinema Group,
Inc.; June 4, 1997 relating to the combined financial statements of the United
Artists Theatre Circuit, Inc. Theaters at Bronxville, Larchmont, Wayne, New City
and Mamaroneck; October 22, 1997 relating to the combined financial statements
of the Nelson Ferman Theaters at Parsippany and Roxbury; and December 4, 1997,
relating to the combined financial statements of the CJM Theaters at Kin-Mall,
Middlebrook, Cedar Grove and Bellevue which appear in such Prospectus.
We also consent to the 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
July 21, 1998
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
____________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
____________
CLEARVIEW CINEMA GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 22-3338356
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
A. Dale Mayo
97 Main Street
Chatham, NJ 07928
(Address of principal executive offices) (Zip code)
____________
10 7/8% Senior Notes due 2008 (Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Name Address
- ---------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 15th day of July, 1998.
THE BANK OF NEW YORK
By: /s/MARY JANE SCHMALZEL
--------------------------
Name: MARY JANE SCHMALZEL
Title: VICE PRESIDENT
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Exchange
10 7/8% Senior Notes Due 2008
For 10 7/8% Series A Senior Notes Due 2008 that
have been registered under The Securities Act of 1933
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______ __, 1998,
UNLESS THE OFFER IS EXTENDED.
(SUCH DATE AS IT MAY BE EXTENDED, THE "EXPIRATION DATE")
The Exchange Agent For the Exchange Offer Is:
The Bank of New York
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street
Floor: 7 East New York, New York 10286
New York, New York 10286 Confirm by Telephone: Attention: Ground Level
Attention: Denise Robinson, Reorganization Section (212) 815-2791 Corporate Trust
Services Window
</TABLE>
By Overnight Delivery:
The Bank of New York
101 Barclay Street
Floor 7 East
New York, New York 10286
Attention: Denise Robinson, Reorganization Section
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated _________, 1998 (the "Prospectus"), of Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal and related
documents, which together with the Prospectus constitute the Company's offer
(the "Exchange Offer") to exchange an aggregate principal amount of up to
$80,000,000 of 10 7/8% Senior Notes due 2008, that have been registered under
the Securities Act of 1933, as amended (the "Securities Act") (the "New Notes")
of the Company for a like principal amount of its outstanding Senior Notes
due 2008 (the "Old Notes") of the Company from the holders thereof.
IF YOU WISH TO EXCHANGE 10 7/8% SENIOR NOTES DUE 2008 FOR AN EQUAL
AGGREGATE PRINCIPAL AMOUNT OF 10 7/8% SENIOR NOTES DUE 2008, PURSUANT TO THE
EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) OLD NOTES TO THE
EXCHANGE AGENT PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
-1-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS
CAREFULLY BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
This Letter of Transmittal is to be completed by holders of Old Notes
either if Old Notes are to be forwarded herewith or if tenders of Old Notes are
to be made by book-entry transfer to an account maintained by The Bank of New
York (the "Exchange Agent") at The Depository Trust Company (the "Book-Entry
Transfer Facility" or "DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to 5:00 P.M. on
the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer-Guaranteed Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
Ladies and Gentlemen:
The undersigned hereby tenders to Clearview Cinema Group, Inc., a Delaware
corporation (the "Company"), the aggregate principal amount of Old Notes due
2008, described above in exchange for an identical aggregate principal amount of
New Notes, upon the terms and subject to the conditions contained in the
Prospectus and in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
-2-
<PAGE>
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT (AS DEFINED IN THE PROSPECTUS). THE UNDERSIGNED HAS READ AND
AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed in Box 1 below, if they are not already set
forth below, as they appear on the Certificate representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate box below.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions hereto will, upon the Company's
acceptance for exchange of such tendered Old Notes, constitute a binding
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company may not be
required to accept for exchange and of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions" below (Box 7), the undersigned hereby directs that the New Notes
be issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Old Notes, that such New Notes be credited to the account indicated
below maintained at DTC. If applicable, substitute Certificates representing Old
Notes not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Old Notes, will be
credited to the account indicated below maintained a DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions" (Box 8), please
deliver New Notes to the undersigned at the address shown below the
undersigned's signature.
-3-
<PAGE>
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) ANY NEW NOTES TO BE RECEIVED
ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON RECEIVING
SUCH NEW NOTES, WHETHER OR NOT SUCH PERSON IS THE HOLDER, (II) NEITHER THE
UNDERSIGNED NOR ANY SUCH OTHER PERSON RECEIVING THE NEW NOTES HAS ANY
ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE
EXCHANGE OFFER, AND (III) NEITHER THE UNDERSIGNED NOR SUCH OTHER PERSON IS AN
"AFFILIATE" OF THE COMPANY. BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE
OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES THAT IS A
BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE
LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE
SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT SUCH OLD NOTES WERE
ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING
OR OTHER TRADING ACTIVITIES AND THAT IT WILL DELIVER THE PROSPECTUS (AS AMENDED
OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES
ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE
DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES
ACT).
