SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): April 23, 1998
Clearview Cinema Group, Inc.
(Exact name of registrant as specified in charter)
Delaware 001-13187 22-3338356
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
97 Main Street 07928
Chatham, New Jersey (Zip code)
(Address of principal executive
offices)
Registrant's telephone number,
including area code: (973) 377-4646
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Item 5. Other Events
On April 23, 1998, Clearview Cinema Group, Inc. (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 Shares"),
pursuant to, and in accordance with the terms of, a Certificate of Designation
of Class C Convertible Preferred Stock of Clearview Cinema Group, Inc., dated as
of April 23, 1998 (the "Certificate of Designation"). The Company entered into a
Securities Purchase Agreement, dated as of April 23, 1998 (the "Securities
Purchase Agreement") with Proprietary Convertible Investment Group, Inc. (the
"Purchaser"), whereby the Company issued 3,000 shares of its Class C Preferred
Shares to the Purchaser for an aggregate purchase price of $3,000,000 paid in
cash on April 24, 1998. The Certificate of Designation and the Securities
Purchase Agreement are attached hereto as Exhibit 4.01 and Exhibit 10.01,
respectively, and are incorporated by reference herein in their entirety.
In connection with the issuance of the Class C Preferred Shares, the
Company and the Purchaser entered into a Registration Rights Agreement, dated as
of April 23, 1998 (the "Registration Rights Agreement") relating to the shares
of Class C Preferred Shares issued to the Purchaser. Under the Registration
Rights Agreement, the Company agreed to prepare and file with the Securities and
Exchange Commission not later than July 15, 1998, a registration statement on
Form SB-2 as a "shelf" registration under Rule 415 of the Securities Exchange
Act of 1934, as amended, covering the resale of at least 150% of the number of
shares of Registrable Securities (as defined in Section 1(e) of the Registration
Rights Agreement) then issuable on conversion of the Class C Preferred Shares.
The Company also granted the Purchaser incidental registration rights to include
shares of Common Stock received by the Purchaser upon conversion of the Class C
Preferred Shares in registration statements filed by the Company in connection
with the public offering of shares of Common Stock for cash (other than under
employee plans or in connection with a business combination), if a registration
statement covering the Registrable Shares is not otherwise effective. A copy of
the Registration Rights Agreement is attached hereto as Exhibit 10.02 and is
incorporated by reference herein in its entirety.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
4.01 Certificate of Designation of Class C Convertible Preferred
Stock of Clearview Cinema Group, Inc., dated April 23, 1998.
10.01 Securities Purchase Agreement, dated as of April 23, 1998,
by and between Clearview Cinema Group, Inc. and Proprietary
Convertible Investment Group, Inc.
10.02 Registration Rights Agreement, dated as April 23, 1998, by and
between Clearview Cinema Group, Inc., and Proprietary
Convertible Investment Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEARVIEW CINEMA GROUP, INC.
By:
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Name: A. Dale Mayo
Title: Chairman of the Board, President and
Chief Executive Officer
Date: May 8, 1998
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Exhibit Index
SEQUENTIAL
EXHIBIT NO. DOCUMENT PAGE NO.
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4.01 Certificate of Designation of Class C Convertible Filed herewith
Preferred Stock of Clearview Cinema Group, Inc.,
dated April 23, 1998.
10.01 Securities Purchase Agreement dated as of April Filed herewith
23, 1998, by and between Clearview Cinema Group,
Inc. and Proprietary Convertible Investment Group,
Inc.
10.02 Registration Rights Agreement dated as April 23, Filed herewith
1998, by and between Clearview Cinema Group, Inc.,
and Proprietary Convertible Investment Group, Inc.
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CERTIFICATE OF DESIGNATION
OF
CLASS C CONVERTIBLE PREFERRED STOCK
OF
CLEARVIEW CINEMA GROUP, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
Clearview Cinema Group, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that the following resolutions were adopted by the Board of Directors of the
Corporation pursuant to authority of the Board of Directors as required by
Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to the Board of
Directors in accordance with the provisions of the Corporation's Certificate of
Incorporation, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $.01 per share
(the "PREFERRED STOCK"), to be issued pursuant to a Securities Purchase
Agreement between the Corporation and the Purchaser named therein (the
"SECURITIES PURCHASE AGREEMENT"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences, privileges and
restrictions thereof as follows:
1. DESIGNATION AND AMOUNT.
The designation of this series, which consists of three thousand
(3,000) shares (the "PREFERRED SHARES") of Preferred Stock, is the Class C
Convertible Preferred Stock (the "CLASS C PREFERRED STOCK") and the face amount
shall be One Thousand Dollars ($1,000) per share (the "STATED VALUE").
2. DIVIDENDS.
(a) DIVIDEND RATE; PAYMENTS. The holder (the "HOLDER") of Preferred
Shares shall be entitled to receive, to the extent permitted by applicable law,
subject to the prior, full payment of any accumulated and unpaid dividends on
any class or series of Senior Securities (as defined below) and in preference to
the payment of any dividend on any class or series of Junior Securities (as
defined below), cumulative dividends ("DIVIDENDS") on each Preferred Share in an
amount equal to, on an annualized basis, the Stated Value of such Preferred
Share TIMES five percent (5%). Dividends shall accrue, whether or not earned or
declared, on each Preferred Share from the date of the original issuance thereof
(the "ISSUE DATE") through the earlier to occur of (A) the Maturity
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Date (as defined below) and (B) the redemption or conversion thereof in
accordance with the terms hereof. Accrued Dividends on a Preferred Share shall
be payable on each Conversion Date (as defined below) and on the Maturity Date
(as defined below) for such Preferred Share (each, a "DIVIDEND PAYMENT DATE").
If, on any date, Dividends on any outstanding Preferred Shares have not been
paid or declared by the Board of Directors in accordance with applicable law and
set aside for payment with respect to all Dividend Payment Dates preceding such
date, the aggregate amount of such Dividends shall be fully paid or declared and
set aside for payment before any distribution, whether by way of dividend or
otherwise, shall be declared, paid or set apart with respect to any Junior
Securities on or after such date. Dividends shall be paid either in cash or, at
the option of the Corporation (the "STOCK PAYMENT OPTION"), and subject to the
satisfaction of the conditions set forth in paragraph (b) below (the "STOCK
PAYMENT CONDITIONS"), in whole or in part in shares (the "DIVIDEND PAYMENT
SHARES") of the Corporation's Common Stock (the "COMMON STOCK"). Cash Dividends
shall be paid to the Holder within five (5) Business Days following the
applicable Dividend Payment Date by delivering immediately available funds to
the Holder in accordance with the Holder's wiring instructions. Any amount of
Dividends payable in cash which is not paid within five (5) Business Days of the
applicable Dividend Payment Date shall bear interest at an annual rate equal to
the lower of (x) the "prime" rate (as published in the Wall Street Journal) on
such fifth Business Day PLUS three percent (3%) and (y) the highest rate
permitted by applicable law, for the number of days elapsed from such Dividend
Payment Date until such amount is paid in full (the "DEFAULT INTEREST RATE").
(b) CONDITIONS TO STOCK PAYMENT OPTION. If the Corporation wishes to
exercise the Stock Payment Option, it may do so only if each of the following
conditions has been satisfied as of the relevant Conversion Date:
(i) the number of shares of Common Stock authorized, unissued
and unreserved for all other purposes, or held in the Corporation's treasury, is
sufficient to pay 125% of the aggregate number of (x) Conversion Shares issuable
upon the conversion in full of the Preferred Shares and (y) the number of
Dividend Payment Shares issuable pursuant to such option;
(ii) the Dividend Payment Shares are listed for trading on the
American Stock Exchange ("AMEX"), the New York Stock Exchange ("NYSE") or the
Nasdaq National Market System ("NMS") and trading in the Common Stock has not
been suspended by such exchange;
(iii) the registration statement (the "REGISTRATION
STATEMENT") described in the Registration Rights Agreement between the
Corporation and the Purchaser (the "REGISTRATION RIGHTS AGREEMENT", or another
registration statement with respect to which the Corporation has granted
"piggyback" rights to the Holder under the Registration Rights Agreement, is
effective and available for the sale of the Dividend Payment Shares by the
Holder or such shares may be sold to the public pursuant to Rule 144(k) under
the Securities Act of 1933, as amended (the "SECURITIES ACT");
(iv) a Mandatory Redemption Event (as defined herein) has
not occurred and is not continuing; and
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(v) the Corporation has delivered to the Holder a certificate,
signed by an executive officer of the Corporation, setting forth:
o the amount of the Dividend to which the
Holder is entitled and, if not the same,
the amount of such payment to be made in
Dividend Payment Shares;
o the number of Dividend Payment Shares to
be delivered in payment of such
Dividends, and the calculation therefor;
and
o a statement to the effect that all of
the conditions set forth in
sub-paragraphs i-iv above have been
satisfied.
(c) EXERCISE OF STOCK PAYMENT OPTION. In order for the Corporation to
exercise the Stock Payment Option, it must deliver written notice thereof (a
"STOCK PAYMENT EXERCISE NOTICE") to the Holder on or before the tenth (10th)
Business Day prior to the Initial Conversion Date (as defined below) and on or
before the tenth (10th) Business Day prior to the first day of each calendar
quarter thereafter specifying whether the Corporation intends to pay Dividends
during such calendar quarter (or shorter period in the case of the notice
delivered prior to the Initial Conversion Date) in Dividend Payment Shares or
cash. Upon delivering a Stock Payment Exercise Notice to the Holder, the
Corporation thereafter shall be irrevocably bound by its election made therein
to deliver Dividend Payment Shares or cash, as the case may be, during the
period to which such notice relates.
(d) DELIVERY OF DIVIDEND PAYMENT SHARES. Upon exercise of the Stock
Payment Option, the Corporation shall deliver to the Holder, on or before the
third (3rd) Business Day following the applicable Dividend Payment Date (the
"DIVIDEND PAYMENT SHARE DELIVERY DATE"), the aggregate number of whole Dividend
Payment Shares that is determined by dividing (x) the amount of the Dividend to
which the Holder is entitled as of such Dividend Payment Date with respect to
the Preferred Shares being converted or redeemed by (y) the applicable
Conversion Price (as defined below) on such Dividend Payment Date. The
Corporation shall effect delivery of Dividend Payment Shares to the Holder by,
as long as the Corporation's transfer agent ("TRANSFER AGENT") is participating
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
program ("FAST"), crediting the account of the Holder or its nominee at DTC with
the number of Dividend Payment Shares required to be delivered, no later than
the close of business on such Dividend Payment Share Delivery Date. In the event
that the condition specified above with respect to the Transfer Agent's
participation in FAST is not satisfied as of the applicable Dividend Payment
Share Delivery Date, or if the Holder specifies in the applicable Conversion
Notice (as defined below) or otherwise notifies the Corporation in writing prior
to the applicable Dividend Payment Date that the Holder wishes to receive
physical certificates, the Corporation shall effect delivery of Dividend Payment
Shares by delivering to the Holder or its nominee physical certificates
representing such Dividend Payment Shares, no later than the close of business
on such Dividend Payment Share Delivery Date. No fractional Dividend Payment
Shares shall be issued; the Corporation shall, in lieu thereof, either issue a
number of Dividend Payment Shares which reflects
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a rounding up to the next whole number of shares or pay such amount in cash.
Dividend Payment Shares shall be fully paid and non-assessable, free and clear
of any liens, claims, preemptive rights or encumbrances imposed by or through
the Corporation.
(e) FAILURE TO DELIVER DIVIDEND PAYMENT SHARES. In the event that the
Corporation fails for any reason to deliver to the Holder certificates
representing the appropriate number of Dividend Payment Shares on or before the
Dividend Payment Share Delivery Date therefor, and such failure continues for
five (5) Business Days following the Dividend Payment Share Delivery Date, the
Corporation shall pay to the Holder payments in the amount of (i) (N/365)
MULTIPLIED BY (ii) the amount of such Dividend MULTIPLIED BY (iii) the lower of
twenty-four percent (24%) and the maximum rate permitted by applicable law,
where "N" equals the number of days elapsed between the original Dividend
Payment Share Delivery Date for such Dividend Payment Shares and the date on
which all of the certificates representing such Dividend Payment Shares are
issued and delivered to the Holder. Amounts payable under this subparagraph (e)
shall be paid to the Holder in immediately available funds on or before the
fifth (5th) Business Day of the calendar month immediately following the
calendar month in which such amounts have accrued. The Holder shall have the
right to pursue actual damages for the Corporation's failure to issue and
deliver Dividend Payment Shares on the Dividend Payment Share Delivery Date for
a Dividend, including, without limitation, damages relating to any purchase of
shares of Common Stock by the Holder to make delivery on a sale effected in
anticipation of receiving Dividend Payment Shares, such damages to be in an
amount equal to (A) the aggregate amount paid by the Holder for the shares of
Common Stock so purchased MINUS (B) the aggregate amount of net proceeds, if
any, received by the Holder from the sale of the Dividend Payment Shares issued
by the Corporation with respect to such Dividend, and the Holder shall have the
right to pursue all other remedies available to it at law or in equity
(including, without limitation, a decree of specific performance and/or
injunctive relief).
