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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-13187
Clearview Cinema Group, Inc.
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(Name of small business issuer in its charter)
Delaware 22-3338356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
97 Main Street, Chatham, New Jersey 07928
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (973) 377-4646
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value American Stock Exchange
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Securities registered under Section 12(g) of the Exchange Act:
None
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No .
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's
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knowledge, in definitive proxy or information statements incorporated by
reference in Part III of the Form 10-KSB or any amendment to this
Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $17,261,977.
The aggregate market value of the voting and nonvoting common equity of
the issuer held by non-affiliates computed by reference to the price at which
the common equity was sold as of March 23, 1998 was: $20,140,610.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,227,879 shares of Common
Stock, $.01 par value, as of March 23, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement for the Annual
Stockholders' Meeting to be held June 11, 1998 are incorporated by reference
into Part III hereof.
Transitional Small Business Disclosure Form (check one):
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Clearview Cinema Group, Inc. ("Clearview" or the "Company") is a major
regional motion picture exhibitor that operates community-based multiplex
theaters primarily located in affluent suburban communities in the New York/New
Jersey metropolitan area. As of March 23, 1998, the Company operated 37 theaters
with a total of 169 screens. The Company's theaters offer a mix of first-run
commercial, art and family-oriented films designed to appeal primarily to
sophisticated moviegoers and families with younger children.
The Company was incorporated on November 23, 1994 and acquired the
leaseholds of four theaters with eight screens on December 21, 1997. During
1997, Clearview completed 14 acquisition transactions, added a total of six
screens to acquired theaters, and constructed a five screen theater in an
existing building. From December 31, 1994 through March 23, 1998, the number of
Clearview theaters has increased from four to 37 and the number of Clearview
screens has increased from eight to 169. See "Item 2. Properties" for a
description of the acquired theaters.
During the past ten years, overall movie theater attendance in the
United States has remained relatively stable. Admissions revenues increased from
a total of approximately $3.8 billion in 1986 to approximately $5.9 billion in
1996, or a compound annual growth rate of 4.5%. The theatrical exhibition
industry is fragmented. Although the eleven largest theater circuits operated
approximately 60% of the screens at May 1, 1997, 268 of the approximately 478
remaining exhibitors operated four or fewer screens.
The multiplex theater was introduced to the moviegoing public in the
1960's and multiplexing is now considered the industry standard. The advantages
of a multiplex theatrical format include the following: (i) the ability to play
a range of movies to fit the various tastes of the moviegoing public; (ii) the
ability to accommodate the expected size of the audience for a particular movie;
(iii) the ability to run a popular movie for a longer period of time and to
exhibit newer films immediately upon their release; and (iv) the ability to show
a single film in two auditoriums simultaneously, thereby effectively increasing
the viewing capacity for a popular film.
The major movie theater circuits appear to be focused for the most part
on acquiring, upgrading and developing larger multiplex theaters and megaplex
complexes (theaters with more than 16 screens) at urban and highway locations.
Independent movie theater operators with one or a few locations can find it
difficult to compete with the larger circuits. Both of these categories of
theater operations offer opportunities for the Company to acquire
community-based theaters in the affluent suburban communities in the New
York/New Jersey metropolitan area that are its target markets.
The Company was incorporated in Delaware in 1994. The Company's
principal executive offices are located at 97 Main Street, Chatham, New Jersey
07928.
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BUSINESS STRATEGY
The Company's strategy is to become a preeminent regional motion
picture exhibitor operating multiplex theaters based on strict operating
controls, principally at in-town locations or otherwise in retail centers that
are the focus of community life. The Company continues to implement this
strategy by pursuing the following objectives:
Pursue Niche, Community-based Strategy. The Company believes that, in
the Middle Atlantic and New England states, theaters located in town or
otherwise in community-based retail centers serve audiences that prefer these
theaters to the larger out-of-town multiplex and megaplex theaters that appear
to be the focus of the major theater circuits. Many of the Company's target
markets are in densely populated areas consisting of numerous small
municipalities with local business districts that are well-suited to the
Company's strategy of operating community-based theaters. In many of these areas
it can be difficult for theater circuit operators to identify suitable locations
to build or expand theaters into large multiplexes or megaplexes. By
concurrently showing first run commercial, art and family-oriented films, the
Company seeks to appeal to three main groups in affluent suburban communities:
families with younger children (10 years of age and younger), baby boomers
and older moviegoers. Because of its community-based focus, Clearview can
adjust its mix of films based on sensitivity to the tastes of the audiences
in each community. Also as part of its community-based strategy, Clearview
encourages community involvement through regular participation in local
fundraising and charity functions.
Consolidate Regional Focus. The Company seeks to continue to acquire or
develop theaters in communities that are close to the communities where the
Company's existing theaters are located, and to acquire or develop similar
clusters of theaters in other affluent suburban locations in the New York/New
Jersey metropolitan area. This strategy enables theaters to share skilled
personnel and for the appropriate district manager to coordinate the theaters'
activities. Also, with a large number of screens in an area, the Company can
operate a number of separate theaters as if they were a single larger multiplex,
enabling the Company to offer a wide selection of films, play successful films
longer and play films with very strong demand on a number of screens. In the
eight counties of Northern New Jersey where the Company has theaters, the
Company currently operates approximately 26.6% of the screens overall, with
Sony/Loews Theater Exhibition Group having approximately 23.9% of the screens
(30.7% after its pending merger with Cineplex Odeon Corporation). Independent
theaters operated individually or as part of a small group account for
approximately 28.5% of the screens in these markets. The Company seeks theaters
that will be the sole or dominant exhibitors in their geographic film licensing
zones. A geographic film licensing zone or "film zone" is a geographic area,
recognized by film distributors, that generally has a three-to-five mile radius
in metropolitan and suburban markets, in which a film is licensed for exhibition
at only one theater in that film zone. Currently, 69.4% of the Company's
theaters are the sole exhibitors in their film zones, and an additional 16.6%
are the dominant exhibitors in their film zones.
Operate Clean, Modern Theaters which Appeal to Targeted Customer Base.
The Company's theaters generally are multiplexes with fewer than eight screens
located in towns and
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communities rather than in shopping malls or on highways. Each of the Company's
theaters has at least one auditorium equipped with digital sound. Most locations
are surrounded by stores and restaurants, with nearby parking available. An
important aspect of Clearview's operating strategy is to provide a clean,
comfortable and visually appealing environment, which usually includes silk
flower arrangements, chandeliers and a decorative fireplace. When Clearview
acquires a theater it typically refurbishes the existing seats and equips them
with cup holders. In addition, Clearview will generally redecorate the lobby,
upgrade the concession stand, provide a courtesy phone so that patrons can make
local telephone calls and selectively add digital sound. The concession stand at
each theater offers high-margin snack and food items, such as fruit juice,
bottled water, ice cream, cappuccino and Swiss chocolates, as well as soft
drinks, popcorn and an assortment of candy items. The Company mandates an
extensive set of procedures to keep its theaters clean and to ensure proper film
presentation. Adherence to employee dress and appearance codes and to specific
rules of behavior is also required of all its theater employees.
Maintain Cost Controls and Pursue Margin Enhancement. The Company seeks
to improve the operating margins of its theaters by controlling theater-level
costs through centralized management, by increased efficiencies in concession
purchasing, by increasing other sources of theater revenues and through film
selection that appeals to Clearview's target audiences but results in relatively
low aggregate film rental costs as a percentage of box office receipts.
Centralized Management
The Company has developed sophisticated operational controls and
installed a computerized management information system of the type used by some
of the largest movie circuits to control and account for all aspects of
day-to-day operations. Clearview believes that its operational controls and
management information system enable it to expand the number of locations and
screens in its circuit without a proportionate increase in general and
administrative expenses. The Company can closely track and manage box office and
concession revenues. The management information system has on-line capabilities
to collect information concerning box office receipts, ticketing, concession
sales, inventory control and booking.
Focus on Margin Enhancement
The Company also seeks to enhance operating margins by actively working
to increase per patron concession sales, to consolidate concession purchases and
to provide theater- and district-level incentive programs designed to improve
operating margins. In 1998, the Company began implementing community programs
to generate additional theater revenues and expand on-screen advertising.
Film Mix
In addition to first run commercial and family-oriented features, the
Company's mix of films typically includes first run art films that appeal to
sophisticated moviegoers, and have rental fees beginning at significantly lower
percentages of box office receipts. This film mix results in relatively low
aggregate film costs for the Company as a percentage of its total box office
receipts.
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Pursue Balanced Growth Through Acquisition, Expansion and Development
The Company intends to continue its program of acquiring and expanding theaters
in its existing and target markets, and to develop new theaters
opportunistically to fill in markets where it operates or in municipalities
which offer the Company financially attractive terms as part of revitalization
initiatives.