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN
CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE
SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, FOR A PERIOD
ENDING 90 DAYS AFTER THE DATE OF THE PROSPECTUS. IN THAT REGARD, EACH
BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER- DEALER"), BY
TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT,
UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OF THE
DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED IN THE PROSPECTUS
UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN, IN
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, OR OF THE
OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS
AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES
PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE
PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF
THE AMENDED OR SUPPLEMENTED PROSPECTUS TO SUCH PARTICIPATING BROKER-DEALER OR
THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS
THE CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW
NOTES, IT SHALL EXTEND THE 90-DAY PERIOD REFERRED TO ABOVE DURING WHICH
PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION
WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND
INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN
PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR
AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW NOTES OR TO AND
INCLUDING THE DATE ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF NEW
NOTES MAY BE RESUMED, AS THE CASE MAY BE. A PARTICIPATING BROKER-DEALER WHO
INTENDS TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES
RECEIVED IN EXCHANGE FOR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST NOTIFY
THE COMPANY, OR CAUSE THE COMPANY TO BE NOTIFIED, ON OR PRIOR TO THE EXPIRATION
DATE THAT IT IS A PARTICIPATING BROKER-DEALER. SUCH NOTICE MAY BE GIVEN IN THE
BOX ENTITLED "PARTICIPATING BROKER-DEALER" BELOW (BOX 5), OR MAY BE DELIVERED TO
THE EXCHANGE AGENT AT ONE OF THE ADDRESSES SET FORTH ON PAGE ONE HEREOF. ANY
PARTICIPATING BROKER-DEALER WHO IS AN "AFFILIATE" OF THE COMPANY MAY NOT RELY ON
THE INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES REFERENCED
ABOVE AND MUST COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE TRANSACTION.
-4-
<PAGE>
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Old Notes for any New
Notes, and may terminate or amend the Exchange Offer before the acceptance of
any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable good faith judgment, would be expected
to impair the ability of the Company to proceed with the Exchange Offer, or
(b) any law, statute, rule or regulation is adopted or enacted, or any
existing law, statute, rule or regulation is interpreted by the Commission
or its staff, which, in the Company's reasonable good faith judgment, would
be expected to impair the ability of the Company to proceed with the
Exchange Offer.
If the Company determines in its reasonable good faith judgment that either
of the foregoing conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders who tendered such
Old Notes to withdraw their tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business days.
If (i) the Company is not required to file an Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the procedures set forth
in the Registration Rights Agreement have been complied with) or (ii) if any
holder of Transfer Restricted Securities (as defined in the Registration Rights
Agreement) shall notify the Company after the consummation of the Exchange Offer
and on or prior to the 20th business day following the consummation of the
Exchange Offer (A) that such holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Old
Notes acquired directly from the Company or one of its affiliates, then the
Company shall use its best efforts to:
(x) cause to be filed a shelf registration statement pursuant to Rule
415 under the Securities Act, which may be an amendement to the Exchange
Offer Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 60th day after
the date on which the Company determines that it is not required to file the
Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer or (2) the 60th day after the day on which the Company
receives notice from a holder of Transfer Restricted Securities as
contemplated by clause (ii) above (such earliest date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities the Holders of which shall
have provided the information required pursuant to Section 4(b) of the
Registration Rights Agreement, and
(y) use its best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission on or before the 150th day after the
Shelf Filing Deadline as set forth in the Registration Rights Agreement.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after June 12,
1998.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representative, successors and assigns of the undersigned. Except pursuant
to the withdrawal rights set forth in the Prospectus, this tender is
irrevocable.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE
BOXES BELOW AND FOLLOW THE INSTRUCTIONS BEGINNING ON PAGE HEREOF.
-5-
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<CAPTION>
Principal Amount
Certificate Number(s) Aggregate Principal of Old Notes
of Old Notes* Amount of Old Notes Tendered**
---------------------- --------------------------- ------------------
<S> <C> <C> <C>
Total Principal Total Principal
Amount $___________ Amount Tendered
$___________
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry holders.