3. PRIORITY.
(a) PAYMENT UPON DISSOLUTION.
(i) Upon the occurrence of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, commenced by the Corporation or by its
creditors, as such, or relating to its assets or (y) the dissolution or other
winding up of the Corporation whether total or partial, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy proceedings,
or (z) any assignment for the benefit of creditors or any marshalling of the
material assets or material liabilities of the Corporation (each, a "LIQUIDATION
EVENT"), no distribution shall be made to the holders of any shares of Junior
Securities (as defined below) unless, following the payment of preferential
amounts on all Senior Securities (as defined below), the Holder shall have
received the Liquidation Preference (as defined below) with respect to each
Preferred Share then held by the Holder. In the event that upon the occurrence
of a Liquidation Event, and following the payment of preferential amounts on all
Senior Securities (as defined below), the assets available for distribution to
the Holder and the holders of Pari Passu Securities are insufficient to pay the
Liquidation Preference with respect to all of the outstanding Preferred Shares
and the preferential
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amounts payable to such holders, the entire assets of the Corporation shall be
distributed ratably among the Preferred Shares and the shares of Pari Passu
Securities in proportion to the ratio that the preferential amount payable on
each such share (which shall be the Liquidation Preference in the case of a
Preferred Share) bears to the aggregate preferential amount payable on all such
shares.
(ii) The "LIQUIDATION PREFERENCE" with respect to a Preferred
Share shall mean an amount equal to the Stated Value of such Preferred Share
(subject to ratable adjustment in the event of any stock split or combination of
the Class C Preferred Stock and to equitable adjustment in the event of a
reclassification of the Class C Preferred Stock or other similar event) plus any
accrued and unpaid Dividends thereon. "JUNIOR SECURITIES" shall mean the Common
Stock and all other capital stock of the Corporation that are not Pari Passu
Securities or do not have a preference over the Class C Preferred Stock in
respect of dividends, redemption or distribution upon liquidation. "PARI PASSU
SECURITIES" shall mean the Class A Convertible Preferred Stock of the
Corporation (the "Class A Preferred Stock") and any other securities ranking
pari passu with the Class C Preferred Stock in respect of dividends, redemption
or distribution upon liquidation. "SENIOR SECURITIES" shall mean the Class B
Nonvoting Cumulative Redeemable Preferred Stock of the Corporation (the "CLASS B
PREFERRED STOCK"), any debt instrument of the Corporation and any securities of
the Corporation which by their terms have a preference over the Class C
Preferred Stock in respect of dividends, redemption or distribution upon
liquidation.
4. CONVERSION.
(a) RIGHT TO CONVERT. The Holder shall have the right to convert, at
any time after the earlier to occur of (i) the ninetieth (90th) day following
the Issue Date and (ii) the date on which the Registration Statement has been
declared effective (the "INITIAL CONVERSION DATE"), all or any part of the
Preferred Shares held by the Holder into such number of fully paid and
non-assessable shares of Common Stock ("CONVERSION SHARES") as is computed in
accordance with the terms hereof (a "CONVERSION").
(b) CONVERSION NOTICE. In order to convert Preferred Shares, the Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which the Holder wishes to effect such Conversion (the
"CONVERSION DATE"), (i) a notice of conversion (a "CONVERSION NOTICE"), in
substantially the form of Exhibit A hereto, to the Corporation and to the
Transfer Agent stating the number of Preferred Shares to be converted, the
applicable Conversion Price (as defined below) and a calculation of the number
of shares of Common Stock issuable upon such Conversion and (ii) a copy of the
certificate or certificates representing the Preferred Shares being converted.
The Holder shall promptly thereafter send the original of the Conversion Notice
and of such certificate or certificates to the Transfer Agent. The Corporation
shall issue a new certificate for Preferred Shares in the event that less than
all of the Preferred Shares represented by a certificate delivered to the
Corporation in connection with a Conversion are converted. Except as otherwise
provided herein, upon delivery of a Conversion Notice by the Holder in
accordance with the terms hereof, the Holder shall, as of the applicable
Conversion Date, be deemed for all purposes to be record owner of the Common
Stock to which such Conversion Notice relates. In the case of a dispute between
the Corporation and the Holder as to the calculation of the Conversion
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Price or the number of Conversion Shares issuable upon a Conversion, the
Corporation shall promptly issue to the Holder the number of Conversion Shares
that are not disputed and shall submit the disputed calculations to its
independent accountant within two (2) Business Days of receipt of the Holder's
Conversion Notice. The Corporation shall cause such accountant to calculate the
Conversion Price as provided herein and to notify the Corporation and the Holder
of the results in writing no later than three (3) Business Days following the
day on which it received the disputed calculations. Such accountant's
calculation shall be deemed conclusive absent manifest error. The fees of any
such accountant shall be borne by the party whose calculations were most at
variance with those of such accountant.
(c) NUMBER OF CONVERSION SHARES; CONVERSION PRICE. The number of
Conversion Shares to be delivered by the Corporation pursuant to a Conversion
shall be determined by dividing the aggregate Stated Value of the Preferred
Shares to be converted by the Conversion Price (as defined herein) in effect on
the applicable Conversion Date. Subject to adjustment as provided in Section 6
below, "CONVERSION PRICE" with respect to a Preferred Share shall mean the
lesser of (i) $21.95 (the "FIXED CONVERSION PRICE") and (ii) eighty seven and
one half percent (87.5%) of the average of the fourth, fifth and sixth lowest
Closing Trade Prices for the Common Stock during the period of twenty (20)
Trading Days occurring immediately prior to (but not including) the applicable
Conversion Date (the "FLOATING CONVERSION PRICE").
(d) CERTAIN DEFINITIONS. "TRADING DAY" means any day on which the
Common Stock is traded on the AMEX or on the principal securities exchange or
market on which the Common Stock is then traded. "CLOSING TRADE PRICE" means,
with respect to the Common Stock, the last sale price for the Common Stock
occurring on a given Trading Day on the AMEX or on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then
reporting such sales, by a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to the Holder
(collectively, "BLOOMBERG") or, if a sale is not so reported on a Trading Day,
the average of the bid and asked prices of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg or if the foregoing does not apply, the average of the
last reported bid and asked prices of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no such prices are reported for such security by Bloomberg,
the average of the bid and asked prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Trade Price cannot be calculated for such security on any of the
foregoing bases, the Closing Trade Price of such security shall be the fair
market value as reasonably determined by an investment banking firm selected by
the Holder (which may be an affiliate of the Holder) and reasonably acceptable
to the Corporation, with the costs of such appraisal to be borne by the
Corporation. "BUSINESS DAY" means any day on which the New York Stock Exchange
and commercial banks located in the City of New York are open for business.
(e) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon receipt of a
Conversion Notice from the Holder pursuant to paragraph 4(b) above, the
Corporation shall, no later than the close of business on the later of (i) the
third (3rd) Business Day following the Conversion Date set forth
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in such Conversion Notice and (ii) the date on which the certificate(s)
representing the Preferred Shares being converted are delivered to the
Corporation or the Transfer Agent by the Holder (the "DELIVERY DATE"), issue and
deliver or cause to be delivered to the Holder the number of Conversion Shares
as shall be determined as provided herein. The Corporation shall effect delivery
of Conversion Shares to the Holder by, as long as the Transfer Agent is
participating in FAST, crediting the account of the Holder or its nominee at DTC
with the number of Conversion Shares required to be delivered, no later than the
close of business on such Delivery Date. In the event that Transfer Agent is not
a participant in FAST or if the Holder so specifies in a Conversion Notice or
otherwise in writing prior to the Conversion Date, the Corporation shall effect
delivery of Conversion Shares by delivering to the Holder or its nominee
physical certificates representing such Conversion Shares, no later than the
close of business on such Delivery Date. If any Conversion would create a
fractional Conversion Share, such fractional Conversion Share shall be
disregarded and the number of Conversion Shares issuable upon such Conversion,
in the aggregate, shall be the next higher number of Conversion Shares.
Conversion Shares and Dividend Payment Shares delivered to the Holder shall not
contain any restrictive legend as long as (A) the sale or transfer of such
Conversion Shares is covered by an effective Registration Statement, (B) such
Conversion Shares can be sold pursuant to Rule 144 ("RULE 144") under the
Securities Act and a registered broker dealer provides to the Corporation a
customary broker's Rule 144 letter and such Purchaser delivers to the
Corporation a customary seller's representation letter (including, without
limitation, a representation of the Holder's present intention to sell such
shares), or (C) such Conversion Shares are eligible for resale under Rule 144(k)
or any successor rule or provision.
(f) FAILURE TO DELIVER CONVERSION SHARES.
(i) In the event that the Corporation fails for any reason
(other than by operation of Section 5(b) below) to deliver to the Holder
certificates representing the number of Conversion Shares specified in the
applicable Conversion Notice on or before the Delivery Date therefor (a
"CONVERSION DEFAULT"), and such failure continues for five (5) Business Days
following the Delivery Date, the Corporation shall pay to the Holder payments
("CONVERSION DEFAULT PAYMENTS") in the amount of (i) (N/365) MULTIPLIED BY (ii)
the aggregate Liquidation Preference of the Preferred Shares represented by the
Conversion Shares which remain the subject of such Conversion Default MULTIPLIED
BY (iii) the lower of twenty-four percent (24%) and the maximum rate permitted
by applicable law, where "N" equals the number of days elapsed between the
original Delivery Date for such Conversion Shares and the earlier to occur of
(A) the date on which all of the certificates representing such Conversion
Shares are issued and delivered to the Holder, (B) the date on which such
Preferred Shares are redeemed pursuant to the terms hereof and (C) the date on
which a Withdrawal Notice (as defined below) is delivered to the Corporation.
Amounts payable under this subparagraph (f) shall be paid to the Holder in
immediately available funds on or before the fifth (5th) Business Day of the
calendar month immediately following the calendar month in which such amounts
have accrued.
(ii) In the event that the Holder has not received
certificates representing the Conversion Shares by the tenth (10th) Business Day
following a Conversion Default, the Holder may, upon written notice (a
"WITHDRAWAL NOTICE") delivered to the Corporation on such Business
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Day or on any Business Day thereafter (unless, prior to the delivery of such
notice, such Conversion Shares are delivered to the Holder), withdraw its
Conversion Notice with respect to such Conversion Shares and regain its rights
as the Holder of the Preferred Shares that are the subject of such Conversion
Default. Upon delivery by the Holder of a Withdrawal Notice, the Holder shall
retain all of the Holder's rights and remedies with respect to the Corporation's
failure to deliver such Conversion Shares (including without limitation the
right to receive the cash payments specified in subparagraph 4(f)(i) above).
(iii) Nothing herein shall limit the Holder's right to pursue
actual damages for the Corporation's failure to issue and deliver Conversion
Shares on the applicable Delivery Date (including, without limitation, damages
relating to any purchase of shares of Common Stock by the Holder to make
delivery on a sale effected in anticipation of receiving Conversion Shares upon
Conversion, such damages to be in an amount equal to (A) the aggregate amount
paid by the Holder for the shares of Common Stock so purchased MINUS (B) the
aggregate amount of net proceeds, if any, received by the Holder from the sale
of the Conversion Shares issued by the Corporation pursuant to such Conversion),
and the Holder shall have the right to pursue all remedies available to it at
law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief).
(g) CONVERSION AT MATURITY. On the date which is two (2) years
following the Issue Date (the "MATURITY DATE"), each Preferred Share then
outstanding shall be automatically converted into the number of shares of Common
Stock equal to the Stated Value of such shares DIVIDED BY the Conversion Price
then in effect (a "MANDATORY CONVERSION"); provided, however, that if, on the
Maturity Date, (i) the number of shares of Common Stock authorized, unissued and
unreserved for all other purposes, or held in the Corporation's treasury, is not
sufficient to effect the issuance and delivery of the number of Conversion
Shares into which all outstanding Preferred Shares are then convertible, (ii)
the Common Stock is not listed for trading on the AMEX, the NYSE, or NMS or
(iii) a Mandatory Redemption Event (as defined herein) has occurred and is
continuing, the Holder shall have the option, upon written notice to the
Corporation at any time prior to the date on which the Holder's Preferred Shares
are redeemed pursuant to the terms hereof, to regain its rights as a holder of
Preferred Shares, including without limitation, the right to convert such
Preferred Shares in accordance with the terms of paragraphs 4(a) through 4(f)
hereof and, upon delivery of such notice, such Preferred Shares shall not be
subject to a Mandatory Conversion hereunder until the thirtieth (30th) day
following the later of (a) the date on which the event specified (i), (ii) or
(iii) is no longer continuing and (b) the date on which the Corporation delivers
to the Holder written notice to such effect, and in such event, such thirtieth
day shall be deemed to be the Maturity Date for purposes of this Certificate of
Designation. If a Mandatory Conversion occurs, the Corporation and the Holder
shall follow the procedures for Conversion set forth in this Section 4, with the
Maturity Date deemed to be the Conversion Date, except that the Holder shall not
be required to send a Conversion Notice as contemplated by paragraph 4(b).