Selectively Acquire Theater Operations
The Company believes that one of its strengths is its ability to
successfully identify available theaters in appropriate locations. A significant
number of theaters in the types of communities in which Clearview would want to
operate a theater are closely-held businesses that often either (i) do not have
sufficient capital to expand or renovate or (ii) are not managed as efficiently
as possible. In addition, many of the major movie theater circuits appear to be
focused on acquiring, upgrading and developing larger multiplex theaters and
megaplex complexes. As a result, both of these categories of theater operators
offer opportunities for the Company to acquire community-based theaters in the
affluent suburban communities in the New York/New Jersey metropolitan area that
are its target markets. The Company also will consider opportunities to acquire
clusters of theaters in affluent suburban communities in other Middle Atlantic
and New England states.
Add Screens to Existing Theaters
The Company plans to add screens to existing theaters when the Company
believes that this will increase revenues and cash flow. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Dividing an auditorium into two or more smaller auditoriums creates
an opportunity to increase revenue with only a marginal increase in expenses.
Develop New Theaters
The Company believes that it can successfully identify locations in
suitable communities that can be developed into theaters. Opportunities have
been presented by real estate developers who wish to enhance their properties
with the presence of a movie theater. Such opportunities often would require
limited direct investment by the Company. In addition, Clearview has been
approached by the governments or community development agencies of towns in the
New York/New Jersey metropolitan area that are interested in revitalizing parts
of their communities and believe that a movie theater could provide an impetus
to such redevelopment.
In order to fund its plans for continued growth, the Company will
require additional debt financing, which it is currently seeking, and may need
to seek additional equity financing. Failure to obtain any such financing could
require the Company to significantly curtail its acquisition activities and
reduce its planned capital expenditures.
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FILM LICENSING
The Company licenses films from distributors on a film-by-film and
theater-by-theater basis. Prior to negotiating for film licenses, senior
management of Clearview evaluates the prospects for upcoming films using many
factors, including cast, director, plot, performance of similar films, estimated
film rental costs and expected Motion Picture Association of America rating.
Clearview's success when licensing particular films depends in large part upon
its knowledge of trends and the historical film preferences of the residents in
the markets served by its theaters, as well as on the availability of motion
pictures that the Company believes will be successful in those markets.
Films are licensed from either film distributors owned by major film
production companies or from independent film distributors that generally
distribute films for smaller production companies for exhibition at only one
theater in a particular film licensing zone. Film distributors typically
recognize geographic film licensing zones with radii of three to five miles in
metropolitan and suburban markets, depending primarily on population density. Of
Clearview's current theaters, 69.4% are the sole exhibitors in their film zones,
permitting the Company to choose which films it wishes to exhibit at these
theaters, and an additional 16.6% are the dominant exhibitors in their film
zones.
In film zones where Clearview is the sole exhibitor, a film license is
generally obtained by Clearview after selecting a film from among those offered
and negotiating directly with its distributor. In film zones where there are
multiple exhibitors, a distributor will either require the exhibitors in the
film zone to bid for a film or will allocate films among the exhibitors in the
film zone. When films are licensed under the allocation process, a distributor
will choose which exhibitor is to be offered a movie and then that exhibitor
will negotiate film rental terms directly with that distributor. Over the past
several years, distributors have almost exclusively used the allocation process
rather than the bidding process to license their films in the New York/New
Jersey metropolitan area. When films are licensed through a bidding process,
exhibitors compete for licenses based upon the film rental fees to be paid. The
Company currently does not bid for films in any of its film zones, although it
may be required to do so in the future.
Clearview predominantly licenses "first run" films. If the Company
believes that a film has substantial remaining potential following its first
run, it may license that film for a "second run." Second runs enable Clearview
to exhibit a variety of films during periods in which there are few new releases
and to offer its target audience an opportunity to see a film that did not fit
into Clearview's first run schedule. Film distributors establish second run
availability on a national or market-by-market basis after a film's release from
first run theaters and generally permit each theater within a market to exhibit
that film.
Each film license typically specifies that the rental fee is based on
either a gross box office receipts formula or a theater admissions revenue
formula, depending upon which one results in the larger amount. In addition, if
a distributor deems a film to be extremely promising, exhibitors may be required
to pay non-refundable guarantees of film rental fees or to make refundable
advance payments of film rental fees or both in order to obtain a license for
that film. Under a gross box
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office receipts formula, the distributor receives a specified percentage of box
office receipts from the licensed film, with the percentage declining over the
term of the film run. First run commercial and family-oriented film rental fees
typically begin at approximately 70% to 50% of box office receipts for the
licensed film in the first week (depending on the type of film and its
distributor) and gradually decline, over a period of four to seven weeks,
to as low as 30% of box office receipts. First run art film rental fees and
second run commercial and family-oriented film rental fees typically begin at
35% to 40% of box office receipts for the licensed film and often decline to
30% to 35% of box office receipts after the first week. Under a theater
admissions revenue formula (commonly known as a "90/10" clause), the distributor
receives a specified percentage (i.e., 90%) of the excess of box office receipts
for a given film over a negotiated allowance for theater overhead expenses.
Although generally not specifically contemplated by the provisions of film
licenses, the terms of a film license often are adjusted or renegotiated
subsequent to the initial release of the film.
The Company's business is dependent upon the availability of marketable
first run commercial, family-oriented and art motion pictures and its
relationships with distributors. Many distributors provide first run movies to
the motion picture exhibition industry; however, distribution has been
historically dominated by a limited number of distributors (Warner Brothers,
Paramount, 20th Century Fox, Universal, Disney/Touchstone, MGM/UA and
Columbia/Tri-Star) which, since 1989, have typically accounted for well over 75%
of domestic admission revenues and virtually every one of the top 25 grossing
films in a given year. No single major distributor dominates the market.
Disruption in the production of motion pictures by the major studios and/or
independent producers, poor commercial success of motion pictures or poor
relationships with distributors could have a material adverse effect upon the
Company's business and results of operations.
The Company licenses films from each of the major distributors and
believes that it has good relationships with these distributors that result
in favorable terms and which should continue in the future. The Company
also licenses films from independent film distributors on a consistent basis.
Because these distributors often have difficulty licensing films at theaters
that are well-maintained and technologically up-to-date, these distributors have
cooperated with the Company when it seeks to move prints, modify the length of a
film's run or change a film's rent. From year to year, the box office revenues
of the Company attributable to individual distributors will vary depending upon
the films they distribute. Set forth below are the top fifteen distributors for
the Company for 1996 and 1997, ranked by the number of films shown.
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DISTRIBUTORS RANKED BY NUMBER OF FILMS EXHIBITED
<TABLE>
<CAPTION>
1996 1997
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NAME # OF FILMS NAME # OF FILMS
- ---- ---------- ---- ----------
<S> <C> <C> <C>
Buena Vista 31 Buena Vista 29
Sony 22 Sony 27
Warner Brothers 21 Warner Brothers 25
Miramax 20 Miramax 18
Paramount 17 Paramount 22
20th Century Fox 16 20th Century Fox 21
MCA/Universal 15 MCA/Universal 11
MGM/UA 13 MGM/UA 7
New Line 9 New Line 14
Gramercy 6 Gramercy 6
Fine Line 4 Fine Line 3
Orion 4 Orion 3
Samuel Goldwyn 4 Samuel Goldwyn 0
Sony Classic 4 Sony Classic 5
October 3 October 5
Dreamworld 3
Fox Search Light 4
</TABLE>
INDUSTRY OVERVIEW
Theatrical exhibition is the primary distribution channel for new
motion picture releases. The Company believes that the successful theatrical
release of a movie abroad and in "downstream" distribution channels, such as
home video and pay-per-view, network, syndicated and satellite television, is
largely dependent on its successful theatrical release in the United States. The
Company further believes that the emergence of new motion picture distribution
channels has not adversely affected attendance at theaters and that these
distribution channels do not provide an experience comparable to the out-of-home
experience of viewing a movie in a theater. The Company believes that the public
will continue to recognize the advantages of viewing a movie on a large screen
with superior audio and visual quality, while enjoying a variety of concessions
and sharing the experience with a large audience. In addition, when compared
with other forms of entertainment, such as many sporting events and cultural
events, movies remain one of the best entertainment values for families.
The theatrical exhibition industry is fragmented. Although the eleven
largest theater circuits operated approximately 60% of the screens at May 1,
1997, 268 of the remaining approximately 478 exhibitors operated four or fewer
screens. From 1986 through 1996 the net number of indoor screens increased from
approximately 19,600 to approximately 28,900.
The multiplex theater was introduced to the moviegoing public in the
1960's and multiplexing is now considered the industry standard. The advantages
of a multiplex theatrical format include the following: (i) the ability to play
a range of movies to fit the various tastes of the moviegoing public; (ii) the
ability to accommodate the expected size of the audience for a particular movie;
(iii) the ability to run a popular movie for a longer period of time and to
exhibit newer films immediately upon their release; and (iv) the ability to show
a single film in two
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auditoriums simultaneously, thereby effectively increasing the viewing capacity
for a popular film. The major movie theater circuits appear to be focused for
the most part on acquiring, upgrading and developing larger multiplex theaters
and megaplex complexes (theaters with more than 16 screens) at urban and highway
locations.