** Old Notes may be tendered in whole or in part in integral multiples of
$1,000; See Instruction 4. Unless otherwise indicated in the column, a holder
will be deemed to have tendered all Old Notes represented by the Old Notes
surrendered. See Instruction 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
BOX 2
BOOK-ENTRY TRANSFER
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _________________________________________
DTC Account Number: ____________________________________________________
Transaction Code Number: _______________________________________________
-6-
<PAGE>
BOX 3
NOTICE OF GUARANTEED DELIVERY
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s): __________________________________________
Window Ticket Number (if any): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________
Name of Institution which Guaranteed Delivery: _________________________
________________________________________________________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution: _________________________________________
DTC Account Number: ____________________________________________________
Transaction Code Number: _______________________________________________
BOX 4
RETURN OF NON-EXCHANGED OLD NOTES TENDERED BY BOOK-ENTRY TRANSFER
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER SET FORTH ABOVE.
BOX 5
PARTICIPATING BROKER-DEALER
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: __________________________________________________________________
Address: _______________________________________________________________
-7-
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
- - ------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6 BELOW)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 IN BOX 9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Certificate(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the Company
or the Trustee for the Old Notes to comply with the restrictions on transfer
applicable to the Old Notes). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary capacity or representative capacity, please set forth the signer's
full title. See Instruction 5 below.
_______________________________________________________________________________
_______________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date: ______________________________ , 1998
Name(s):_______________________________________________________________________
(PLEASE PRINT)
Address:_______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number:________________________________________________
_______________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
_______________________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1, 2 and 5 below)
Authorized Signature:__________________________________________________________
Name:__________________________________________________________________________
(PLEASE PRINT)
Date: ______________________________ , 1998
Capacity or Title:_____________________________________________________________
Name of Firm:__________________________________________________________________
Address:_______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number:________________________________________________
- --------------------------------------------------------------------------------
-8-
<PAGE>
BOX 7
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6 BELOW)
- --------------------------------------------------------------------------------
To be completed ONLY if the New Notes are to be issued in the name of
someone other than the registered holder of the Old Notes whose name(s)
appear(s) above.
Issue New Notes to:____________________________________________________________
Name:__________________________________________________________________________
(Please Print)
Address:_______________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Taxpayer Identification or Social Security No.)
BOX 8
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6 BELOW)
- --------------------------------------------------------------------------------
To be completed ONLY if New Notes are to be sent to someone other than the
registered holder of the Old Notes whose name(s) appear(s) above, or to such
registered holder(s) at an address other than that shown above.
Mail New Notes to:_____________________________________________________________
Name:__________________________________________________________________________
(Please Print)
Address:_______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Taxpayer Identification or Social Security No.)
- --------------------------------------------------------------------------------
-9-
<PAGE>
BOX 9
SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 9 BELOW)
SIGN THIS SUBSTITUTE FORM W-9 IN ADDITION TO THE SIGNATURE(S) REQUIRED IN BOX 6
- --------------------------------------------------------------------------------
PAYER'S NAME: THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUBSTITUTE Part 1--Please provide your TIN
FORM W-9 (either your social security
number or employer identification TIN________________________
number) in the box to the right
and certify by signing and dating
below.
----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY Part 2-- Part 3--
INTERNAL REVENUE SERVICE
Awaiting TIN [ ] Exempt [ ]
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) SIGN THIS FORM and THE CERTIFI- See enclosed Guidelines for
AND CERTIFICATION CATION OF AWAITING TAXPAYER additional information and
IDENTIFICATION NUMBER BELOW SIGN THIS FORM
- ---------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (i) I am exempt from
backup withholding, or (ii) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (iii) the
IRS has notified me that I am no longer subject to backup withholding;
and
(3) Any other information provided on this form is true and correct.
CERTIFICATION INSTRUCTIONS--You must cross out item (iii) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because of under-reporting interest or dividends on your tax return and you
are no longer subject to backup withholding.
Signature_______________________________________________ Date ______________
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 2 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administrative Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the New Notes
shall be retained until I provide a taxpayer identification number to the
Exchange Agent and that, if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted to the Internal
Revenue Service as backup withholding and 31% of all reportable payments made
to me thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
Signature_______________________________________________ Date ______________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
FOR ADDITIONAL INFORMATION.