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5. CONVERSION LIMITATIONS.
In no event shall the Holder be permitted to convert any Preferred
Shares in excess of the number of such shares, upon the Conversion of which:
(a) the number of Conversion Shares to be issued pursuant to such
Conversion, when added to the number of shares of Common Stock issued pursuant
to all prior Conversions of Preferred Shares and issuances of Dividend Payment
Shares would exceed 19.99% of the number of outstanding shares of Common Stock
on the Closing Date (subject to equitable adjustments from time to time for the
events described in Section 6 below) (the "CAP AMOUNT"), except that such
limitation shall not apply in the event that (i) the Corporation obtains the
requisite approval of its stockholders for issuances of Common Stock in excess
of such amount (it being understood that (A) the Holder, upon converting
Preferred Shares into a number of Conversion Shares which equals or exceeds
seventy five percent (75%) of the Cap Amount (as defined below), shall have the
right to require the Corporation, upon written notice to such effect, to seek
such approval by means of a special meeting of stockholders promptly, but in any
case (i) within sixty (60) days following the Corporation's receipt of such
notice or (ii) if earlier, the second (2d) Business Day following the
Corporation's receipt of notice from the Securities and Exchange Commission (the
"COMMISSION") that the Commission has no comments or no further comments to the
Corporation's related proxy statement, and (B) if the Holder has not requested
such approval at such special meeting prior to the date on which the Corporation
has delivered a proxy statement to its stockholders with respect to the
Corporation's 1999 annual meeting of stockholders, the Holder shall have the
right to require the Corporation, upon written notice to such effect, to seek
such approval at such annual meeting) and to recommend such approval to its
stockholders or (ii) the Holder obtains an opinion of counsel reasonably
satisfactory to the Corporation that such approval is not required. Until such
approval or opinion is obtained, the Holder shall not be issued, upon Conversion
of the Preferred Shares, Conversion Shares in an amount greater than the Cap
Amount; and
(b) (x) the number of shares of Common Stock beneficially owned by the
Holder (other than shares of Common Stock issuable upon conversion of such
Preferred Shares or which would otherwise be deemed beneficially owned except
for being subject to a limitation on conversion or exercise analogous to the
limitation contained in this subparagraph (b)) PLUS (y) the number of shares of
Common Stock issuable upon the Conversion of such Preferred Shares, would be
equal to or exceed (z) 4.99% of the number of shares of Common Stock then issued
and outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this paragraph 5(b) applies, the determination of whether Preferred Shares
are convertible (in relation to other securities owned by the Holder) and of
which Preferred Shares are convertible shall be in the sole discretion of the
Holder, and the submission of Preferred Shares for Conversion by the Holder as
provided herein shall be deemed to be the Holder's determination that such
Preferred Shares are convertible pursuant to the terms hereof, and the
Corporation shall have no obligation whatsoever to verify or confirm the
accuracy of such determination. This paragraph may be amended (i) in order to
clarify an ambiguity or otherwise to give effect to such limitation, by the
Holder and the Corporation and (ii) for any other reason, with the further
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<PAGE>
requisite approval of the Corporation's stockholders. Nothing contained herein
shall be deemed to restrict the right of the Holder to convert Preferred Shares
at such time as the Conversion thereof will not violate the provisions of this
subparagraph 5(b). The restriction contained in this subparagraph 5(b) shall not
apply in the event of a Mandatory Conversion.
6. ADJUSTMENTS TO CONVERSION PRICE.
(a) ADJUSTMENT TO FIXED CONVERSION PRICE DUE TO STOCK SPLIT, STOCK
DIVIDEND, ETC. If, prior to the Conversion of all of the Preferred Shares, (A)
the number of outstanding shares of Common Stock is increased by a stock split,
a stock dividend on the Common Stock, a reclassification of the Common Stock,
the distribution to holders of Common Stock of rights or warrants entitling them
to subscribe for or purchase Common Stock at less than the then current market
price thereof (based upon the subscription or exercise price of such rights or
warrants at the time of the issuance thereof) or other similar event, the Fixed
Conversion Price shall be proportionately reduced, or (B) the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares or other similar event, the Fixed
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof. For purposes hereof, the market price per share of
Common Stock on any date shall be the average Closing Trade Price for the Common
Stock on the five (5) consecutive Trading Days occurring immediately prior to
but not including the earlier of such date and the Trading Day before the "ex"
date, if any, with respect to the issuance or distribution requiring such
computation. The term "'ex' date", when used with respect to any issuance or
distribution, means the first Trading Day on which the Common Stock trades
regular way in the market from which such average Closing Trade Price is then to
be determined without the right to receive such issuance or distribution.
(b) ADJUSTMENT TO CONVERSION PRICE DURING REFERENCE PERIOD. If, prior
to the Conversion of all of the Preferred Shares, the number of outstanding
shares of Common Stock is increased or decreased by a stock split, a stock
dividend on the Common Stock, a combination, a reclassification of the Common
Stock or other similar event, and such event takes place during the reference
period for the determination of the Conversion Price for any Conversion thereof,
the Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all Trading Days occurring during such reference period.
(c) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, prior to the
Conversion of all of the Preferred Shares, there shall be any merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of stock or securities
of the Corporation or another entity (an "EXCHANGE TRANSACTION"), then the
Holder shall (A) upon the consummation of such Exchange Transaction, have the
right to receive, with respect to any shares of Common Stock then held by the
Holder, or which the Holder is then entitled to receive pursuant to a Conversion
Notice previously delivered by the Holder as provided herein (and without regard
to whether such shares
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<PAGE>
contain a restrictive legend or are freely-tradeable), the same amount and type
of consideration (including without limitation, stock, securities and/or other
assets) and on the same terms as a holder of shares of Common Stock would be
entitled to receive in connection with the consummation of such Exchange
Transaction (the "EXCHANGE CONSIDERATION"), and (B) upon the Conversion of
Preferred Shares occurring subsequent to the consummation of such Exchange
Transaction, have the right to receive the Exchange Consideration which the
Holder would have been entitled to receive in connection with such Exchange
Transaction had such shares been converted immediately prior to such Exchange
Transaction, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end that the provisions
hereof (including, without limitation, provisions for the adjustment of the
Conversion Price and of the number of shares issuable upon a Conversion) shall
thereafter be applicable as nearly as may be practicable in relation to any
securities thereafter deliverable upon the Conversion of such Preferred Shares.
The Corporation shall not effect any Exchange Transaction unless (i) it first
gives to the Holder twenty (20) days prior written notice of such Exchange
Transaction (an "EXCHANGE NOTICE"), and makes a public announcement of such
event at the same time that it gives such notice and (ii) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of the Corporation hereunder, including the terms of
this subparagraph 6(c), and under the Securities Purchase Agreement and the
Registration Rights Agreement.
(d) DISTRIBUTION OF ASSETS. If the Corporation or any of its
subsidiaries shall declare or make any distribution of cash, evidences of
indebtedness or other securities or assets (other than cash dividends or
distributions payable out of earned surplus or net profits for the current or
the immediately preceding year), or any rights to acquire any of the foregoing,
to holders of Common Stock (or to a holder of the common stock of any such
subsidiary, other than the Corporation or any wholly-owned subsidiary of the
Corporation) as a partial liquidating dividend, by way of return of capital or
otherwise, including any dividend or distribution in shares of capital stock of
a subsidiary of the Corporation (collectively, a "DISTRIBUTION"), then, upon a
Conversion by the Holder occurring after the record date for determining
stockholders entitled to such Distribution, the Fixed Conversion Price for
Preferred Shares not converted prior to the record date of a Distribution shall
be reduced to a price determined by decreasing the Fixed Conversion Price in
effect immediately prior to the record date of the Distribution by an amount
equal to the fair market value of the assets so distributed with respect to each
share of Common Stock, such fair market value to be determined by an investment
banking firm selected by the Holder and reasonably acceptable to the
Corporation.
(e) ADJUSTMENT DUE TO MAJOR ANNOUNCEMENT. If the Corporation (i) makes
a public announcement that it intends to enter into a Change of Control
Transaction (as defined below) or (ii) any person, group or entity (including
the Corporation) publicly announces a tender offer, exchange offer or other
transaction to purchase 50% or more of the Common Stock (such announcement being
referred to herein as a "MAJOR ANNOUNCEMENT" and the date on which a Major
Announcement is made, the "ANNOUNCEMENT DATE"), then, in the event that the
Holder seeks to convert Preferred Shares on or following the Announcement Date,
the Conversion Price shall, effective upon the Announcement Date and continuing
through the fifth (5th) Business Day
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<PAGE>
following the earlier to occur of the consummation of the proposed transaction
or tender offer, exchange offer or other transaction and the Abandonment Date
(as defined below), be equal to the lower of (x) the average Closing Trade Price
for the Common Stock on the five (5) Trading Days immediately preceding (but not
including) the Announcement Date and (y) the Conversion Price in effect on the
Conversion Date for such Preferred Shares. "ABANDONMENT DATE" means with respect
to any proposed transaction or tender offer, exchange offer or other transaction
for which a public announcement as contemplated by this paragraph 6(e) has been
made, the date upon which the Corporation (in the case of clause (i) above) or
the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer, exchange offer or another transaction which caused this paragraph 6(e) to
become operative. In the event that a Major Announcement is made prior to the
Initial Conversion Date, the Holder shall be permitted to convert the Preferred
Shares at any time following the Announcement Date. This paragraph (e) shall not
be deemed to apply to a bona fide registered public offering of the Common Stock
made otherwise than in connection with a Change of Control Transaction.
(f) ADJUSTMENT PURSUANT TO REGISTRATION RIGHTS AGREEMENT. In addition
to and without limiting in any way the adjustments provided in this Section 6,
the Conversion Price shall be adjusted as may be required by the provisions of
the Registration Rights Agreement.
(g) NO FRACTIONAL SHARES. If any adjustment under this Section would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon Conversion shall be the next higher
number of shares or, at the option of the Corporation, shall be paid in cash in
an amount calculated by multiplying the amount of the fractional share TIMES the
Closing Trade Price used to calculate the Conversion Price for such Conversion.
7. MANDATORY REDEMPTION BY HOLDER.
(a) MANDATORY REDEMPTION. In the event that a Mandatory Redemption
Event (as defined below) occurs, the Holder shall have the right, to the extent
permitted by applicable law and subject to the rights and preferences of the
Senior Securities, to have all or any portion of the Preferred Shares held by
the Holder redeemed by the Corporation (a "MANDATORY REDEMPTION") at the
Mandatory Redemption Price (as defined herein) in same day funds. In order to
exercise its right to effect a Mandatory Redemption, the Holder must deliver a
written notice (a "MANDATORY REDEMPTION NOTICE") to the Corporation at any time
on or before the Business Day following the day on which such event is no longer
continuing; provided, however, that, in the case of subparagraph (b)(vi) below,
the following procedure shall be followed in lieu thereof: (a) no sooner than
fifteen (15) days nor later than ten (10) days prior to the Corporation's good
faith estimate of the date of the consummation of a Change of Control
Transaction (as defined below), but not prior to the public announcement of such
Change of Control Transaction, the Corporation shall deliver a written notice (a
"NOTICE OF CHANGE OF CONTROL TRANSACTION") to the Holder, and (b) within five
(5) days of delivery by the Corporation of a Notice of Change of Control
Transaction, the Holder who wishes to exercise its right to effect a Mandatory
Redemption hereunder shall deliver a Mandatory Redemption Notice to the
Corporation. The Mandatory Redemption Notice shall specify
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<PAGE>
the effective date of such Mandatory Redemption (the "MANDATORY REDEMPTION
DATE") and the number of such shares to be redeemed. In the event that a Change
of Control Transaction occurs and the Corporation does not deliver to the Holder
a Notice of Change of Control Transaction, the Holder may exercise its right to
a Mandatory Redemption hereunder by delivering a Mandatory Redemption Notice to
the Corporation (or to the surviving or successor entity) at any time on or
before the twentieth (20th) Business Day following such Change of Control
Transaction.