Revenues for the theatrical exhibition industry are a function of
theater attendance, ticket prices, trends in movie releases and concession
sales. According to data released by the Motion Picture Association of America,
overall movie theater attendance in the United States over the ten-year period
from 1986 to 1996 has remained relatively stable. The Company believes that the
primary reason for variances in year-to-year attendance is the overall audience
appeal of the films released and to a lesser extent general economic conditions.
Admissions revenues increased from a total of approximately $3.8 billion in 1986
to approximately $5.9 billion in 1996, or a compound growth rate of 4.5%. Over
the same period, the average ticket price increased at a compound annual growth
rate of approximately 1.8%, whereas the U. S. Consumer Price Index increased at
a compound annual growth rate of approximately 3.7%. The following table
represents the results of a survey by the Motion Picture Association of America
outlining the historical trends in U. S. theater attendance, average ticket
prices and box office sales for the last ten years.
<TABLE>
<CAPTION>
Year Attendance (Millions) Average Ticket Price U.S. Box Office Sales (Billions)
- ---- --------------------- -------------------- --------------------------------
<C> <C> <C> <C>
1986 1,020 $3.71 $3.78
1987 1,090 3.91 4.25
1988 1,080 4.11 4.46
1989 1,260 3.99 5.03
1990 1,189 4.23 5.02
1991 1,141 4.21 4.80
1992 1,173 4.15 4.87
1993 1,244 4.14 5.15
1994 1,292 4.18 5.40
1995 1,263 4.35 5.49
1996 1,339 4.42 5.91
</TABLE>
From 1986 to 1996 the number of movies released remained relatively
constant, and the Company expects that trend to continue, with some annual
variability. The Company also believes that movies generally are being released
to a wider number of screens as studios seek to recover higher costs.
Historically, the motion picture industry was somewhat seasonal, as major film
distributors generally released the films expected to have the greatest
commercial appeal during the summer and Thanksgiving through year-end holiday
season. The seasonality of motion picture exhibition has become less pronounced
in recent years as studios have begun to release major motion pictures somewhat
more evenly throughout the year.
COMPETITION
The motion picture exhibition industry is highly competitive,
particularly with respect to licensing films, attracting patrons and acquiring
or developing theaters to operate. The Company's theaters compete with theaters
operated by national and regional circuits and by smaller independent
exhibitors. The Company believes that the principal competitive factors with
respect to film licensing include licensing terms, the seating capacity,
location and reputation of an
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exhibitor's theaters, the quality of projection and sound equipment at an
exhibitor's theaters and an exhibitor's ability and willingness to promote
films. Competition for patrons is dependent upon factors such as the
availability of popular films, the location of theaters, the comfort and quality
of theaters and ticket prices. The Company believes that it competes favorably
with respect to each of these factors.
There were approximately 489 domestic motion picture exhibitors as of
May 1, 1997. Motion picture exhibitors vary substantially in size, from small
independent operators of single-screen theaters to large national chains of
multi-screen theaters. Many of the Company's larger competitors have been in
existence significantly longer than the Company and may be better established in
the markets where the Company's theaters are or may, in the future, be located.
Certain of the Company's larger competitors have sought to increase the number
of theaters and screens in operation in particular markets. Such increases may
cause those markets or portions thereof to become overscreened, which could
negatively impact the earnings of the Company's theaters, if any, in those
markets.
The Company analyzes the level of competition in a geographic area
prior to and in the early stages of the negotiation of any acquisition or
development of a theater. This analysis is crucial, as many of the Company's
potential theater locations are in well-established communities that have
previously experienced the building of large out-of-town multiplexes and the
addition of screens to in-town theaters.
The Company's theaters also face competition from a number of other
motion picture delivery systems, such as cable television, direct satellite
delivery, video cassettes and pay-per-view television. The impact of such
delivery systems on the motion picture exhibition industry is difficult to
determine precisely, and there can be no assurance that existing or future
delivery systems will not have an adverse impact on attendance at movie
theaters. The Company believes that the public will continue to recognize the
advantages of viewing a movie on a large screen with superior audio-visual
quality as a shared experience in a public forum and that alternative delivery
systems do not provide an experience comparable to the out-of-home entertainment
experience of attending a movie in a theater. The Company believes that movie
theaters also face competition from other forms of outside-the-home
entertainment that compete for the public's leisure time and disposable income.
Clearview believes that movie exhibition is priced competitively relative to
other out-of-home entertainment options, such as music concerts, sporting events
and live theater.
EMPLOYEES
As of March 16, 1998, the Company had 772 employees, of whom 14 work at
the corporate headquarters, 6 are district managers, 12 are salaried theater
managers and projectionists and 740 are hourly employees. Clearview employs one
primary manager and one or more relief managers at each of its theaters. In most
of its theaters, each shift (which is five to six hours) has a manager and a
projectionist or a single manager/projectionist. Generally, the theater manager
serves as the projectionist if the applicable theater has four or fewer screens.
In the larger theaters there are separate managers and projectionists. In
addition, the Company's
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six district managers, each of whom also manages a theater within his district,
have certain supervisory obligations. The Company has entered into an agreement
with the International Alliance of Theatrical Stage Employees union that
provides for a skilled projectionist for every shift at a substantial number of
its theaters. The Company believes that it has a positive working relationship
with the union.
REGULATORY ENVIRONMENT
The distribution of motion pictures is in large part regulated by
federal and state antitrust laws and has been the subject of numerous antitrust
cases. The Company has never been a party to any of such cases or the resulting
decrees, but its licensing operations are subject to those decrees. The consent
decrees resulting from such cases bind certain major motion picture distributors
and require the films of those distributors to be offered and licensed to
exhibitors, including the Company, on a film-by-film and theater-by-theater
basis. Consequently, exhibitors, such as the Company, cannot assure themselves
of a supply of films by entering into long-term arrangements with major
distributors, but must negotiate for licenses on a film-by-film and
theater-by-theater basis.
The Federal Americans With Disabilities Act (the "Disabilities Act")
prohibits discrimination on the basis of disability in public accommodations and
employment. The Disabilities Act became effective as to public accommodations in
January 1992 and as to employment in July 1992. The Company will have new
theaters constructed to be accessible to the disabled and believes that it is
otherwise in substantial compliance with all current applicable regulations
relating to accommodations for the disabled. The Company intends to comply with
any future regulations relating to accommodating the needs of the disabled, and
the Company does not currently anticipate that such compliance will require the
Company to expend substantial funds.
The Company's theater operations are also subject to federal, state and
local laws governing such matters as wages and working conditions, health and
sanitation requirements and licensing. A significant portion of the Company's
employees are paid just above the federal minimum wage and, accordingly, further
increases in that minimum wage could increase the Company's labor costs.
In connection with the construction, renovation and operation of its
theaters, the Company and its contractors and landlords are required to obtain
proper building and operating permits and to comply with the other requirements
of local zoning and other laws and regulations. The Company does not anticipate
that compliance with such laws and regulations will have a material adverse
effect on its business.
* * *
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CAUTIONARY STATEMENTS
This report on Form 10-KSB includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All
statements other than statements of historical facts included in this report,
including, without limitation, the statements under "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
located elsewhere herein regarding industry prospects, the Company's prospects
and the Company's financial position are forward-looking statements. Although
the Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations ("Cautionary Statements") are
disclosed in this report, including, without limitation, in conjunction with the
forward-looking statements set forth below. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
LIMITED OPERATING HISTORY AND RESULTS
The Company was incorporated on November 23, 1994 and acquired the
leaseholds of four theaters with eight screens on December 21, 1994. The
Company, which was organized as a vehicle to acquire theaters, acquired the
leaseholds of 25 additional theaters and acquired 7 theaters together with
their underlying real estate since its initial acquisition and has 169 screens
in operation as of March 23, 1998. Therefore, the Company has a limited combined
operating history. In addition, the Company incurred net losses of $216,316,
$218,328 and $1,328,938 in 1995, 1996 and 1997, respectively. There can be
no assurances that the Company will have net income in the near future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, including the notes
thereto, appearing elsewhere in this report.
EXPANSION PLANS
The Company's strategy is to acquire or develop theaters at a rapid
pace and add screens in its theaters where appropriate. The Company's ability to
implement its expansion plans will depend on a number of factors, including
obtaining any required financing, the selection and availability of suitable
locations, the hiring and training of sufficiently skilled management and other
personnel and other factors, such as general economic and demographic
conditions, that are beyond the control of the Company. There can be no
assurances that the Company will be able to execute this strategy at its
contemplated pace or to operate profitably the theaters that it acquires or
develops. See "Business--Business Strategy."
NEED FOR ADDITIONAL FINANCING
In accordance with the Company's strategic plan, Clearview intends to
continue to acquire theaters and it is pursuing the acquisition of additional
locations. However, in order to fund its
13
<PAGE> 14
plans for continued growth, the Company will require additional debt financing,
which it is currently seeking, and may need to seek additional equity financing.