-10-
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
Please do not send Certificates for Old Notes directly to the Company. Your
Old Note Certificates, together with your signed and completed Letter of
Transmittal and any required supporting documents should be mailed in the
enclosed addressed envelope, or otherwise delivered, to the Exchange Agent, at
either of the addresses indicated on the first page hereof. THE METHOD OF
DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer--Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth herein on or
prior to 5:00 p.m., New York City time, on the Expiration Date. Old Notes may be
tendered in whole or in part in the principal amount of $1,000 and integral
multiples of $1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other required documents to the Exchange Agent on or prior to
the Expiration Date or (iii) who cannot complete the procedures for delivery by
book-entry transfer prior to the Expiration Date may tender their Old Notes by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the Guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus and by completing Box 3
hereof. Pursuant to such procedures: (i) such tender must be made by or through
an Eligible Institution (as defined below); (ii) prior to the Expiration Date,
the Exchange Agent must receive from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form accompanying this Letter of Transmittal, and (iii) such properly completed
and executed Letter of Transmittal (or facsimile thereof) as well as the
Certificates (or a book-entry confirmation (as defined in the Prospectus))
representing all tendered Old Notes, in proper form for transfer, with any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within five New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus.
-11-
<PAGE>
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein, "Eligible Institution" means a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange, Inc. Medallion Signature Program or the
Stock Exchanges Medallion Program.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter or Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes) of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Exchange Instructions" (Box 7)
or the box entitled "Special Delivery Instructions" (Box 8) above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal (Box 6). See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which should be attached to this Letter of
Transmittal.
-12-
<PAGE>
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in the principal amount of $1,000 and integral multiples thereof.
If less than all the Old Notes evidenced by any Certificate submitted are to be
tendered, fill in the principal amount of Old Notes which are to be tendered in
Box 1 under the column "Principal Amount of Old Notes Tendered." In such case,
new Certificate(s) for the remainder of the Old Notes that were evidenced by
your old Certificate(s) will only be sent to the holder of the Old Notes,
promptly after the Expiration Date. All Old Notes represented by Certificates
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to 5:00 p.m. on the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Old Notes to be withdrawn,
the aggregate principal amount of Old Notes to be withdrawn, and (if
Certificates for such Old Notes have been tendered) the name of the registered
holder of the Old Notes as set forth on the Certificate for the Old Notes, if
different from that of the person who tendered such Old Notes. If Certificates
for the Old Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Certificates for the Old
Notes, the tendering holder must submit the serial numbers shown on the
particular Certificates for the Old Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Old Notes tendered for the account of an Eligible Institution. If
Old Notes have been tendered pursuant to the procedures for book-entry transfer
set forth in the Prospectus under "The Exchange Offer--Procedures for
Tendering," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Old Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of
Old Notes may not be rescinded. Old Notes validly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give such a notification. Any Old Notes which have been tendered but
which are withdrawn on or prior to the Expiration Date will be returned to the
holder thereof without cost to such holder promptly after withdrawal.
-13-
<PAGE>
5. SIGNATURES OF LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). However, if New Notes are
to be issued in the name of a person other than the registered holder(s),
signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee of the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal, or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed (Box 7 and
8). Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer" or any conditions or irregularity in any tender of Old Notes of any
particular holder whether or not similar conditions or irregularities are waived
in the case of other holders.
-14-
<PAGE>
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification .
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the
Letter of Transmittal may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is
required, unless an exemption applies, to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on Substitute Form W-9
of this Letter of Transmittal (Box 9) and certify, under penalties of perjury,
that such number is correct and he or she is not subject to backup withholding.
If the Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Old Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 2 of the Substitute Form W-9 (Box 9) may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below Substitute Form W-9 in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
-15-
<PAGE>
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below and check the box in Part 3 of
Box 9 for "exempt," to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificate(s) have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-16-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
A. TIN--The Taxpayer Identification Number for most individuals is your social
security number. Refer to the following chart to determine the appropriate
number:
- -------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. Adult and minor The adult or if the minor
(joint account) is the contributor, the
minor
5. Account in the name of The ward, minor or
guardian or committee for incompetent person
a designated ward, minor
or incompetent person
6. a. The usual revocable The grantor-trustee(1)
savings trust (grantor
is also trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under state law
- -------------------------------------------------------------
- -------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- -------------------------------------------------------------
7. Sole proprietorship The owner(3)
8. A valid trust, estate, or Legal entity (4)
pension trust
9. Corporate The corporation
10. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
11. Partnership The partnership
12. A broker or registered The broker or nominee
nominee
13. Account with the The public entity
Department of Agriculture
in the name of a public
entity that receives
agricultural program
payments
- -------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's name and social security
number.
(3) Show the individual's name. You may also enter your business name or "doing
business as" name. You may use either your Social Security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
-17-
<PAGE>
B. EXEMPT PAYEES--The following lists exempt payees. If you are exempt, you must
nonetheless complete the form and provide your TIN to establish that you are
exempt. Check the box in Part 3 of the form, sign and date the form.