(b) MANDATORY REDEMPTION EVENT. Each of the following events shall be
deemed a "MANDATORY REDEMPTION EVENT":
(i) the Corporation fails for any reason (including without
limitation as a result of not having a sufficient number of shares of Common
Stock authorized and reserved for issuance, or as a result of the limitation
contained in Section 5(a) hereof), due to voluntary action undertaken by the
Corporation or a failure by the Corporation to take action, to issue shares of
Common Stock to the Holder and deliver certificates representing such shares to
the Holder as and when required by the provisions hereof upon Conversion of any
Preferred Shares, and such failure continues for ten (10) Business Days;
(ii) the Corporation breaches, in a material respect, due to
voluntary action undertaken by the Corporation or a failure by the Corporation
to take action, any covenant or other material term or condition of this
Certificate, the Securities Purchase Agreement, the Registration Rights
Agreement, or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated thereby, and such
breach continues for a period of ten (10) Business Days after written notice
thereof to the Corporation from the Holder;
(iii) any material representation or warranty made by the
Corporation in the Securities Purchase Agreement, the Registration Rights
Agreement or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated hereby or thereby is
inaccurate or misleading in any material respect as of the date such
representation or warranty was made due to voluntary action undertaken by the
Corporation or a failure by the Corporation to take action;
(iv) the Registration Statement is not declared effective by
the one hundred and eightieth (180th) day following the initial Issue Date
hereunder or if the Registration Statement has been declared effective by such
date and, while the effectiveness of the Registration Statement is required to
be maintained pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including
without limitation, the issuance of a stop order) or is unavailable to the
Holder for the sale of Conversion Shares in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of five (5) Business Days, 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 of the Registration Statement to be
declared effective or the lapse or unavailability thereof is due to voluntary
action undertaken by the Corporation or a failure by the Corporation to take
action;
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(v) the Common Stock is not listed on the AMEX, the NYSE, or
NMS due to any voluntary action or the failure to take action on the part of the
Corporation; and
(vi) there occurs (i) the sale, conveyance or disposition of
all or substantially all of the assets of the Corporation or any of its
subsidiaries (including without limitation the sale or other conveyance of any
common stock or other equity securities of any of the Corporation's
subsidiaries), or (ii) the effectuation of a transaction or series of related
transactions, in which more than 50% of the voting power of the Corporation is
disposed of (other than a transaction which is either (A) a bona fide registered
public offering of the Corporation's securities immediately following the
completion of which no purchaser in such offering beneficially owns more than
five percent (5%) of the number of shares of Common Stock then outstanding or
(B) a private placement of the Corporation's securities with one or more
investors each of which has been identified by the Purchaser or an affiliate of
the Purchaser to the Corporation for the purpose of investing in such
placement), or (iii) the consolidation, merger or other business combination of
the Corporation or any of its subsidiaries with or into any other entity,
immediately following which the prior stockholders of the Corporation fail to
own, directly or indirectly, at least fifty percent (50%) of the surviving
entity (a "CHANGE OF CONTROL TRANSACTION"), other than a Change of Control
Transaction which is not approved by the Board of Directors of the Corporation.
(c) MANDATORY REDEMPTION PRICE. The "MANDATORY REDEMPTION PRICE" shall
be equal to the greater of (i) Liquidation Preference of the Preferred Shares
being redeemed MULTIPLIED BY one hundred and twenty five (125%) and (ii) an
amount determined by dividing the Liquidation Preference of the Preferred Shares
being redeemed by the Conversion Price in effect on the Mandatory Redemption
Date and multiplying the resulting quotient by the average Closing Trade Price
for the Common Stock on the five (5) Trading Days immediately preceding (but not
including) the Mandatory Redemption Date.
(d) PAYMENT OF MANDATORY REDEMPTION PRICE.
(i) The Corporation shall pay the Mandatory Redemption Price
to the Holder exercising its right to redemption on the later to occur of (i)
the fifth (5th) Business Day following the Mandatory Redemption Date and (ii)
the date on which the Preferred Shares being redeemed are delivered by the
Purchaser to the Corporation for cancellation.
(ii) If Corporation fails to pay the Mandatory Redemption
Price to the Holder within five (5) Business Days of the Mandatory Redemption
Date, the Holder shall be entitled to interest thereon, from and after the
Mandatory Redemption Date until the Mandatory Redemption Price has been paid in
full, at an annual rate equal to the Default Interest Rate.
(iii) If the Corporation fails to pay the Mandatory Redemption
Price within ten (10) Business Days of the Mandatory Redemption Date, then the
Holder shall have the right at any time, so long as the Corporation remains in
default, to require the Corporation, upon written notice, to immediately issue,
in lieu of the Mandatory Redemption Price, the number of shares of Common
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<PAGE>
Stock of the Corporation equal to the Mandatory Redemption Price DIVIDED BY the
Conversion Price in effect on such Conversion Date as is specified by the Holder
in writing to the Corporation.
(e) MODIFICATION OF MANDATORY REDEMPTION PROVISIONS. The terms of this
Section 7 shall apply to the Class C Preferred Stock until such time, if any, as
such terms have been superseded, in whole or in part, by the terms of a
Determination Certificate (as defined below). A "DETERMINATION CERTIFICATE"
shall be a written instrument containing redemption provisions applicable to the
Class C Preferred Stock (or affirming the absence of any such provisions)
proposed by the Holder of a majority of the shares of Class C Preferred Stock at
the time outstanding and duly adopted by the Board of Directors, PROVIDED that
the approval of the Board of Directors shall be deemed to be given if the
adopting Holder furnish the Corporation with a certificate to the effect that
the Determination Certificate reflects a determination made in consultation with
the Corporation's auditors that each of the changes contemplated thereby are
necessary to qualify the Class C Preferred Stock as stockholders' equity under
generally accepted accounting principles. The Corporation shall promptly give
written notice of the adoption of any Determination Certificate to all holders
of its Class C Preferred Stock, shall refer to the existence of any
Determination Certificate in its annual financial statement and shall supply to
any stockholder upon request the full text thereof. One or more Determination
Certificates may be adopted pursuant to this paragraph. The contents of a
Determination Certificate shall be deemed to be "facts" for purposes of Section
151 of the Delaware General Corporation Law.
8. MISCELLANEOUS.
(a) TRANSFER OF PREFERRED SHARES. The Holder may sell or transfer all
(but not less than all) of the Preferred Shares to an affiliate of the Holder as
long as such sale or transfer is the subject of an effective registration
statement under the Securities Act or is exempt from registration thereunder and
otherwise is made in accordance with the terms of the Securities Purchase
Agreement. From and after the date of such sale or transfer, the transferee
thereof shall be deemed to be the Holder. Upon any such sale or transfer, the
Corporation shall, promptly following the return of the certificate or
certificates representing the Preferred Shares that are the subject of such sale
or transfer, issue and deliver to such transferee a new certificate in the name
of such transferee.
(b) NOTICES. Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms hereof, the form
or delivery of which notice, demand or request is not otherwise specified
herein, shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission on or before 5:00 p.m.,
eastern time, on a Business Day or, if such day is not a Business Day, on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the third Business Day after
deposit in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed to the parties as follows:
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IF TO THE CORPORATION:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Attn: A. Dale Mayo
Tel: 973-377-4646
Fax: 973-377-4303
WITH A COPY TO:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Janice C. Hartman, Esq.
Tel: 412-355-6500
Fax: 412-355-6501
and if to the Holder, to such address for the Holder as shall be designated by
the Holder in writing to the Corporation.
(c) LOST OR STOLEN CERTIFICATE. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of a certificate
representing Preferred Shares, and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Corporation, and upon
surrender and cancellation of such certificate if mutilated, the Corporation
shall execute and deliver to the Holder a new certificate identical in all
respects to the original certificate.
(d) NO VOTING RIGHTS. Except as provided by applicable law and
paragraph 8(g) below, the Holder of the Preferred Shares shall have no voting
rights with respect to the business, management or affairs of the Corporation;
provided that the Corporation shall provide the Holder with prior notification
of each meeting of stockholders (and copies of proxy statements and other
information sent to such stockholders).
(e) REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided to the Holder in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
to the Holder under this Certificate of Designation or under any Transaction
Document (as defined in the Securities Purchase Agreement), at law or in equity
(including without limitation a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing contained
herein shall limit the Holder's right to pursue actual damages for any failure
by the Corporation to comply with the terms of this Certificate of Designation.
The Corporation agrees with the Holder that there shall be no characterization
concerning this instrument other than as specifically provided herein. Amounts
set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be
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<PAGE>
received by the Holder hereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Corporation (or the
performance thereof). The Corporation acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Corporation agrees, in
the event of any such breach or threatened breach, the Holder shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
(f) FAILURE OR DELAY NOT WAIVER. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
(g) PROTECTIVE PROVISIONS.
So long as shares of Class C Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the Holder:
(i) alter or change the rights, preferences or
privileges of the Class C Preferred Stock or any other capital stock of the
Corporation so as to affect adversely the Class C Preferred Stock;
(ii) create any new class or series of capital stock
having a preference over or ranking pari passu with the Class C Preferred Stock
as to redemption, the payment of dividends or distribution of assets upon a
Liquidation Event or any other liquidation, dissolution or winding up of the
Corporation;
(iii) increase the authorized number of shares of
Preferred Stock;
(iv) re-issue any shares of Class C Preferred Stock
which have been converted in accordance with the terms hereof;
(v) issue any Pari Passu Securities or Senior
Securities (other than (i) debt securities which are not convertible into or
exchangeable for Common Stock or any other equity or convertible security of the
Corporation or (ii) pursuant to rights granted to the holders of the Class B
Preferred Stock); or
(vi) redeem, or declare, pay or make any provision for
any dividend or distribution with respect to, the Common Stock or any other
capital stock of the Corporation ranking junior to the Class C Preferred Stock
as to dividends or as to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation.
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IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Designation as of the 24th day of April, 1998.
Clearview Cinema Group, Inc.
By: ___________________________________
Name: A. Dale Mayo
Title: President
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EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert shares of Class C Convertible Preferred
Stock (the "Preferred Stock"), represented by stock certificate No(s). ________
(the "Preferred Stock Certificates"), into shares of common stock ("Common
Stock") of Clearview Cinema Group, Inc. according to the terms and conditions of
the Certificate of Designation relating to the Preferred Stock (the "Certificate
of Designation"), as of the date written below. Capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Certificate of Designation.
Date of Conversion: _________________________________
Number of Shares of
Preferred Stock to be Converted: ____________________
Applicable Conversion Price: ________________________
Number of Shares of
Common Stock to be Issued: __________________________
Name of Holder: _____________________________________
Address: _____________________________________
_____________________________________
_____________________________________
Signature: __________________________________________
Name:
Title:
HOLDER REQUESTS DELIVERY TO BE MADE: (check one)
/_/ By Delivery of Physical Certificates to the Above Address
/_/ Through Depository Trust Corporation
(Account __________________________________________)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 23,
1998, by and between Clearview Cinema Group, Inc., a Delaware corporation (the
"COMPANY"), and Proprietary Convertible Investment Group, Inc. (the
"PURCHASER").
The Company wishes to sell to the Purchaser, and the Purchaser wishes
to buy, on the terms and subject to the conditions set forth in this Agreement,
shares (the "PREFERRED SHARES") of the Company's Class C Convertible Preferred
Stock, par value $0.01 per share (the "PREFERRED STOCK"). The Preferred Shares
are convertible pursuant to the terms of a Certificate of Designation relating
to the Preferred Stock, the form of which is attached hereto as EXHIBIT B (the
"CERTIFICATE OF DESIGNATION"), into shares (the "CONVERSION SHARES") of the
Company's common stock, par value $0.01 per share (the "COMMON STOCK").
Dividends on the Preferred Shares are payable, subject to the terms and
conditions of the Certificate of Designation, in cash or, at the option of the
Company, in shares of Common Stock (the "DIVIDEND PAYMENT SHARES"). The
Preferred Shares, the Conversion Shares and the Dividend Payment Shares are
collectively referred to herein as the "SECURITIES". The Conversion Shares and
the Dividend Payment Shares are collectively referred to herein as the "COMMON
SHARES".
The Company has agreed to effect the registration of the Conversion
Shares and the Dividend Payment Shares under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), pursuant to a Registration Rights Agreement of
even date herewith by and between the Company and the Purchaser (the
"REGISTRATION RIGHTS AGREEMENT"). The sale of the Preferred Shares by the
Company to the Purchaser will be effected in reliance upon the exemption from
securities registration afforded by the provisions of Regulation D ("REGULATION
D"), as promulgated by the Securities and Exchange Commission (the "COMMISSION")
under the Securities Act.
The Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 AGREEMENT TO PURCHASE AND SELL. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell and the Purchaser agrees to purchase three thousand (3,000) Preferred
Shares at a purchase price equal to one thousand dollars ($1,000) per share (the
"PURCHASE PRICE").
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth herein, the closing of the purchase and sale of the Preferred Shares
hereunder (the "CLOSING") will be deemed to occur when this Agreement and the
other Transaction Documents (as defined below) have been executed and delivered
by the Company and the Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price has been made by the
Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of duly executed certificates representing the Preferred
Shares purchased by the Purchaser at the Closing. The date on which the Closing
occurs is referred to herein as the "CLOSING DATE".