Failure to obtain any such financing could require the Company to significantly
curtail its acquisition activities and reduce its planned capital expenditures
and could have a material adverse effect on the Company's ability to achieve its
business strategy.
The Company's estimates of its cash requirements to develop or acquire
and renovate theaters and service any debts incurred in connection with such
development or acquisition and renovation are and will be based upon certain
assumptions, including assumptions as to the Company's revenues and cash flows
after any such acquisition or development. There can be no assurances that such
assumptions will prove to be accurate or that unforeseen costs will not be
incurred.
DEPENDENCE ON ABILITY TO SECURE FAVORABLE LOCATIONS AND LEASE TERMS
The success of the Company's strategic plan is dependent on its ability
to acquire or develop theaters in favorable locations with advantageous lease
terms. There can be no assurances that the Company will be able to locate or
develop theaters in appropriate communities or, if it does locate any such
theaters, lease them on favorable terms. The failure of the Company to acquire
or develop theaters in favorable locations or to lease theaters on advantageous
terms could result in an inability to fully implement its strategic plan. See
"Business--Business Strategy."
POSSIBLE RISKS IN THEATER DEVELOPMENT AND RENOVATION
In connection with the development of new theaters, the Company either
will enter into an agreement with the property owner/developer who will oversee
almost all of the construction and completion of a theater or will oversee that
construction and completion itself. When acquiring the right to operate an
existing theater (either by entering into a lease or purchasing the theater and
its underlying real estate), the Company generally will take responsibility for
the completion of any proposed renovations or the construction of new screens.
As a result, the Company will, at times, be subject to some of the risks
inherent in the development of real estate, many of which are beyond its
control. Such risks include changes in federal, state or local laws or
regulations, strikes, adverse weather, material shortages and increases in the
costs of labor and materials. There can be no assurances that any such theater
development or renovation will be successfully completed in a timely manner.
DEPENDENCE ON PRESIDENT AND CHIEF EXECUTIVE OFFICER
The Company's success depends upon the continued contributions of A.
Dale Mayo, its Chairman of the Board, President and Chief Executive Officer. The
loss or unavailability of Mr. Mayo to the Company for an extended period of time
could have a material adverse effect upon the Company's business and
development. To the extent that the services of Mr. Mayo are unavailable to the
Company for any reason, the Company will be required to hire other personnel to
manage and operate the Company. There can be no assurances that the Company will
be able
14
<PAGE> 15
to locate qualified personnel to manage and operate the Company or to employ
them on acceptable terms. The Company has entered into an employment agreement
with Mr. Mayo that provides for his employment through 2003. In addition, the
Company maintains key man life insurance in the amount of $2.5 million on the
life of Mr. Mayo.
GEOGRAPHIC CONCENTRATION
Each of the Company's current theaters is located in the New York/New
Jersey metropolitan area and the theaters that it has agreed to or is
contemplating acquiring or developing are principally in the same area. As a
result, negative economic or demographic changes in that area would have a
disproportionately large and adverse effect on the success of the Company's
operations when compared to the effect of any such changes on its competitors
that have a wider geographic distribution of theaters.
COMPETITION
The motion picture exhibition industry is highly competitive,
particularly with respect to licensing films, attracting patrons and finding
theater sites. There are a number of well-established theater circuits with
substantially greater financial and other resources than the Company that
operate in the New York/New Jersey metropolitan area and in the Middle Atlantic
and New England states generally. Some of these theater operators have been in
existence significantly longer than the Company and may be better established in
the Company's markets and better capitalized. Moreover, alternative delivery
systems are available for the presentation of filmed entertainment, including
cable television, direct satellite delivery, video cassettes and pay-per-view
television. An expansion of such delivery systems could have a material adverse
effect on movie theater attendance in general and upon the Company's business
and results of operations in particular. See "Business--Industry Overview" and
"--Competition."
DEPENDENCE ON FILMS
The ability of the Company to operate successfully depends upon a
number of factors, the most important of which is the availability of marketable
motion pictures. Poor relationships with film distributors, a disruption in the
production of motion pictures or poor commercial success for motion pictures
could have a material adverse effect upon the Company. See "Business--Film
Licensing."
DEPENDENCE ON CONCESSION SALES
Concession sales accounted for approximately 23% of the Company's
revenues in each of the years ended December 31, 1996 and 1997. Accordingly, the
financial success of the Company depends, to a significant extent, on its
ability to successfully generate concession sales in the future.
15
<PAGE> 16
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
Generally, the most marketable motion pictures have been released
during the summer and the Thanksgiving through year-end holiday season. Thus,
the motion picture exhibition industry's revenues have been seasonal. The
emergence of hit films during other periods can alter this traditional trend. In
addition, the seasonality of motion picture exhibition has become less
pronounced in recent years as studios have begun to release major motion
pictures somewhat more evenly throughout the year. In any case, the timing of
releases is likely to have a substantial effect on the Company's results of
operations and the results for any one quarter are not necessarily indicative of
results of operations for subsequent quarters. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results and
Seasonality."
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
Clearview is a holding company with no business operations of its own.
Clearview's only significant assets are the outstanding capital stock of its
subsidiaries. Clearview conducts all its business operations through its
subsidiaries. There can be no assurance that Clearview's subsidiaries will
generate sufficient cash flow to meet the Company's obligations. Furthermore,
the terms of the Senior Credit Facility place restrictions on the subsidiaries'
ability to pay dividends or to make distributions, and in any event, such
dividend or distributions may only be paid if no default has occurred under the
Senior Credit Facility. See "--Substantial Leverage; Restrictions Imposed by the
Terms of the Company's Indebtedness" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
* * *
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information as of March 23, 1998 concerning
the Company's executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
A. Dale Mayo 56 Chairman of the Board, President, Chief Executive Officer
and Director
Paul Kay 57 Senior Vice President - Operations
Craig L. Zeltner 47 Vice President - Film and President - Cinema Services
Division
Sueanne Hall Mayo 51 Vice President - Management Information Systems and
Assistant Secretary
Joan M. Romine 46 Treasurer and Chief Financial Officer
Robert D. Lister 29 General Counsel and Secretary
</TABLE>
16
<PAGE> 17
A. DALE MAYO has been the Chairman of the Board, President and Chief
Executive Officer and a director of the Company since its incorporation. He was
the president of Clearview Cinema Corp. from 1987 to 1993. Mr. Mayo is a member
of the Foundation of Motion Picture Pioneers and the Motion Picture Club. He is
married to Sueanne Hall Mayo. Mr. Mayo is a Class III Common Director, with a
term expiring in 2000.
PAUL KAY was appointed Senior Vice President-Operations on February 23,
1998 and had been the Vice President - Operations of the Company since its
incorporation. He was the vice president and general manager of Clearview Cinema
Corp.(1) from 1987 to 1993.
CRAIG ZELTNER was appointed Vice President - Film and President of the
Company's Cinema Services Division on February 23, 1998. Prior to joining
Clearview, Mr. Zeltner had been President of Cinema Services, Inc., an
independent film buying service, for more than five years.
SUEANNE HALL MAYO has been the Vice President - Management Information
Systems and Secretary of the Company since 1997 and a director since its
incorporation. She joined the Company upon its incorporation as its Vice
President - Finance and Treasurer. Ms. Mayo was the treasurer of Clearview
Cinema Corp. from 1987 to 1993. She is married to A. Dale Mayo. Ms. Mayo is a
Class II Common Director, with a term expiring in 1999.(1)
JOAN M. ROMINE has been the Treasurer and Chief Financial Officer of
the Company since 1997. Prior to joining the Company in 1996 as its Controller,
she was the controller of Magic Cinemas, L.L.C. from 1995 through 1996 and
controller, treasurer and secretary of Hanita Cutting Tools, Inc., a U.S.
subsidiary of an international metalworking company, from 1988 through 1995.
ROBERT D. LISTER has been the General Counsel and Secretary of the
Company since March 1998. From September 1993 through March 1996, Mr. Lister was
an associate attorney with Kelley Drye & Warren, a New York law firm, and served
as associate general counsel of Merit Behavioral Care Corporation, a behavioral
healthcare company, from March 1996 until his employment by the Company.
A. Dale Mayo, who is the Chairman of the Board, President and Chief
Executive Officer and a director of the Company, is married to Sueanne Hall
Mayo, who is the Vice President - Management Information Systems and Secretary
and a director of the Company.
- ------------------------------
(1) Clearview Cinema Corp. was founded in 1987 by Mr. Mayo and two other persons
to operate one theatre and it acquired an additional three theatres over the
next several years. It was sold in 1993, after Mr. Mayo and his then-partners
were unable to agree on its future, with Mr. Mayo retaining the rights to the
Clearview name and trademark and one of those theatres through 1994.