For this purpose, Exempt Payees include: (1) A corporation; (2) An
organization exempt from tax under section 501(a), or an individual
retirement plan (IRA) or a custodial account under section 403(b)(7); (3) The
United States or any of its agencies or instrumentalities; (4) A state, the
District of Columbia, a possession of the United States, or any of their
political subdivisions or instrumentalities; (5) A foreign government or any
of its political subdivisions, agencies or instrumentalities; (6) An
international organization or any of its agencies or instrumentalities; (7) A
foreign central bank of issue; (8) A dealer in securities or commodities
required to register in the U.S. or a possession of the U.S.; (9) A real
estate investment trust; (10) An entity registered at all times during the
tax year under the Investment Company Act of 1940; (11) A common trust fund
operated by a bank under section 584(a); (12) A financial institution.
C. OBTAINING A NUMBER--If you do not have a taxpayer identification number or
you do not know your number, obtain Form SS-5, application for a Social
Security Number, or Form SS-4, Application for Employer identification
Number, at the local offfice of the Social Security Admmmstration or the
Intemal Revenue Service and apply for a number.
D. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of
taxable-interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number. Certain penalties may also
apply.
E. PENALTIES.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as
being due to negligence and will be subject to a penalty of 5% on any
portion of an under-payment attributable to that failure unless there is
clear and convincing evidence to the contrary.
-18-
<PAGE>
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS
(See Instruction 3)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART l-PLEASE PROVIDE YOUR TIN ON THE LINE AT TIN:
Form W-9 RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number or
Department of the Treasury BELOW Employer Identification Number
Internal Revenue Service
PART 2-TIN Applied For [ ]
Payor's Request For
Taxpayer Identification
Number ("TIN")
and Certification
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct
taxpayer identification number (or I am
waiting for a number to be issued to me).
(2) I am not subject to backup withholding either
because (i) I am exempt from backup
withholding, (ii) I have not been notified by
the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a
failure to report all interest or dividends,
or (iii) the IRS has notified me that I am no
longer subject to backup withholding, and
(3) any other information provided on this form is
true and correct.
Signature __________________________________________ Date _________________________, 1998
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
You must cross out item (iii) in Part (2) above if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature _____________________________ Date __________________________, 1998
-20-
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
10 7/8% SENIOR NOTES DUE 2008
OF
CLEARVIEW CINEMA GROUP, INC.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the 10 7/8% Senior Notes due 2008 (the "Old Notes"), of
CLEARVIEW CINEMA GROUP, INC. (the "Company") are not immediately available, (ii)
Old Notes, the Letter of Transmittal and all other required documents cannot be
delivered to The Bank of New York (the "Exchange Agent") on or prior to 5:00
P.M. New York City time, on the Expiration Date (as defined in the Prospectus
referred to below) or (iii) the procedures for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender Old Notes pursuant to the Exchange
Offer, a completed, signed and dated Letter of Transmittal relating to The Old
Notes (or facsimile thereof) must also be received by the Exchange Agent within
five New York Stock Exchange, Inc. trading days after the date of execution of
this Notice of Guaranteed Delivery. Capitalized terms not defined herein have
the meanings assigned to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street
Floor 7 East Confirm by Telephone: New York, New York 10286
New York, New York 10286 (212) 815-2791 Attention: Ground Level
Attention: Denise Robinson, Corporate Trust
Reorganization Section Services Window
By Overnight Delivery:
The Bank of New York
101 Barclay Street
Floor 7 East
New York, New York 10286
Attention: Denise Robinson,
Reorganization Section
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
-1-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Clearview Cinema Group, Inc., a Delaware
Corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus (as the same may be amended or supplemented from time to
time, the "Prospectus"), and the related Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the
aggregate principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
Name(s) of Registered Holder(s): _______________________________________________
Aggregate Principal Amount Tendered: $ _________________________________________
Certificate No.(s) (if available): _____________________________________________
(Total Principal Amount Represented by Old Notes Certificate(s)) _______________
$_______________________________________________________________________________
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number: ____________________________________________________________
Date: __________________________________________________________________________
* Must be in denominations of a principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X ________________________________________________ _________________________
X ________________________________________________ _________________________
Signature(s) of Owner(s) or Authorized Signatory Date
Area Code and Telephone Number: ________________________________________________
-2-
<PAGE>
Must be signed by the holder(s) of the Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in- fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
-3-
<PAGE>
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
learning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Old Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Old Notes to the Exchange Agent's account at The Depositary
Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within five business days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
_________________________________ ____________________________________
Name of Firm Authorized Signature
_________________________________ ____________________________________
Address Title
_________________________________ ____________________________________
Zip Code (Please Type or Print)
Area Code and Telphone No._______ Dated:______________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD CAPITAL SECURITIES WITH THIS FORM.
CERTIFICATES FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