<PAGE>
1.3 CERTAIN DEFINITIONS. When used herein, (A) "BUSINESS DAY" shall
mean any day on which the New York Stock Exchange (the "NYSE") and commercial
banks in the city of New York are open for business, (B) an "AFFILIATE" of a
party shall mean any person or entity controlling, controlled by or under common
control with that party and (C) "CONTROL" shall mean, with respect to an entity,
the ability to direct the business, operations or management of such entity,
whether through an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby makes the following representations and warranties
to the Company and agrees with the Company that, as of the date of this
Agreement and as of the Closing Date:
2.1 AUTHORIZATION; ENFORCEABILITY. The Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares, to acquire the Conversion Shares upon
conversion of the Preferred Shares and to execute, deliver and perform its
obligations under this Agreement, the Registration Rights Agreement and all
other agreements, documents, certificates or other instruments executed and
delivered by or on behalf of the Purchaser at the Closing. This Agreement
constitutes the Purchaser's valid and legally binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 ACCREDITED INVESTOR; INVESTMENT INTENT. The Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares solely for its own account for investment
purposes as a principal and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, the Purchaser does not agree to hold the Securities for any
minimum or specific term (except as otherwise may be provided in this Agreement)
and reserves the right to sell, transfer or otherwise dispose of the Securities
at any time in accordance with the provisions of this Agreement and with Federal
and state securities laws applicable to such sale, transfer or disposition.
2.3 INFORMATION. The Company has provided the Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to the Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Preferred Shares
hereunder. Neither such information nor any other investigation conducted by the
Purchaser or any of its representatives shall modify, amend or otherwise affect
the Purchaser's right to rely on the Company's representations and warranties
contained in this Agreement.
2.4 LIMITATIONS ON DISPOSITION. The Purchaser acknowledges that,
except as provided
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in the Registration Rights Agreement, the Securities have not been and are not
being registered under the Securities Act and may not be transferred, sold or
otherwise disposed of without registration under the Securities Act or unless
pursuant to an exemption therefrom (it being understood that, in the case of a
sale of Common Shares pursuant to any such exemption to a buyer that is not an
affiliate of the Purchaser, the Purchaser will deliver to the Company an opinion
of counsel to the effect that such exemption is available). Other than a
transfer of the Preferred Shares in their entirety to an affiliate of the
Purchaser, the Purchaser agrees that, without the consent of the Company, none
of the Preferred Shares may be transferred, sold or otherwise disposed of prior
to the Maturity Date (as defined in the Certificate of Designation).
2.5 LEGEND. The Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may
not be offered, sold or otherwise disposed of unless a
registration statement under the Securities Act and applicable
state securities laws shall have become effective with regard
thereto, or an exemption from registration under the Securities
Act and applicable state securities laws is available in
connection with such offer, sale or disposition. Such securities
are issued subject to the provisions of (i) the Certificate of
Designation relating to the Class C Convertible Preferred Stock
of Clearview Cinema Group, Inc. (the "Company"), (ii) a
Securities Purchase Agreement, dated as of April 23, 1998, by and
between the Company and the purchaser named therein, and (iii) a
Registration Rights Agreement, dated as of April 23, 1998, by and
between the Company and such purchaser."
Notwithstanding the foregoing, it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Common Shares is registered pursuant to an effective registration statement, (B)
such Common Shares can be sold pursuant to Rule 144 under the Securities Act
("RULE 144") and a registered broker dealer provides to the Company a customary
broker's Rule 144 letter and the Purchaser delivers to the Company a customary
seller's representation letter (including without limitation a representation of
the Purchaser's present intention to sell such Common Shares) and a copy of any
Form 144 which may have been required to be filed by the Purchaser pursuant to
Rule 144, or (C) such Common Shares are eligible for resale under Rule 144(k),
such Common Shares shall be issued without any legend or other restrictive
language and, with respect to Common Shares upon which such legend is stamped,
the Company shall issue new certificates without such legend to the holder upon
request.
2.6 SHORT SALES. The Purchaser hereby acknowledges and agrees that it
will not, directly or indirectly, engage in any short sales of shares of Common
Stock during the period from the date of this Agreement until the first date on
which the Purchaser no longer owns any Preferred Shares. Notwithstanding the
foregoing, (i) nothing contained herein will be deemed to limit the right of any
affiliate of the Purchaser to engage in short sales resulting from customer
orders or which are effected on a proprietary basis by trading personnel who are
not acting at the direction or request
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of the Purchaser or any employee of the Purchaser (ii) the Purchaser shall have
the right, as long as the Closing Bid Price for the Common Stock exceeds the
Fixed Conversion Price (each as defined in the Certificate of Designation), to
establish an aggregate short position (including any such position previously
established) of up to ten thousand (10,000) shares of Common Stock, and to
maintain that position thereafter regardless of whether the Closing Bid Price
exceeds the Fixed Conversion Price. As used herein, the term "short sale" shall
have the meaning specified in Rule 3b-3 under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"); provided, however, that such term shall
not include any such sale (x) effected as a result of a failure by the Company
to issue Conversion Shares or to deliver certificates representing such shares
in accordance with the terms of the Certificate of Designation or (y) which
involves a number of shares of Common Stock up to and including the number of
Conversion Shares for which a Conversion Notice (as defined in the Certificate
of Designation) has been, or will be on the day on which such short sales are
effected, submitted to the Company.
2.7 SELLING RESTRICTIONS. The Purchaser shall not sell on any Trading
Day (as defined in the Certificate of Designation) a number of Conversion Shares
(the "MAXIMUM SALE AMOUNT") that exceeds the greatest of (i) seven thousand
(7,000) Conversion Shares, (ii) fifteen percent (15%) of the total number of
shares of Common Stock traded on such Trading Day on all of the exchanges and/or
markets on which the Common Stock is then traded, and (iii) fifteen percent
(15%) of the average daily trading volume for the Common Stock on all of the
exchanges and/or markets on which the Common Stock is then traded during the
period of five (5) Trading Days immediately preceding, but not including, such
Trading Day (collectively, the "SELLING RESTRICTIONS"), and shall not direct or
request that any other person sell shares of Common Stock for the purpose of
circumventing or avoiding the effect of the Selling Restrictions; PROVIDED,
HOWEVER, that if, at any time during the Restricted Period, the Purchaser
refrains from selling Conversion Shares for one or more consecutive Trading
Days, up to a maximum of five (5) Trading Days (each such period of one or more
Trading Days being referred to herein as a "NO-SALE PERIOD"), the Maximum Sale
Amount applicable to the first Trading Day on which the Purchaser sells
Conversion Shares following the end of the No-Sale Period shall be increased by
an amount equal to the aggregate of the Maximum Sale Amounts applicable to all
of the Trading Days occurring during the No-Sale Period. The Selling
Restrictions shall cease to apply (i) in the event that the Company delivers an
Exchange Notice or a Major Announcement (each as defined in the Certificate of
Designation) is made and/or (ii) twenty (20) days prior to the Maturity Date (as
defined in the Certificate of Designation) and/or (iii) at such time as the
number of Conversion Shares into which the outstanding Preferred Shares are then
convertible represents less than one percent (1%) of the number of shares of
Common Stock then outstanding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to the Purchaser and agrees with the Purchaser that, as of the date of this
Agreement and as of the Closing Date:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its subsidiaries is duly organized, validly existing and in good standing
under the laws of the
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jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to carry on its business as now conducted. Each of
the Company and its subsidiaries is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. The term
"subsidiaries" shall mean entities in which the Company has an equity interest
of 50% or greater.
3.2 AUTHORIZATION; CONSENTS. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) all other
agreements, documents, certificates or other instruments executed and delivered
by or on behalf of the Company at any Closing (the instruments described in (i),
(ii) and (iii) being collectively referred to herein as the "TRANSACTION
DOCUMENTS"), to execute and perform its obligations under the Certificate of
Designation, to issue and sell the Preferred Shares to the Purchaser in
accordance with the terms hereof, to issue the Conversion Shares upon conversion
of the Preferred Shares in accordance with the Certificate of Designation and to
issue the Dividend Payment Shares in accordance with the Certificate of
Designation. All corporate action on the part of the Company by its officers,
directors and stockholders necessary for (A) the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents, and (B) the authorization, execution and filing of, and
the performance by the Company of its obligations under, the Certificate of
Designation has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than as may be required under the Securities Act and
applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the American Stock Exchange ("AMEX") or otherwise), except that the provisions
of the Transaction Documents requiring that the Common Shares be listed on the
AMEX, NYSE or the Nasdaq National Market System ("NMS") may require the approval
of the Company's stockholders in the event that the number of shares of Common
Stock issuable pursuant to the conversion of the Preferred Shares pursuant to
the Certificate of Designation is equal to or exceeds twenty percent (20%) of
the number of shares of Common Stock outstanding as of the Closing Date.
3.3 ENFORCEMENT. The Transaction Documents constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except as such enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
general principles of equity.
3.4 DISCLOSURE DOCUMENTS; AGREEMENTS; FINANCIAL STATEMENTS; OTHER
INFORMATION. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 and (ii) all Current
Reports on Form 8-K required to be filed by the Company with the Commission
since December 31, 1997 (collectively, the "DISCLOSURE DOCUMENTS"). The Company
is not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date
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of the filing thereof with the Commission, conformed in all material respects to
the requirements of the Exchange Act, and the rules and regulations thereunder
and, as of the date of such filing, such Disclosure Document did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements required to be filed as exhibits to the Disclosure Documents have
been filed as required. Neither the Company nor any of its subsidiaries is in
breach of any agreement to which it is a party or by which it is bound where
such breach is reasonably likely to have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole. Except as set forth in the Disclosure Documents or any
schedule or exhibit attached hereto, the Company has no liabilities, contingent
or otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the Disclosure
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied at
the times and during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end adjustments). The written
information described in paragraph 2.3 above (other than such materials that
were not prepared by or on behalf of the Company) does not contain an untrue
statement of material fact and does not include any material, non-public
information.
3.5 CAPITALIZATION. The capitalization of the Company as of the date
hereof, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares) exercisable
for, or convertible into or exchangeable for any shares of Common Stock and the
number of shares initially to be reserved for issuance upon conversion of the
Preferred Shares is set forth on SCHEDULE 3.5 hereto. All of such outstanding
shares of capital stock have been, or upon issuance will be, validly issued,
fully paid and non-assessable. No shares of the capital stock of the Company are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances created by or through the Company.
Except as disclosed on SCHEDULE 3.5, or as contemplated herein, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries.
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3.6 VALID ISSUANCE. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company, (ii) based in part upon the representations of the
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be entitled
to all of the rights, preferences and privileges set forth in the Certificate of
Designation. The Conversion Shares are duly authorized and reserved for issuance
and, when issued upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation, will be duly and validly issued, fully
paid and nonassessable, free and clear of any taxes, liens, claims, preemptive
or similar rights or encumbrances imposed by or through the Company. The
Dividend Payment Shares are duly authorized and, upon the issuance thereof in
accordance with the terms of the Certificate of Designation, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company.
3.7 NO CONFLICT WITH OTHER INSTRUMENTS. Neither the Company nor any of
its subsidiaries is in violation of any provisions of its charter, Bylaws or any
other governing document as amended and in effect on and as of the date hereof
or in default (and no event has occurred which, with notice or lapse of time or
both, would constitute a default) under any provision of any instrument or
contract to which it is a party or by which it is bound, or of any provision of
any Federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company, which would have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole. Other than as set forth on
SCHEDULE 3.7, the (i) execution, delivery and performance of this Agreement and
the other Transaction Documents, (ii) execution and filing of the Certificate of
Designation, and (iii) consummation of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the reservation for issuance and issuance of the Conversion Shares and the
Dividend Payment Shares) will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument or contract or an event
which results in the creation of any lien, charge or encumbrance upon any assets
of the Company or of any of its subsidiaries or the triggering of any preemptive
or anti-dilution rights or rights of first refusal or first offer on the part of
holders of the Company's securities.
3.8 FINANCIAL CONDITION; TAXES; LITIGATION.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, there has been no material
adverse change to the Company's business, operations, properties, financial
condition, prospects or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents.
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3.8.2 The Company has filed all tax returns required to be
filed by it and paid all taxes which are due, except for taxes which it
reasonably disputes, other than tax returns as to which the failure to file
would not have a material adverse effect on the consolidated business or
financial condition of the Company and its subsidiaries taken as a whole.
3.8.3 Each of the Company and its subsidiaries is not the
subject of any pending or, to the Company's knowledge, threatened inquiry,
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, the
Commission or any state securities commission or other governmental or
regulatory entity.
3.8.4 Except as described on SCHEDULE 3.8.4, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its subsidiaries, or against any officer, director or employee of the Company or
any such subsidiary in connection with such person's employment therewith.
Neither the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have
a material adverse effect on the consolidated business or financial condition of
the Company and its subsidiaries taken as a whole.
3.9 REPORTING COMPANY; FORM SB-2. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company is currently eligible to register for resale shares of its
Common Stock on a registration statement on Form SB-2 under the Securities Act
pursuant to Rule 415 thereunder.