17
<PAGE> 18
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases or sub-leases all of its theaters other than seven
theaters located in Tenafly and Bergenfield, New Jersey, and Bronxville,
Mamaroneck, New City, Manhasset and Babylon, New York. Those seven theaters are
owned by the Company. The theaters located in Baldwin, New Hyde Park and Port
Washington, New York are being operated under agreements under which the Company
pays rent to the landlords and has the right to acquire the underlying
leaseholds and related theater equipment upon paying the optionor an amount to
be calculated based on the operating cash flow of the theaters. The option will
expire in September 2000 if not exercised, and the three theaters would then be
returned to the optionor. The Company has leased the Roslyn Theater from Tower
Theater 20, Inc. since acquiring the theater in November 1997. The Company also
acquired in February 1998 an option to purchase a twinplex theater located in
Millburn, New Jersey, which the Company currently leases, for a purchase price
of $1.15 million.
When the Company develops a theater or negotiates directly with a
landlord, the term of the relevant lease, including all renewal options, is
usually more than twenty-five years. If a lease is acquired from an exhibitor,
typically the lease is assigned to Clearview and still has a substantial term.
Most of the Company's current leases have terms, including all renewal options,
of at least ten years and provide for periodic rent increases. Only one theater
that is leased by the Company has a lease that expires in the next five years
under which the Company does not have one or more renewal options and that
theater is not material to the Company's business and future operations. All of
the Company's landlords are unaffiliated third parties. As of December 31, 1997,
the aggregate annual minimum lease payments for all the Company's theaters over
the next five years are as follows: 1998: $2,685,334; 1999: $2,699,106;
2000: $2,646,440; 2001: $2,557,795; and 2002: $2,602,006.
The Company's corporate office is located in approximately 4,000 square
feet of space in Chatham, New Jersey, and is subject to a lease agreement, the
term of which expires on December 31, 2002.
The Company has entered into an agreement with the Nelson Ferman
Theater organization to acquire the right to develop a new multiplex theater.
This theater project will include 14 screens in Mansfield Township, New Jersey.
Construction is scheduled to begin in the near future once final permits are
approved. If construction permits have been obtained, the Company will become
liable for 50% of the monthly rent payments beginning on May 1, 1998, and
will become liable for the full monthly rent payments on January 1, 1999.
The Company's Mansfield theater complex would be the only multiplex in
Warren County, New Jersey.
In March 1998, the Company entered into an agreement with HRE
Properties, Inc., subject to obtaining certain approvals, to develop a new
15-screen multiplex theater in the Carmel ShopRite Center in Putnam County,
New York. The agreement provides that the Company will provide the seats and
concession stands after the theater is constructed, and become liable for
monthly rental payments the earlier of 120 days after the landlord completes
construction or when the Company begins operating the theater.
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<PAGE> 19
In February 1997, the Company entered into an agreement with
LPM Services, Inc. to lease a new multiplex theater to be constructed by
the landlord on a "turn key" basis. This theater project will include
10 screens in Bayonne, New Jersey. The landlord agreed to install all theater
seats, projection and sound equipment, concession stands, and final finishes
according to the Company's specifications. This theater complex would be the
only multiplex in Bayonne. As of March 23, 1998, the theater has not yet been
constructed.
The following table sets forth certain ownership information regarding
the theaters currently operated by the Company.
<TABLE>
<CAPTION>
Date Of Means Of
Acquisition Community County/State Ownership Expiration
- ----------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Dec. 21, 1994 Bernardsville Somerset, NJ Lease Dec. 31, 1999(2)
Dec. 21, 1994 Chester Morris, NJ Lease Jan. 31, 2008(2)
Dec. 21, 1994 Madison Morris, NJ Lease Dec. 31, 2000(2)
Dec. 21, 1994 Manasquan Monmouth, NJ Lease Jan. 14, 2000
Sept. 8, 1995 Baldwin Nassau, NY Lease Aug. 31, 2015
Sept. 8, 1995 New Hyde Park Nassau, NY Lease Aug. 31, 2022
Sept. 8, 1995 Port Washington Nassau, NY Lease Jan. 31, 2010
May 29, 1996 Clifton Passaic, NJ Lease Jan. 14, 2007
May 29, 1996 Emerson Bergen, NJ Lease Dec. 31, 2006
May 29, 1996 New City Rockland, NY Lease Dec. 31, 2017
May 29, 1996 Washington Twp. Bergen, NJ Lease Oct. 31, 2006
July 18, 1996 Bedford Westchester, NY Lease Dec. 31, 2011
July 18, 1996 Mount Kisco Westchester, NY Lease Dec. 31, 2003
Dec. 13, 1996 Bergenfield Bergen, NJ Own (4)
Dec. 13, 1996 Closter Bergen, NJ Lease Aug. 31, 1999(2)
Dec. 13, 1996 Tenafly Bergen, NJ Own (4)
July 2, 1997 Summit Union, NJ Lease Dec. 31, 2007(2)
Sept. 12, 1997 Bronxville Westchester, NY Own (4)
Sept. 12, 1997 Larchmont Westchester, NY Lease Sep. 30, 2016(2)
Sept. 12, 1997 Mamaroneck Westchester, NY Own (4)
Sept. 12, 1997 New City Rockland, NY Own (4)
Sept. 12, 1997 Wayne Passaic, NJ Lease (2)(5)
Nov. 7, 1997 Roslyn Nassau, NY Lease Apr. 30, 2013 (3)
Nov. 21, 1997 Parsippany Morris, NJ Lease Dec. 23, 2015(2)(6)
Nov. 21, 1997 Succusunna Morris, NJ Lease Dec. 31, 2019(2)
Dec. 9, 1997 Edison Middlesex, NJ Lease Dec. 31, 2004(2)
Dec. 9, 1997 Woodbridge Middlesex, NJ Lease Dec. 30, 2003
Dec. 12, 1997 Bellevue Monmouth, NJ Lease Nov. 30, 2017(2)
Dec. 12, 1997 Cedar Grove Essex, NJ Lease May 31, 2010
Dec. 12, 1997 Kinnelon Morris, NJ Lease Apr. 30, 2002(2)
Dec. 12, 1997 Middlebrook Morris, NJ Lease Oct. 31, 1999(2)
Jan. 29, 1998 Millburn Essex, NJ Lease Apr. 30, 1998(2)(3)
Feb. 13, 1998 Montclair Essex, NJ Lease Dec. 31, 2016(2)
Feb. 15, 1998 Montclair Essex, NJ Lease Feb. 15, 2008(2)
Mar. 6, 1998 Manhasset Nassau, NY Own (4)
Mar. 6, 1998 Babylon Suffolk, NY Own (4)
Mar. 23, 1998 Cobble Hill Kings, NY Lease Mar. 23, 2003(2)
- -----------------------
</TABLE>
19
<PAGE> 20
(1) This is an existing theater that is to be leased from a party who is
acquiring it from its current owner.
(2) Under these leases, the Company has one or more renewal options.
(3) The Company currently leases this theater and has an option to purchase it.
(4) Not applicable because the theater is owned by the Company.
(5) This lease expires 20 years from the date permits were issued for the
construction of the theater.
(6) This lease was initially recorded on December 23, 1994, and expires 21 years
from the date permits were issued for the construction of the theater.
ITEM 3. LEGAL PROCEEDINGS.
From time to time the Company is involved in litigation in the
ordinary course of its business. Currently, the Company does not have pending
any litigation that would have a material adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders, by
means of solicitation of proxies or otherwise, during the fourth quarter of
1997, except that the Company submitted a unanimous written consent and waiver
dated December 12, 1997, to a vote of MidMark Capital, L.P., the sole holder of
the Class A Convertible Preferred Stock of the Company, for the issuance of
Class B Preferred Stock.
20
<PAGE> 21
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's shares of Common Stock, par value $.01 per share
("Common Stock"), are listed on the American Stock Exchange. The trading symbol
for the Company's Common Stock is CLV. The Company's shares of Class A
Convertible Preferred Stock, par value $.01 per share ("Class A Convertible
Preferred Stock"), and Class B Nonvoting Cumulative Redeemable Preferred Stock,
par value $0.01 per share ("Class B Preferred Stock"), are not listed on any
exchange and are not traded over-the-counter.
The following table sets forth the range of the low and high sale
price for the Common Stock for each calendar quarter indicated since the
Company's initial public offering on August 19, 1997 (the "Initial Public
Offering").
1997 High Low
---- ---- ---
Third Quarter
(from August 19, 1997) $17.25 $ 8.25
Fourth Quarter $14.25 $10.19
As of March 23, 1998, the Company had approximately 30 holders of
record of the Company's Common Stock, one holder of record of the Company's
Class A Convertible Preferred Stock, and two holders of record of the Company's
Class B Preferred Stock.
The Company paid a $10,000 dividend on its Common Stock in 1996. The
Company has paid no dividends in 1997 on its Common Stock and does not
anticipate paying dividends in the foreseeable future. Pursuant to the Amended
and Restated Credit Agreement dated September 12, 1997, by and among the
Company, its wholly-owned subsidiaries, and The Provident Bank, the Company may
not, directly or indirectly, declare, order, pay, make or set apart any sum for
any dividend or other distribution on any account of any shares of any class of
its stock or any of its subsidiaries, except a dividend payable solely in shares
of that class of stock to the holders of that class.