3.10 ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares and
the issuance of Dividend Payment Shares in accordance with the terms of the
Certificate of Designation may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of Preferred Shares and to issue Dividend Payment Shares in
accordance with the terms of the Certificate of Designation is unconditional and
absolute regardless of the effect of any such dilution.
3.11 INTELLECTUAL PROPERTY. The Company and its subsidiaries each owns
or possesses adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other intellectual
property rights necessary to conduct the business now operated by it, and is not
aware of any infringement by a third party with respect to such rights or of any
infringement by it or conflict with asserted rights of others that, in any such
case, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole.
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3.12 REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as described
on SCHEDULE 3.12 hereto, (A) the Company has not granted or agreed to grant to
any person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation which has not been
waived.
3.13 TRADING ON AMEX. The Common Stock is listed on the AMEX and
trading in the Common Stock on the AMEX has not been suspended. The Company is
in full compliance with all material requirements of the AMEX for continued
listing of the Common Stock, and does not reasonably anticipate that the Common
Stock will be delisted from the AMEX, whether by reason of the transactions
contemplated by this Agreement, the other Transaction Documents or the
Certificate of Designation, and is not aware of any inquiry by and has not
received any notice from the AMEX regarding any failure or alleged failure by
the Company to comply with such requirements.
3.14 SOLICITATION. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
3.15 FEES. Except as described on SCHEDULE 3.15 hereto, the Company is
not obligated to pay any compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby.
3.16 FOREIGN CORRUPT PRACTICES. To the knowledge of the Company,
neither the Company, nor any of its subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.17 OTHER ISSUANCES OF SECURITIES. The Company has not issued (and
will not issue) any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into, exchangeable for or
otherwise entitling the holder thereof to acquire shares of Common Stock which
would be integrated with the sale of the Preferred Shares to the Purchaser, or
the issuance of the Conversion Shares upon conversion thereof, for purposes of
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determining whether stockholder approval is required under the listing
requirements of the AMEX.
3.18 TITLE. Except as set forth on SCHEDULE 3.18, the Company and its
subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property, in each case purported
to be owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects, except for liens, claims or encumbrances as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries. Any real
property and facilities held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
3.19 REGULATORY PERMITS. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
4. COVENANTS OF THE COMPANY.
4.1 CORPORATE EXISTENCE. The Company shall, so long as the Purchaser or
any affiliate of the Purchaser beneficially owns any Securities, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes.
4.2 PROVISION OF INFORMATION. The Company shall provide the Purchaser,
as long as any Preferred Shares are outstanding, with copies of its annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and proxy statements and other materials sent to stockholders, in each such
case promptly after the filing thereof with the Commission.
4.3 FORM D; BLUE-SKY QUALIFICATION. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Purchaser promptly after such filing. The Company shall, on
or before the Closing Date, take such action as is necessary to qualify the
Preferred Shares for sale under applicable state or "blue-sky" laws or obtain an
exemption therefrom, and shall provide evidence of any such action to the
Purchaser at or prior to such Closing.
4.4 REPORTING STATUS. As long as the Purchaser or any affiliate of the
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to Rule 144(k) (or any
successor rule or regulation), (i) the Company shall timely file with the
Commission all reports required to be so filed pursuant to the Exchange Act and
(ii) the Company shall not terminate its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit
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such termination. The Company agrees to file with the Commission a Form 8-K
describing the terms of the transactions contemplated by this Agreement and the
other Transaction Documents, with the Transaction Documents attached to such
Form 8-K as an exhibit thereto, on or before the fifteenth (15th) day following
the Closing Date in the form required by the Exchange Act.
4.5 RESERVATION OF COMMON STOCK. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares hereunder, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Preferred Shares (the "RESERVED AMOUNT"). As
of the Closing Date, the Reserved Amount shall be equal to no less than 150% of
the number of shares of Common Stock issuable upon conversion of all of the
Preferred Shares to be issued at the Closing (such number to be determined using
the Conversion Price in effect on the Closing Date). If during any period of
five (5) consecutive business days, the Reserved Amount is less than 150% of the
number of shares of Common Stock then issuable upon conversion of all of the
Preferred Shares then outstanding (such number to be determined using the
Conversion Price in effect on such date), the Company must take action
(including without limitation seeking stockholder authorization for the
authorization or reservation of additional shares of Common Stock) as soon as
practicable but in no event later than the fifth (5th) business day following
receipt by the Company of notice thereof from the Purchaser or in the case of
stockholder authorization (i) within sixty (60) days following receipt by the
Company of notice thereof from the Purchaser or (ii) if earlier, the second (2d)
Business Day following the Corporation's receipt of notice from the Commission
that the Commission has no comments or no further comments on the Corporation's
related proxy statement) to increase the Reserved Amount to no less than 150% of
the number of shares of Common Stock into which such outstanding Preferred
Shares are then convertible. The Company shall not reduce the number of shares
reserved for issuance hereunder without the written consent of the Purchaser.
4.6 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Preferred Shares for general corporate purposes only, in the ordinary
course of its business and consistent with past practice, including without
limitation for the acquisition or development of movie theaters, and shall not
use such proceeds to make a loan to any employee, officer or director of the
Company or to repurchase or pay a dividend on shares of Common Stock or other
securities junior to the Class C Preferred Stock.
4.7 LISTING ON AMEX. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include the number of shares of
Common Stock required to be reserved by the Company pursuant to Section 4.5
above for listing on the AMEX and (ii) use its best efforts to maintain such
listing on the AMEX or, if applicable, the NYSE or NMS.
4.8 USE OF PURCHASER NAME. Except as may be required by applicable law,
the Company shall not use, directly or indirectly, the Purchaser's name or the
name of any of its affiliates in any advertisement, announcement, press release
or other similar communication unless it has received the prior written consent
of the Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.
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4.9 COMPANY'S INSTRUCTIONS TO TRANSFER AGENT. On or prior to the
Closing Date, the Company shall execute and deliver irrevocable instructions to
its transfer agent (the "TRANSFER AGENT") (i) to issue certificates representing
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation and receipt of a valid Conversion Notice
(as defined in the Certificate of Designation) from the holder thereof in the
amount specified in such Conversion Notice, in the name of such holder or its
nominee, (ii) to issue certificates representing the Dividend Payment Shares
upon the issuance thereof in accordance with the Certificate of Designation,
(iii) to deliver such certificates to such holder no later than the close of
business on or before the later of (a) the third (3rd) business day following
the related Conversion Date or Dividend Payment Date (each as defined in the
Certificate of Designation), as the case may be, and (b) the date on which the
certificate(s) representing the Preferred Shares being converted are delivered
to the Company or the Transfer Agent by such holder and (iv) that the Conversion
Shares or the Dividend Payment Shares, as the case may be, will not bear a
restrictive legend as long as (A) the resale or transfer (including without
limitation a pledge) of such shares is registered pursuant to an effective
registration statement, (B) such shares can be sold pursuant to Rule 144, a
registered broker dealer provides to the Company a customary broker's Rule 144
letter and the holder delivers to the Company a customary seller's
representation letter including without limitation a representation of the
holder's present intention to sell such shares, or (C) such shares are eligible
for resale under Rule 144(k), and, with respect to shares upon which such legend
may be stamped, upon the occurrence of any such event, the Transfer Agent shall
issue new certificates without such legend to the holder upon request. The
Company shall instruct the Transfer Agent that, in lieu of delivering physical
certificates representing shares of Common Stock to a Purchaser upon conversion
of the Preferred Shares, or issuance of the Dividend Payment Shares, and as long
as the Transfer Agent is a participant in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program, and the Purchaser has not informed
the Company that it wishes to receive physical certificates therefor, the
transfer agent may effect delivery of Conversion Shares or Dividend Payment
Shares, as the case may be, by crediting the account of the Purchaser or its
nominee at DTC for the number of shares for which delivery is required hereunder
within the time frame specified above for delivery of certificates. The Company
represents to and agrees with the Purchaser that it will not give any
instruction to the Transfer Agent that will conflict with the foregoing
instruction or otherwise restrict the Purchaser's right to convert the Preferred
Shares or to receive Conversion Shares or Dividend Payment Shares in accordance
with the terms of the Certificate of Designation. In the event that the
Company's relationship with the Transfer Agent should be terminated for any
reason, the Company will use its best efforts to cause the Transfer Agent to
continue to act as transfer agent pursuant to the terms hereof until such time
that a successor transfer agent is appointed by the Company and receives the
instructions described above.
4.10 CAPITAL RAISING LIMITATION/REGISTRATION LIMITATION. Unless
otherwise consented to in writing by the Purchaser, the Company will not (A)
during the ninety (90) day period following the Closing Date, issue, offer for
sale or sell any Common Stock or other equity security of the Company, or any
security or instrument convertible or exercisable into or exchangeable for
Common Stock or any such equity security, except pursuant to securities or other
rights described on SCHEDULE 4.10(A) (the "CAPITAL RAISING LIMITATION"), or (B)
during the one hundred and eighty (180) day period following the day on which
the Registration Statement (as defined in the
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Registration Rights Agreement) is declared effective by the Commission, register
any Common Stock or other equity security of the Company (other than Conversion
Shares or Dividend Payment Shares) on a registration statement filed by the
Company under the Securities Act, except pursuant to the rights described on
SCHEDULE 4.10(B) (the "REGISTRATION LIMITATION"). The Capital Raising Limitation
will not apply to (i) the issuance of Common Stock as consideration in a merger,
consolidation or acquisition, in connection with a theater development project,
or pursuant to an employee benefit plan of the Company, in any such case the
primary purpose of which is not to raise equity capital, (ii) the issuance of
Common Stock pursuant to a strategic partnership or joint venture which is
formed for a bona fide commercial purpose, (iii) the issuance of Common Stock
pursuant to a registered public offering, or (iv) the issuance of warrants,
options or other rights to receive Common Stock in connection with a registered
public offering of the Company's debt securities or an offering of the Company's
debt securities pursuant to Rule 144A under the Securities Act where, in either
such case, the Company receives gross proceeds in excess of fifty million
dollars ($50,000,000). The Registration Limitation will not apply with respect
to "piggyback" rights granted by the Company prior to the date of this Agreement
which would allow the holders of the Company's securities to include such
securities on a registration statement being filed by the Company under the
Securities Act.
4.11 RIGHT OF FIRST OFFER. The Company agrees that, prior to any offer
or sale by the Company of Common Stock (or any securities convertible or
exercisable into or exchangeable for Common Stock) during the one (1) year
period following the Closing Date (the "FIRST OFFER PERIOD"), it will deliver to
the Purchaser written notice describing the proposed issuance, including the
terms and conditions thereof, and provide the Purchaser with an option during
the ten (10) business day period following delivery of such notice to purchase
all or any part of the securities being offered on substantially the same terms
as contemplated by the Company in connection with such issuance (the "RIGHT OF
FIRST OFFER"). The Purchaser may exercise the Right of First Offer by delivering
written notice of such exercise to the Company on or before the last day of such
ten business day period. In the event that the Purchaser either fails to
exercise the Right of First Offer during such ten business day period or informs
the Company in writing that it does not intend to participate in all or a part
of the issuance to which such Right of First Offer relates, the Company may
offer to a third party the amount of securities which were declined by the
Purchaser, on the same terms as were offered to the Purchaser. The Right of
First Offer will not apply with respect to a bona fide registered public
offering of the Common Stock.
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5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING. The Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase Preferred Shares, are conditioned upon the fulfillment (or waiver by
the Purchaser) of each of the following events as of the Closing Date:
5.1.1 the representations and warranties of the Company
set forth in this Agreement shall be true and
correct in all material respects as of such date
as if made on such date;
5.1.2 the Company shall have complied with or performed
in all material respects all of the agreements,
obligations and conditions set forth in this
Agreement that are required to be complied with or
performed by the Company on or before the Closing;
5.1.3 the Company shall have delivered to the Purchaser
a certificate, signed by an officer of the
Company, certifying that the conditions specified
in paragraphs 5.1.1 and 5.1.2 above have been
fulfilled as of the Closing;
5.1.4 the Company shall have filed the Certificate of
Designation with the Secretary of State of the
State of Delaware and shall have furnished the
Purchaser with a file-stamped copy thereof;
5.1.5 the Company shall have delivered to the Purchaser
an opinion of counsel for the Company, dated as of
such date, in substantially the form set forth on
Exhibit 5.1.5 hereto;
5.1.6 the Company shall have delivered duly executed
certificates representing the Preferred Shares
being so purchased;
5.1.7 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.8 the Common Stock shall be listed on the AMEX and
trading in the Common Stock shall not have been
suspended;
5.1.9 there shall have been no material adverse changes
in the Company's consolidated business or
financial condition since the date of the
Company's most recent audited financial statements
contained in the Disclosure Documents;
5.1.10 the Company shall have authorized and reserved for
issuance at least
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one hundred and fifty percent (150%) of the
aggregate number of shares of Common Stock
issuable upon conversion of all of the Preferred
Shares to be issued at the Closing (such number to
be determined using the Conversion Price in effect
on the Closing Date); and
5.1.11 each of the Company's executive officers who own
shares of Common Stock shall have executed and
delivered a letter agreement addressed to the
Purchaser regarding such person's agreement to
refrain from selling such person's holdings of
Common Stock for one (1) year from the Closing
Date, PROVIDED that such sales may be made
-------- pursuant to (i) a registered public
offering, (ii) a merger, acquisition or tender
offer that requires or permits such person to
tender such Common Stock, (iii) a strategic
partnership or joint venture which is formed for a
bona fide commercial purpose or (iv) rights
granted to a pledgee of such Common Stock pursuant
to a margin arrangement.
5.1.12 each of the Company's executive officers who owns
shares of Common Stock shall have executed and
delivered a letter agreement addressed to the
Purchaser regarding such person's agreement to
vote such shares in favor of any proposal made at
or in connection with any meeting of the holders
of the Company's Common Stock regarding (i)
approval of the transactions contemplated herein
or (ii) the authorization of additional shares of
Common Stock for issuance upon conversion of the
Preferred Shares; and
5.1.13 the Company shall have notified the Purchaser in
writing of the name, address, telephone number and
fax number of the Transfer Agent (and the name of
a contact person or persons) for the purpose of
delivering Conversion Notices (as defined in the
Certificate of Designation).
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The Company's
obligations at the Closing are conditioned upon the fulfillment (or waiver by
the Company) of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of the
Purchaser shall be true and correct in all
material respects as of such date as if made on
such date;
5.2.2 the Purchaser shall have complied with or
performed all of the agreements, obligations and
conditions set forth in this Agreement that are
required to be complied with or performed by the
Purchaser on or before the Closing; and
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5.2.3 the Purchaser shall have delivered to the Company
a certificate, signed by an officer of the
Purchaser, certifying that the conditions
specified in paragraphs 5.2.1 and 5.2.2 above have
been fulfilled as of the Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
6.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign its
rights and obligations hereunder, in connection with any private sale or
transfer of the Preferred Shares to an affiliate of the Purchaser in accordance
with the terms hereof, as long as, as a condition precedent to such transfer,
the transferee executes an acknowledgment agreeing to be bound by the applicable
provisions of this Agreement, in which case the term "Purchaser" shall be deemed
to refer to such transferee as though such transferee were an original signatory
hereto. The Company may not assign it rights or obligations under this
Agreement.
6.3 NO RELIANCE. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of the other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
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<PAGE>
6.4 INJUNCTIVE RELIEF. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Purchaser
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
6.5 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and construed under the laws of the State of New York without regard
to the conflict of laws provisions thereof. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
6.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.7 HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.8 NOTICES. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely delivery to a nationally-recognized overnight courier and (iii) on
the third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
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IF TO THE COMPANY:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Attn: A. Dale Mayo
Tel: 973-377-4646
Fax: 973-377-4303
WITH A COPY TO:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Janice C. Hartman, Esq.
Tel: 412-355-6500
Fax: 412-355-6501
IF TO THE PURCHASER:
Proprietary Convertible Investment Group, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue, 3rd Floor
New York, New York 10010
Attn: Allan Weine, John McAvoy
Tel: (212) 325-2302
Fax: (212) 325-6519
6.9 EXPENSES. The Company and the Purchaser each shall pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement, PROVIDED, HOWEVER, that the Company
shall reimburse the Purchaser for all out-of-pocket expenses (including without
limitation legal fees and expenses) incurred by it in connection its due
diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of the Certificate of Designation, this
Agreement and the other Transaction Documents in an amount not to exceed twenty
five thousand dollars ($25,000).
6.10 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the Purchaser, and no provision hereof may be waived other than
by a written instrument signed by the party against whom enforcement of any such
waiver is sought.
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<PAGE>
6.11 ADJUSTMENT DUE TO STOCK SPLITS, ETC. Any reference herein
to a number of shares of Common Stock shall be adjusted upwards or downwards, as
the case may be, in the event that (A) the number of outstanding shares of
Common Stock is increased by a stock split, a stock dividend on the Common
Stock, a reclassification of the Common Stock or other similar event, or (B) the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares or other similar event.
Remainder of Page Intentionally Left Blank]
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
CLEARVIEW CINEMA GROUP, INC.
By: __________________________
Name:
Title:
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By: ______________________________
Name:
Title:
20
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of April 23,
1998, by and between Clearview Cinema Group, Inc., a Delaware corporation (the
"COMPANY"), and Proprietary Convertible Investment Group, Inc. (the
"PURCHASER").
The Company has agreed, on the terms and subject to the conditions set
forth in the Securities Purchase Agreement of even date herewith (the
"SECURITIES PURCHASE AGREEMENT"), to issue and sell to the Purchaser shares (the
"PREFERRED SHARES") of the Company's Class C Convertible Preferred Stock, par
value $0.01 per share (the "PREFERRED STOCK"). The Preferred Shares are
convertible pursuant to the Company's Certificate of Designation (the
"CERTIFICATE OF DESIGNATION") into shares (the "CONVERSION SHARES") of the
Company's Common Stock, par value $0.01 per share (the "COMMON STOCK"). In order
to induce the Purchaser to enter into the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and under applicable state
securities laws. Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Securities Purchase Agreement.
In consideration of the Purchaser entering into the Securities Purchase
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings specified:
(a) "FILING DEADLINE" means the earlier to occur of (i) the
twentieth (20th) day following the date on which the Company
completes the distribution of the securities to be sold
pursuant to the High Yield Offering (as defined below) and
(ii) July 15, 1998;
(b) "HIGH YIELD OFFERING" means a distribution of debt
securities conducted by the Company as a registered public
offering or as an offering pursuant to Rule 144A and/or
Regulation S under the Securities Act;
(c) "HOLDER" means any person owning or having the right to
acquire Registrable Securities, including initially the
Purchaser and thereafter any permitted assignee thereof;
(d) "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration
statement or statements in compliance with the Securities Act
and pursuant to Rule 415 under the Securities Act ("RULE 415")
or any successor rule providing for the offering of securities
on a continuous or delayed basis ("REGISTRATION STATEMENT"),
and the declaration or ordering of effectiveness of
<PAGE>
the Registration Statement by the Securities and Exchange
Commission (the "COMMISSION");
(e) "REGISTRABLE SECURITIES" means the Conversion Shares and
the Dividend Payment Shares (as defined in the Certificate of
Designation), and any other shares of Common Stock issuable
pursuant to the terms of the Certificate of Designation or the
Preferred Stock, whether as a dividend, payment of a
redemption price or otherwise, and any shares of capital stock
issued or issuable by the Company from time to time (with any
adjustments) in replacement of, in exchange for or otherwise
in respect of the Conversion Shares or the Dividend Payment
Shares, including without limitation any securities received
by a Holder in connection with an Exchange Transaction (as
defined in the Certificate of Designation); PROVIDED, HOWEVER,
that any such securities shall be deemed to be Registrable
Securities only if and as long as such securities have not
been (A) sold in a public offering or public securities
transaction pursuant to an effective registration statement
under the Securities Act or (B) sold in a transaction exempt
from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect
thereto no longer apply or are removed upon the consummation
of such sale;
(f) "REGISTRATION DEADLINE" means the earlier to occur of (i)
sixtieth (60th) day following the date on which the
Registration Statement is filed by the Company and (ii)
September 15, 1998;
(g) "STANDSTILL PERIOD" means a period during which the
Holder, upon written notice from the Company while the
Registration Statement is effective, will not sell shares of
Common Stock; PROVIDED, HOWEVER, that (i) the Company may
declare a Standstill Period to occur no more than four (4)
times during any period of twelve consecutive months and (ii)
the aggregate number of days included in all Standstill
Periods occurring during any period of twelve consecutive
months may not exceed twenty four (24) days; and
(h) "TRADING DAY" shall have the meaning set forth in the
Certificate of Designation.
2. MANDATORY REGISTRATION.
(a) On or before the Filing Deadline, the Company shall
prepare and file with the Commission a Registration Statement on Form SB-2 as a
"shelf" registration statement under Rule 415 covering the resale of at least
150% of the number of shares of Registrable Securities then issuable on
conversion of the Preferred Shares (such number to be determined using the
Conversion Price in effect on such date). In addition, the Company may elect to
register for resale shares of Common Stock held by other holders. The
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of shares of
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<PAGE>
Common Stock as may be required to effect conversion of the Preferred Shares to
prevent dilution resulting from stock splits, stock dividends or similar events,
or by reason of changes in the Conversion Price in accordance with the terms of
the Certificate of Designation. The plan of distribution included in the
Registration Statement or any amendment or supplement thereto shall include an
underwritten public offering only upon the mutual agreement of the Holder and
the Company. The Company will, as soon as may be practicable following the date
on which the Company becomes eligible to file a registration statement on Form
S-3 (regardless of whether the Registration Statement has theretofore been
declared effective by the Commission), convert the Registration Statement
(whether by post-effective amendment, the filing of a new registration statement
or otherwise) so that documents filed by the Company under the 1934 Act (as
defined below) may be incorporated by reference therein.
(b) The Company shall use its best efforts to cause the
Registration Statement to become effective as soon as practicable following the
filing thereof, but in no event later than the Registration Deadline, and shall
submit to the Commission, within five (5) business days after the Company learns
that no review of the Registration Statement will be made by the staff of the
Commission or that the staff of the Commission has no further comments on the
Registration Statement, as the case may be, a request for acceleration of the
effectiveness of the Registration Statement to a time and date not later than
forty-eight (48) hours after the submission of such request, and maintain the
effectiveness of the Registration Statement until the earlier to occur of (i)
the date on which all of the Registrable Securities have been sold pursuant to
the Registration Statement and (ii) the date on which all of the remaining
Registrable Securities (in the reasonable opinion of counsel to the Purchaser)
may be immediately sold to the public without registration and without regard to
the amount of Registrable Securities which may be sold by a Holder thereof at a
given time (the "REGISTRATION PERIOD").
(c) If (A) the Registration Statement is not filed on or
before the Filing Deadline or declared effective by the Commission on or before
the Registration Deadline, (B) after the Registration Statement has been
declared effective by the Commission, sales of Registrable Securities cannot be
made by a Holder under the Registration Statement for any reason not within the
exclusive control of such Holder (other than such Registrable Securities as are
then freely saleable pursuant to Rule 144(k) under the Securities Act) for any
period of three (3) consecutive Trading Days (other than Trading Days occurring
during a Standstill Period), or (C) the Common Stock is not listed on the
American Stock Exchange, the New York Stock Exchange or the Nasdaq National
Market System or is suspended from trading thereon for a period exceeding one
(1) Business Day (each, a "REGISTRATION EVENT"), the Company shall pay to each
Holder an amount at a rate equal to the lesser of (x) one percent (1%) per month
and (y) the highest rate permitted by applicable law, TIMES the aggregate
Liquidation Preference (as defined in the Certificate of Designation) of the
Preferred Shares held by such Holder, accruing daily and compounded monthly,
from the date on which a Registration Event first occurs until the date on which
the Registration Event is not longer continuing. The amounts paid or payable by
the Company hereunder shall be in addition to any other remedies available to
the Purchaser at law or in equity hereunder or pursuant to the terms of any
other Transaction Document. Payments of cash pursuant hereto shall be made
within five (5) days after the end of each period that gives rise to such
obligation, provided
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<PAGE>
that, if any such period extends for more than thirty (30) days, payments shall
be made at the end of each thirty-day period.
(d) In the event that (A) the Registration Statement is not
declared effective by the twentieth (20th) Business Day following the
Registration Deadline, (B) after the Registration Statement has been declared
effective by the Commission, sales of Registrable Securities cannot be made by a
Holder under the Registration Statement for any reason not within the exclusive
control of such Holder (other than such Registrable Securities as are then
freely saleable pursuant to Rule 144(k) under the Securities Act) for any period
of three (3) consecutive Trading Days (other than Trading Days occurring during
a Standstill Period) or (C) the Common Stock is not listed on the American Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market System or is
suspended from trading thereon for a period exceeding one (1) Business Day
(each, a "REPRICING EVENT"), in addition to any amounts which may be payable
pursuant to paragraph 2(c) above, the Fixed Conversion Price (as defined in the
Certificate of Designation) for any conversion of Preferred Shares occurring
after the date on which a Repricing Event first occurs shall be equal to the
lesser of (i) the lowest reported sale price occurring during the period between
the date on which a Repricing Event first occurs and the date on which such
Repricing Event is no longer continuing and (ii) the Fixed Conversion Price that
would otherwise be in effect on the relevant Conversion Date (as defined in the
Certificate of Designation).