In 1997, since the Initial Public Offering, the Company has issued
104,297 unregistered shares of its Common Stock. On November 21, 1997, the
Company issued a total of 41,797 shares of its Common Stock, which represented
the number of shares with an aggregate average market value of $500,000 for the
ten trading days prior to November 21, 1997, to F&N Cinema, Inc. ("F&N") and
Roxbury Cinema, Inc. ("Roxbury"), as a portion of the purchase price under an
Asset Purchase Agreement dated as of November 21, 1997, by and among the
Company, its wholly-owned subsidiaries CCC Succasunna Cinema Corp. and CCC
Parsippany Cinema Corp., and F&N, Roxbury, John Nelson, Pamela Ferman and Seth
Ferman; pursuant to which the Company's subsidiaries acquired leasehold
interests and certain furniture, fixtures, equipment and
21
<PAGE> 22
personal property related to the operation of two theaters with a total of 22
screens in Parsippany and Succasunna, New Jersey.
On December 12, 1997, the Company issued 62,500 shares of its Common
Stock, which represented the number of shares with an aggregate average market
value of $703,125 calculated on the last trading day immediately prior to
December 12, 1997, to The New Bellevue Theater Corp. in exchange for (i) the
transfer of certain furniture, fixtures, equipment and personal property related
to the operation of a four-screen theater located in Upper Montclair, New
Jersey, and (ii) the acquisition of a leasehold interest in the real property on
which the theater is located; pursuant to an Agreement and Plan of
Reorganization dated as of November 14, 1997, by and among the Company, its
wholly-owned subsidiary CCC Bellevue Cinema Corp., The New Bellevue Theater
Corp., and Jesse Sayegh ("Mr. Sayegh").
All of the shares of the Company's Common Stock were issued in reliance
on the exemption under Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act").
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The Company has achieved significant growth in theaters and screens
since its formation in November, 1994. Since inception of its business in
December, 1994, when the Company acquired the right to operate four theaters
with eight screens, the Company has acquired the right, through December 31,
1997, to operate an additional 27 theaters with 129 screens, has added six
screens to two existing theaters and has constructed a new 5-screen theater in
an existing building, resulting in a total of 31 theaters and 148 screens
operated by the Company at December 31, 1997. Through March 23, 1998, the
Company has acquired four additional theaters and the right to operate two other
theaters, with 21 total screens resulting in a total of 37 theaters and 169
screens. The Company expects that its future revenue growth will be derived
primarily from the acquisition of additional theaters, the addition of screens
to existing theaters and the development of new theaters. In order to fund its
plans for continued growth, the Company will require additional debt financing,
which it is currently seeking, and may need to seek additional equity financing.
Failure to obtain any such financing could require the Company to significantly
curtail its acquisition activities. The Company has had no theater closings
since inception.
The Company's revenues are predominantly generated from box office
receipts, concession sales and on-screen advertising. Direct theater costs
include film rental and booking fees and the cost of concessions. Other theater
operating expenses consist primarily of theater labor and related fringe benefit
costs and occupancy costs (including rent and/or real estate taxes, utilities,
repairs and maintenance, cleaning costs and supplies). Film rental costs are
directly related to the popularity of a film and the number of weeks the film
has run. Film rental costs generally decline as a percentage of box office
receipts the longer a film has been showing. As certain concession items, such
as fountain drinks and popcorn, are purchased in bulk and not prepackaged for
individual servings, the Company has significant gross profit margins on those
items.
General and administrative expenses consist primarily of corporate
overhead costs, such as management and office salaries and related fringe
benefit costs, professional fees, insurance costs and general office expenses.
The Company believes that its current internal controls and management
information system will allow the Company to expand its number of screens
without incurring proportionate increases in general and administrative
expenses. The management information system has on-line capabilities to collect
information concerning box office receipts, ticketing, concession sales,
inventory control and booking. This system allows the Company to closely track
and manage box office and concession revenues.
During 1997, the Company completed the acquisition of 14 theaters with
79 screens. In September 1997, the Company acquired three theaters with the
underlying real estate and the leaseholds of two other theaters with a total of
14 screens, all located in New York or New Jersey, funded by the net proceeds of
its initial public offering. In November 1997, the Company purchased the
leaseholds of two theaters with a total of 22 screens located in New Jersey for
a combination of cash, subordinated debt and common stock. In December 1997, the
Company purchased the leaseholds of four additional theaters with a total of 27
screens, also located in New Jersey, for cash, Class B redeemable preferred
stock and common stock. In two other separate 1997 transactions, the Company
purchased the leaseholds of three additional theaters in New Jersey with a total
of 16 screens. In addition, the Company added six screens to two existing
theaters and constructed a new five-screen theater in 1997.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 AND 1996
Total Revenues. Total revenues for 1997 increased 110.6 % to
$17,261,977 from $8,197,974 in the comparable 1996 period. The increase in box
office receipts resulted primarily from an increase in box office receipts due
to an increase in attendance of 116.4% to approximately 2,380,000 attendees in
1997 from approximately 1,100,000 attendees in 1996. This increase in attendance
is attributable primarily to the Company's operation of the nine theaters
acquired during 1996 for a full year in 1997, as well as the operation of the 14
theaters acquired and the one theater developed during 1997. The increase in
revenue attributable to increased attendance was offset by a decrease in average
ticket price from $5.63 in 1996 to $5.43 in 1997. The decrease was due primarily
to the timing of the 1997 acquisitions, which occurred just prior to the
December holiday season when attendance by children, whose average ticket prices
are lower, increases. Total concession sales increased 110.3% for 1997 to
$3,914,416 from $1,861,155 in the comparable 1996 period, primarily due to the
increase in the number of theaters operated.
Film Rental and Booking Fees. Film rental and booking fees increased
104.1% to $6,168,380 in 1997 from $3,022,377 in 1996, principally due to the
operation of additional theaters as discussed above. Film rental and booking
fees, as a percentage of box office receipts, decreased to 47.7% for the year
ended December 31, 1997 compared to 48.8% for the 1996 period.
Cost of Concession Sales. Cost of concession sales for 1997 increased
126.9% to $634,395 from $279,549 for 1996. This increase is attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of concession revenues, the cost of concession sales increased
from 15.0% in 1996 to 16.2% in 1997. This increase was attributable to the
number of theaters the Company added at the height of the 1997 holiday season
when the majority of the concession sales are lower margin candy sales.
<PAGE> 23
Theater Operating Expenses. Theater operating expenses increased 99.8%
to $6,590,703 in 1997 from $3,297,825 during 1996. This increase is attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of total revenues, theater operating expenses decreased to 38.2%
in 1997 from 40.2% in 1996. The decrease, as a percentage of total revenues, is
primarily due to the Company's ability to control and manage its variable costs,
such as labor, and the lower average per-theater fixed costs, such as occupancy
costs, property taxes and utilities, of the theaters acquired in 1997 as
compared to the Company's other theaters.
General and Administrative Expenses. General and administrative
expenses increased by 91.7% to $1,130,855 in 1997 from $589,822 in 1996. This
increase is due principally to the hiring of additional personnel and related
increases in salaries resulting from the transition from seven locations and 21
screens at January 1, 1996 to 16 locations and 60 screens at January 1, 1997 and
to 31 theaters and 148 screens at December 31, 1997. The increase is also due to
the increase in certain costs in 1997, such as professional fees, which are
typically associated with the transition from a private company to a public
company. As a percentage of total revenues, however, general and administrative
expenses decreased to 6.6% during 1997 from 7.2% during 1996. This decrease is
primarily due to the Company's internal controls and management information
system which allowed the Company to expand its number of screens without
incurring proportionate increases in general and administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense
increased 223.0% to $2,051,163 in 1997 from $635,007 in 1996. This increase is a
direct result of the 14 additional theaters acquired in 1997, which
significantly increased the Company's depreciable and amortizable assets, as
well as the effect of a full year of depreciation and amortization on the assets
of the nine theaters acquired in 1996.
Operating Income. Operating income for 1997 increased 83.8% to $686,481
from $373,394 for the comparable 1996 period. As a percentage of total revenues,
operating income decreased to 4.0% for the year ended December 31, 1997,
compared to 4.6% for the year ended December 31, 1996. Operating income
decreased as a percentage of total revenues primarily due to the substantial
increase in depreciation and amortization expense, which more than tripled in
1997 over 1996, compared to total revenues, which doubled over the same period.
Excluding depreciation and amortization, increases in the Company's other
operating expenses were less, on a percentage basis, than the growth in total
revenues, as summarized below:
Percentage
Increase over 1996
------------------
Total theater revenues 110.6%
Film rental and booking fees 104.1%
Other theater operating expenses 99.8%
General and administrative expenses 91.7%
Depreciation and amortization 223.0%
Interest Expense. Interest expense increased 240.6% in 1997 to
$2,015,419 from $591,722 in 1996. The Company's borrowing rate on its credit
facility decreased from Prime +2% to Prime +1.5% in September 1997. This
decrease was offset by a significant increase in total debt outstanding during
1997 as a result of the Company's acquisitions.
Net Loss. Net loss for the year ended December 31, 1997 increased to
$1,328,938 from $218,328 in the comparable 1996 period. This increase in net
loss is attributable primarily to the substantial increases in both depreciation
and amortization ($1,416,156) and interest expense ($1,423,697), together
totaling over $2,800,000. These increases are due to the additional screens
operated by the Company in 1997 and their related acquisition financing costs,
which are offset by reduced film rental costs, theater operating expenses and
general and administrative expenses, which were less, on a percentage basis,
than the growth in total revenues.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total Revenues. Total revenues for 1996 increased 249.5% to $8,197,974
from $2,345,697 in 1995. This increase in total revenues was primarily a result
of an increase in attendance of 249.2% to 1,101,251 attendees from 315,406
attendees in 1996 and 1995, respectively. The increase in attendance occurred
principally because of the addition of 39 screens during 1996 and the first full
year of operation of the 13 screens added during 1995. Revenues from those
theaters operated by the Company throughout 1995 and 1996 increased 15.7% from
$1,541,843 to $1,783,260. This increase in same theater revenues was
attributable primarily to an overall increase in attendance at two theaters and
the conversion from a single-screen to a triplex at another theater location.
Average ticket prices for the Company's theaters remained relatively constant
during 1995 and 1996. Total concession sales increased 235.5% in 1996 to
$1,861,155 from $554,671 in 1995 principally for the same reasons.
Film Rental and Booking Fees. Film rental and booking fees increased
266.9% for 1996 to $3,022,377 from $823,791 for 1995. As a percentage of box
office receipts, film rental and booking fees increased to 48.8% from 46.8% for
the years ended December 31, 1996 and 1995, respectively. This increase is
primarily attributable to the timing of the Company's acquisition of six
theaters in May and July of 1996 (film rental and booking fees as a percentage
of box office receipts are generally higher during the summer months than most
of the rest of the year).
Cost of Concession Sales. Cost of concession sales for 1996 increased
181.6% to $279,549 from $99,261 for 1995. As a percentage of concession
revenues, the cost of concession sales decreased to 15.0% from 17.9% for the
years ended December 31, 1996 and 1995, respectively. The Company's gross margin
on concession revenues improved in 1996 when compared to 1995 as a result of
obtaining volume discounts.
Theater Operating Expenses. Theater operating expenses increased 205.8%
to $3,297,825 for 1996 from $1,078,370 for 1995 primarily due to the Company's
acquisitions during 1996. As a percentage of total revenues, theater operating
expenses decreased to 40.2% from 46.0% for the years ended December 31, 1996 and
1995, respectively. This reduction was due to the Company's careful management
of its theater labor and fringe benefit costs and the lower average per-theater
fixed costs, such as occupancy costs, taxes and common area maintenance costs,
of the theaters acquired in 1996 as compared to the Company's other theaters. As
a percentage of box office receipts, theater labor and fringe benefit costs
decreased to 20.9% from 23.2% for the years ended December 31,1996 and 1995,
respectively.
General and Administrative Expenses. General and administrative
expenses for 1996 increased 57.2% to $589,822 from $375,262 for 1995. This
increase is due principally to the hiring of additional personnel and increases
in salaries resulting from the transition from seven locations and 21 screens at
the beginning of 1996 to 16 locations and 60 screens by the end of 1996. As a
percentage of total revenues, however, general and administrative expenses
decreased to 7.2% from 16.0% for the years ended December 31, 1996 and 1995,
respectively. This decrease is primarily due to the Company's internal controls
and management information system which allowed the Company to expand its number
of screens without incurring proportionate increases in general and
administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense
for 1996 increased 537.4% to $635,007 from $99,632 for 1995. This increase was
primarily a result of the acquisition of the nine theaters acquired in 1996,
which significantly increased the Company's depreciable and amortizable assets.
Operating Income. Operating income for 1996 increased to $373,394 from
an operating loss of $130,619 for 1995. This increase in the Company's operating
income was primarily due to certain improvements in operating efficiency, the
lower average occupancy costs per-theater of the theaters acquired in 1996 as
compared to the Company's other theaters, and an increase in general and
administrative expenses which was less, on a percentage basis, than the growth
in total revenues.
Interest Expense. Interest expense for 1996 increased 590.5% to
$591,722 from $85,697 for 1995. The increase was primarily attributable to the
significant increase in the Company's total debt during 1996, which was
primarily incurred to finance the Company's acquisitions during that year.
Net Loss. Net loss for 1996 increased 1.0% to $218,328 from a net loss
of $216,316 for 1995. The increase in net loss was primarily due to the
Company's acquisitions during 1996 that resulted in a significant increase in
depreciation and amortization expense, which is a non-cash expense, and a large
increase in interest expense, offset by better operating efficiencies indicated
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company receives substantially all of its revenues in cash from box
office receipts and concession sales and, therefore, benefits from minimal
accounts receivable and inventory requirements. The Company's most significant
operating expenses, film rental and booking fees, continue to be paid to
distributors 30 to 45 days following the receipt of the applicable cash ticket
payments. In addition, nearly all of the Company's other operating expenses,
such as theater payroll and theater rent, are paid bi-weekly or monthly,
respectively. The period between the receipt of cash from operations and use of
that cash to pay the related expenses provides certain operating capital to the
Company. Average per screen film rental and booking fees payable declined to
approximately $11,000 at December 31, 1997 from approximately $11,600 at
December 31, 1996.
Since the Company is in an industry which is capital intensive,
substantially all of its assets are non-current. The Company's primary current
asset is cash, while inventories are relatively insignificant throughout the
fiscal year. The Company had negative working capital of $5,334,136 at December
31, 1997 and $1,710,825 at December 31, 1996, respectively. The increase in
negative working capital is attributable to the increase in the current portion
of long-term debt used to finance the Company's 1997 theater acquisitions, and
the increase in film rental and booking fees payable due to the increase in the
number of screens.
The Company has financed its day-to-day operations principally from the
cash flow generated by its operating activities. Such cash flow totaled
$3,934,204 in 1997, as compared to $1,147,062 in 1996. The difference between
the Company's net loss and its cash flow from operating activities is
principally due to the Company's depreciation and amortization expense of
$2,051,163 in 1997 and $635,007 in 1996, which are non-cash expenses, and
increases in accounts payable and accrued expenses.
The Company's capital requirements in 1997 and 1996 arose principally
in connection with theater acquisitions ($37.9 million), the renovation of
acquired and existing theaters ($2.4 million), the development of a new theater
($866,000) and the addition of screens to an existing theater ($258,000).
Capital expenditures, exclusive of theater acquisitions, totaled approximately
$3,486,000 in 1997 and $318,000 in 1996. During 1997, the Company funded its
capital expenditures, including theater acquisitions, through the net proceeds
of its initial public offering of approximately $7.067 million approximately $24
million of bank borrowings, issuance of $6.0 million of subordinated debt, the
issuance of 750 shares of Class B redeemable preferred stock valued at $750,000
and the issuance of 104,297 shares of common stock, valued at approximately $1.2
million.
In September 1997, the Company entered into an amended and restated
credit agreement with Provident Bank (the "Credit Facility") consisting of a
revolving credit line of $1.0 million, a term note of $12 million and a second
term note of $17 million, the proceeds of which were used to refinance existing
term loans of $10.4 million and to finance certain of the Company's 1997 theater
acquisitions. In December 1997 the Company further increased its Credit Facility
to $36 million by increasing the availability under the second term note to $23
million through the participation of an additional bank, the proceeds of which
were used to finance certain theater acquisitions. In February 1998, the Company
further increased its Credit Facility by obtaining a third term note totaling
$5.8 million which was used to acquire five additional theaters with
screens. The total Credit Facility is $41.8 million at March 24, 1998, of which
$40.8 million is outstanding.
The revolving credit line of $1 million terminates in September 2002
and can be used for refinancing existing debt, financing working capital,
financing acquisitions and for general corporate purposes. There were no amounts
outstanding on the revolving credit line at December 31, 1997 or March 24, 1998.
The Credit Facility is collateralized by substantially all of the
assets of the Company and contains various restrictive covenants, including
maintenance of specified levels of net worth and debt coverage ratios. As of
December 31, 1997, the Company was not in compliance with one of the financial
covenants of its Credit Facility and has obtained a waiver of such
noncompliance from the bank. In February 1998, the covenant restrictions under
the Credit Facility were amended in connection with issuance of the Term Note
C. Based on the present covenant restrictions, the Company expects to be in
compliance with the covenant restrictions under the Credit Facility through
1998.
All loans under the Credit Facility bear interest at prime plus 1.5%.
Principal payments under the term loans are due quarterly commencing in April
1998 for the first and second term loans and commencing in October 1998 for the
third term loan. As of March 23, 1998, principal payments due in 1998 are
approximately $3.2 million.