3. PIGGYBACK REGISTRATION.
If at any time prior to the expiration of the Registration
Period, (i) the Company proposes to register shares of Common Stock under the
Securities Act in connection with the public offering of such shares for cash
(other than a registration relating solely to the sale of securities to
participants in a Company stock plan or employee stock award or a registration
on Form S-4 under the Securities Act or any successor or similar form
registering stock issuable upon a reclassification, a business combination
involving an exchange of securities or an exchange offer for securities of the
issuer or another entity) (a "PROPOSED REGISTRATION") and (ii) a registration
statement covering the sale of all of the Registrable Securities is not then
effective and available for sales thereof by the Holders, the Company shall, at
such time, promptly give each Holder written notice of such Proposed
Registration. Each Holder shall have fifteen (15) days from its receipt of such
notice to deliver to the Company a written request specifying the amount of
Registrable Securities that such Holder intends to sell. Upon receipt of such
request, the Company shall use its best efforts to cause all Registrable
Securities which the Company has been requested to register to be included in
the proposed registration; PROVIDED, HOWEVER, that the Company shall have the
right to postpone or withdraw any registration effected pursuant to this Section
3 without obligation to the Holder. If, in connection with any underwritten
public offering for the account of the Company, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the registration statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distributions, then the Company shall be obligated to include
in such registration statement only such limited portion of the Registrable
Securities with respect to which each Holder has requested inclusion hereunder
as such underwriter(s) shall permit. Any exclusion of Registrable Securities
shall be made pro rata
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among the Holders seeking to include Registrable Securities in the registration
statement, in proportion to the number of Registrable Securities sought to be
included by such Holders; provided, however, that the Company shall not exclude
any Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not entitled to inclusion of such
securities in such registration statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata (on the basis of the number of
shares of Common Stock held by or issuable to the Holders) with holders of other
securities having the right to include such securities in the registration
statement relating to an underwritten public offering with respect to which, in
the good faith opinion of the managing underwriter, the inclusion in the
offering of all shares requested to be registered by all persons holding
registration rights would materially jeopardize the successful marketing of the
securities to be sold.
4. OBLIGATIONS OF THE COMPANY.
In addition to performing its obligations hereunder, including those
pursuant to paragraphs 2(a) and 2(b) above, the Company shall:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act or to maintain the effectiveness of the
Registration Statement during the Registration Period, or as may be reasonably
requested by a Holder in order to incorporate information concerning such Holder
or such Holder's intended method of distribution;
(b) in the event that the number of shares available under the
Registration Statement filed by the Company hereunder is insufficient during any
period of three consecutive Trading Days (as defined in the Certificate of
Designation) to cover 150% of the Registrable Securities then issued or
issuable, the Company shall promptly amend the Registration Statement, or file a
new Registration Statement, or both, so as to cover 150% of such Registrable
Securities, in any event as soon as practicable, but not later than the tenth
business day following the last day of such three day period. Any Registration
Statement filed pursuant to this Section 4 shall state that, to the extent
permitted by Rule 416 under the Securities Act, such Registration Statement also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of all outstanding Preferred Shares. Unless and
until such amendment or new Registration Statement becomes effective, each
Holder shall have the rights described in Section 2 above;
(c) secure and maintain the listing of the Registrable
Securities on the American Stock Exchange, the New York Stock Exchange or the
Nasdaq National Market System;
(d) furnish to each Holder such number of copies of the
prospectus included in such Registration Statement, including a preliminary
prospectus, in conformity with the
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requirements of the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the disposition of such Holder's
Registrable Securities;
(e) use all commercially reasonable efforts to register or
qualify the Registrable Securities under the securities or "blue sky" laws of
such jurisdictions within the United States as shall be reasonably requested
from time to time by a Holder, and do any and all other acts or things which may
be necessary or advisable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities in such jurisdictions; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction;
(f) in the event of an underwritten public offering of the
Registrable Securities, enter into and perform its obligations under an
underwriting agreement, in usual and customary form reasonably acceptable to the
Company, with the managing underwriter of such offering;
(g) notify each Holder immediately upon the occurrence of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, contains an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and as promptly as practicable, prepare, file and furnish to each
Holder a reasonable number of copies of a supplement or an amendment to such
prospectus as may be necessary so that such prospectus does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(h) use all commercially reasonable efforts to prevent the
issuance of any stop order or other order suspending the effectiveness of such
Registration Statement and, if such an order is issued, to obtain the withdrawal
thereof at the earliest possible time and to notify each Holder of the issuance
of such order and the resolution thereof;
(i) furnish to each Holder, on the date that such Registration
Statement becomes effective, (x) a letter, dated such date, of outside counsel
representing the Company (and reasonably acceptable to such Holder) addressed to
such Holder, confirming that such counsel has been informed by telephone of the
effectiveness of the Registration Statement and, to the knowledge of such
counsel, the absence of any stop order, and (y) in the case of an underwriting,
(A) an opinion, dated such date, of such outside counsel, in form and substance
as is customarily given to underwriters in an underwritten public offering, and
(B) a letter, dated such date, from the Company's independent certified public
accountants, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters and to each Holder;
(j) provide each Holder and/or its representatives the
opportunity to conduct a reasonable inquiry of the Company's financial and other
records during normal business hours and
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make available its officers, directors and employees for questions regarding
information which such Holder may reasonably request in order to fulfill any due
diligence obligation on its part;
(k) permit counsel for each Holder (at such Holder's expense)
to review such Registration Statement and all amendments and supplements thereto
a reasonable period of time prior to the filing thereof with the Commission; and
(l) declare a Standstill Period to exist only if the Company's
management has determined in good faith that a proposed transaction would render
the prospectus contained in the Registration Statement to be materially
misleading absent the filing of an appropriate supplement thereto (or an
appropriate amendment to the Registration Statement) and deliver written notice
to the Purchaser immediately upon the termination of any Standstill Period.
5. OBLIGATIONS OF EACH HOLDER.
In connection with the registration of the Registrable Securities
pursuant to the Registration Statement, each Holder shall:
(a) furnish to the Company such information regarding itself
and the intended method of disposition of Registrable Securities as the Company
shall reasonably request in order to effect the registration thereof;
(b) upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraphs 4(g) or 4(h),
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement until the filing of an amendment or supplement as
described in paragraph 4(g) or withdrawal of the stop order referred to in
paragraph 4(h);
(c) in the event of an underwritten offering of the
Registrable Securities, enter into a customary and reasonable underwriting
agreement and execute such other documents as the managing underwriter for such
offering may reasonably request;
(d) to the extent required by applicable law, deliver a
prospectus to each purchaser of Registrable Securities; and
(e) notify the Company when it has sold all of the Registrable
Securities theretofore held by it.
6. INDEMNIFICATION.
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company shall
indemnify and hold harmless each Holder, the officers, directors, employees,
agents and representatives of such Holder,
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<PAGE>
and each person, if any, who controls such Holder within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "1934
ACT"), against any losses, claims, damages, liabilities or reasonable
out-of-pocket expenses (whether joint or several) (collectively, including legal
or other expenses reasonably incurred in connection with investigating or
defending same, "LOSSES"), insofar as any such Losses arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in such Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company will reimburse such Holder, and each such officer, director, employee,
agent, representative or controlling person for any legal or other expenses as
reasonably incurred by any such entity or person in connection with
investigating or defending any Loss; provided, however, that the foregoing
indemnity shall not apply to amounts paid in settlement of any Loss if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be obligated to indemnify
any person for any Loss to the extent that such Loss arises out of or is based
upon and in conformity with written information furnished by such person
expressly for use in such Registration Statement; and provided, further, that
the Company shall not be required to indemnify any person to the extent that any
Loss results from such person selling Registrable Securities (i) to a person to
whom there was not sent or given, at or prior to the written confirmation of the
sale of such shares, a copy of the prospectus, as most recently amended or
supplemented, if the Company has previously furnished or made available copies
thereof or (ii) during any period following written notice by the Company to
such Holder of an event described in Section 4(g) or 4(h).
(b) To the extent permitted by law, each Holder, acting
severally and not jointly, shall indemnify and hold harmless the Company, the
officers, directors, employees, agents and representatives of the Company, and
each person, if any, who controls the Company within the meaning of the
Securities Act or the 1934 Act, against any Losses to the extent (and only to
the extent) that any such Losses arise out of or are based upon and in
conformity with written information furnished by such Holder expressly for use
in such Registration Statement; and such Holder will reimburse any legal or
other expenses as reasonably incurred by the Company and any such officer,
director, employee, agent, representative, or controlling person, in connection
with investigating or defending any such Loss; provided, however, that the
foregoing indemnity shall not apply to amounts paid in settlement of any such
Loss if such settlement is effected without the consent of such Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under this subsection 6(b) exceed the net sale price of securities
sold by such Holder under the Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have
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<PAGE>
the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate under applicable standards of
professional conduct due to actual or potential conflicting interests between
such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, to the extent
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6 with respect to such action, but the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 6 or with respect to any
other action.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree, severally
and not jointly, to contribute to the aggregate Losses to which the Company or
such Holder may be subject in such proportion as is appropriate to reflect the
relative fault of the Company and such Holder in connection with the statements
or omissions which resulted in such Losses; provided, however, that in no case
shall such Holder be responsible for any amount in excess of the net purchase
price of securities sold by it under the Registration Statement. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or by such Holder. The
Company and each Holder agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each officer, director, employee, agent or
representative of such Holder shall have the same rights to contribution as such
Holder, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act and each officer, director, employee,
agent or representative of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The obligations of the Company and each Holder under this
Section 6 shall survive the conversion or redemption, if any, of the Preferred
Shares, the completion of any offering of Registrable Securities pursuant to a
Registration Statement under this Agreement, or otherwise.
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7. REPORTS.
With a view to making available to each Holder the benefits of
Rule 144 under the Securities Act ("Rule 144") and any other similar rule or
regulation of the Commission that may at any time permit such Holder to sell
securities of the Company to the public without registration, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act; and
(c) furnish to such Holder, so long as such Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the Securities Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents filed by
the Company with the Commission, and (iii) such other information as may be
reasonably requested in availing such Holder of any rule or regulation of the
Commission which permits the selling of any such securities without
registration.
8. MISCELLANEOUS.
(a) EXPENSES OF REGISTRATION. All expenses, other than
underwriting discounts and commissions and fees and expenses of counsel to each
Holder, incurred in connection with the registrations, filings or qualifications
described herein, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, the fees and disbursements of
counsel for the Company, and the fees and disbursements incurred in connection
with the opinion and letter described in paragraph 4(i) hereof, shall be borne
by the Company.
(b) AMENDMENT; WAIVER. Any provision of this Agreement may be
amended only pursuant to a written instrument executed by the Company and the
Holder. of at least two thirds (2/3) of the outstanding Registrable Securities
or, if no Registrable Securities are outstanding, the Holder of the outstanding
Preferred Shares. Any waiver of the provisions of this Agreement may be made
only pursuant to a written instrument executed by the party against whom
enforcement is sought. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Holder, each future Holder, and the
Company. The failure of any party to exercise any right or remedy under this
Agreement or otherwise, or the delay by any party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) NOTICES. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not
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a business day, on the next succeeding business day, (ii) on the next business
day after timely delivery to a nationally-recognized overnight courier and (iii)
on the third business day after deposit in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed to the
parties as follows:
IF TO THE COMPANY:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Attn: A. Dale Mayo
Tel: 973-377-4646
Fax: 973-377-4303
WITH A COPY TO:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: Janice C. Hartman, Esq.
Tel: 412-355-6500
Fax: 412-355-6501
IF TO THE PURCHASER:
Proprietary Convertible Investment Group, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue, 3rd Floor
New York, New York 10010
Attn: Allan Weine, John McAvoy
Tel: (212) 325-2302
Fax: (212) 325-6519
and if to any Holder other than the Purchaser, to such address as shall be
designated by such Holder in writing to the Company.
(d) TERMINATION. This Agreement shall terminate on the earlier
to occur of (a) the end of the Registration Period and (b) the date on which all
of the Registrable Securities have been publicly distributed; but any such
termination shall be without prejudice to (i) the parties' rights and
obligations arising from breaches of this Agreement occurring prior to such
termination and (ii) the indemnification and contribution obligations under this
Agreement.
(e) ASSIGNMENT. The rights of a Holder hereunder shall be
assigned automatically to any transferee of the Preferred Shares or Registrable
Securities from such Holder as long as: (i)
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the Company is, within a reasonable period of time following such transfer,
furnished with written notice of the name and address of such transferee, (ii)
the transferee agrees in writing with the Company to be bound by all of the
provisions hereof and (iii) such transfer is made in accordance with the
applicable requirements of the Securities Purchase Agreement.
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same instrument. This Agreement, once
executed by a party, may be delivered to any other party hereto by facsimile
transmission.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of laws provisions thereof.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.
CLEARVIEW CINEMA GROUP, INC.
By: __________________________
Name:
Title:
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By: ______________________________
Name:
Title:
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