In November 1997, the Company issued $6 million in subordinated notes
payable to the seller in connection with the Nelson Ferman acquisition. The
notes bear interest at 10 1/2% payable monthly. The principal and any unpaid
interest on one note in the amount of $2 million is due on the earliest of the
consummation of a private debt offering or January 1999. The principal on the $4
million note is due the earlier of the consummation of a private debt offering
or December 2002. During December 1997, the Company converted $600,000 of
subordinated notes payable to related parties into 600 shares of Class B
redeemable preferred stock valued at $600,000.
Through March 24, 1998, the Company has acquired five additional
theaters and the right to operate one other theater.
The Company seeks to lease theaters, rather than to purchase theaters
with their underlying real estate or to purchase properties for development as
theaters, due to the significantly lower capital requirements for leasing and
because it believes that its potential return on investment when leasing a
theater is higher than its potential return on investment if it owns that
theater and the underlying real estate. Future minimum rental payments for all
non-cancellable operating leases having initial or remaining lease terms in
excess of one year as of December 31, 1997 are:
Year ending December 31,
1998 $ 2,685,334
1999 2,699,106
2000 2,646,440
2001 2,557,795
2002 2,602,006
2003 and thereafter 17,837,239
------------
$ 31,027,920
============
In accordance with the Company's strategic plan, Clearview intends to
continue to acquire theaters and is pursuing the acquisition of additional
locations. However, in order to fund its plans for continued growth, the Company
will require additional debt financing, which it is currently seeking, and may
need to seek additional equity financing. Failure to obtain any such financing
could require the Company to significantly curtail its acquisition activities
and reduce its planned capital expenditures and could have a material adverse
effect on the Company's ability to achieve its business strategy. In the
absence of additional financing, the Company believes that it is capable of
funding its current operations (including interest payments as they come due)
through internally-generated cash flow from operations and existing debt
financing.
QUARTERLY RESULTS AND SEASONALITY
Historically, the most successful films have been released during the
summer and Thanksgiving through year-end holiday season. Consequently, motion
picture exhibitors generally have had proportionately higher revenues during
such periods, although the seasonality of motion picture exhibition revenue has
become less pronounced in recent years as studios have begun to release major
motion pictures more evenly throughout the year. The Company believes that its
regular exhibition of art films has contributed to a moderation in the
seasonality of its own revenues as compared to the seasonality of the revenues
of some of its competitors. Nevertheless, the Company's revenues and income in
any particular quarter will be substantially the result of the commercial
success of the particular films being exhibited during such quarter.
EFFECT OF INFLATION
Inflation has not had a significant impact on the Company's operations
to date.
NEW ACCOUNTING PRONOUNCEMENTS
During February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS 128, "Earnings per Share," which is effective for
financial statements for both interim and annual periods ending after December
15, 1997. The Company adopted SFAS 128 in the fourth quarter of 1997. SFAS 128
replaces the presentation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Basic earnings per share is calculated
based on the weighted average number of common shares outstanding during the
period and excludes all dilution. Diluted earnings per share is calculated by
using the weighted average number of common shares outstanding, while also
giving effect to all dilutive potential common shares that were outstanding
during the period. Prior period amounts have been restated to conform to the
requirements of SFAS 128.
YEAR 2000
The Company is currently evaluating the potential impact of the year
2000 on the electronic data processing and other information systems relevant
to the Company's business and is developing a plan to resolve this issue. The
year 2000 issue is the result of computer programs being written using two
digits (rather than four) to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in miscalculations
or system failures. This issue creates risk for the Company from unforeseen
problems in its own computer systems and from third parties with whom the
Company deals on financial transactions. Based on preliminary information,
costs of addressing potential problems are not currently expected to have a
material adverse impact on the Company's results of operations, financial
position or cash flows.
22
<PAGE> 24
ITEM 7. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Clearview Cinema Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of Clearview Cinema Group, Inc. and its subsidiaries (the "Company") at December
31, 1997, and the results of their operations and their cash flows for the year
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
New York, New York
March 19, 1998
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the consolidated statements of operations, changes in
stockholders' equity and cash flows of Clearview Cinema Group, Inc. and
subsidiaries for the year ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Clearview Cinema Group, Inc. and subsidiaries for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
February 10, 1997 (except as to the stock split
described in Note 7 and as to Note 12, for
which the dates are August 7, 1997 and
February 3, 1998)
<PAGE> 26
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 1,647,176
Inventories 116,655
Other current assets 341,273
-----------
Total current assets 2,105,104
Property, equipment and leaseholds, net 34,488,714
Intangible assets, net 19,931,555
Other non-current assets 827,019
-----------
$57,352,392
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 2,876,607
Accounts payable and accrued expenses 4,562,633
---------
Total current liabilities 7,439,240
Long-term debt, less current maturities 32,234,955
Subordinated notes payable 6,000,000
Commitments and contingencies (Note 10)
Class B redeemable preferred stock 1,350,000
---------
Stockholders' equity
Undesignated preferred stock
2,478,697 shares authorized
Class A preferred stock, par value $.01, 1,303 shares
authorized; 779 shares issued and outstanding 8
Common stock, par value $.01, 10,000,000 shares
authorized; 2,213,097 shares issued and outstanding 22,131
Additional paid-in-capital 12,214,515
Accumulated deficit (1,908,457)
-----------
Total stockholders' equity 10,328,197
----------
$57,352,392
===========
See accompanying notes to consolidated financial statements.
23
<PAGE> 27
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Theater revenues
Box office $6,195,399 $12,926,134
Concession 1,861,155 3,914,416
Other 141,420 421,427
---------- -----------
8,197,974 17,261,977
---------- -----------
Operating expenses
Film rental and booking fees 3,022,377 6,168,380
Cost of concession sales 279,549 634,395
Theater operating expenses 3,297,825 6,590,703
General and administrative expenses 589,822 1,130,855
Depreciation and amortization 635,007 2,051,163
----------- -----------
7,824,580 16,575,496
----------- -----------
Operating income 373,394 686,481
Interest expense, net 591,722 2,015,419
----------- -----------
Net loss $ (218,328) $(1,328,938)
=========== ===========
Basic and diluted loss per share $ (.29) $ (1.03)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 28
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 600,000 $6,000 $784,810 $(325,191) $465,619
Proceeds from sale of preferred 779 $ 8 2,345,081 2,345,089
stock, net of related costs of $154,911
Dividends paid (10,000) (10,000)
Issuance of common stock
For cash 12,600 126 69,874 70,000
Upon conversion of debt 12,000 120 79,880 80,000
For assets acquired 208,200 2,082 1,107,918 1,110,000
Issuance of warrants in connection
with
Subordinated debt 23,532 23,532
Bank financing 416,001 416,001
Net loss (218,328) (218,328)
----- ------ --------- ------- ----------- ----------- -----------
Balance, December 31, 1996 779 8 832,800 8,328 4,827,096 (553,519) 4,281,913
Repurchase of warrants held by lender (1,000,000) (1,000,000)
Sale of underwriter warrants 1,000 1,000
Issuance of common stock
At initial public offering, net of
costs 1,150,000 11,500 7,055,597 7,067,097
Upon termination of preferred 60,000 600 25,400 (26,000)
stock redemption right
In exchange for warrants
surrendered 66,000 660 103,340 104,000
In exchange for assets acquired 104,297 1,043 1,202,082 1,203,125
Net loss (1,328,938) (1,328,938)
----- ------ --------- ------- ----------- ----------- -----------
Balance, December 31, 1997 779 $ 8 2,213,097 $22,131 $12,214,515 $(1,908,457) $10,328,197
===== ====== ========= ======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 29
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $ (218,328) $(1,328,938)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation and amortization of property,
equipment and leaseholds 526,182 1,675,856
Amortization of intangible assets 108,825 375,307
Amortization of debt discount and debt issuance costs 42,715 281,190
Interest expense recognized upon surrender of warrants 104,000
Changes in operating assets and liabilities
Inventories (28,455) (71,553)
Other current assets 32,954 (306,407)
Other non-current assets (48,063) (131,382)
Accounts payable and accrued expenses 731,232 3,336,131
----------- -----------
Net cash provided by operating activities 1,147,062 3,934,204
----------- -----------
Cash flows from investing activities
Purchase of property, equipment and leaseholds (317,946) (3,486,123)
Acquisitions of theaters (6,290,000) (29,875,000)
Acquisition costs (686,906) (285,499)
----------- -----------
--------- ---------
Net cash used in investing activities (7,294,852) (33,646,622)
----------- -----------
Cash flows from financing activities
Proceeds from issuance of long-term debt 4,317,228 30,386,108
Payments on long-term debt (136,543) (4,995,054)
Proceeds from issuance of subordinated notes payable 600,000
Payments on subordinated notes payable (1,100,000)
Debt issuance costs (342,842) (750,902)
Proceeds from issuance of common stock upon initial
public offering 9,200,000
Initial public offering costs (2,132,903)
Proceeds from issuance of common stock 70,000
Proceeds from issuance of preferred stock 2,500,000
Preferred stock issuance costs (154,911)
Dividends paid (10,000)
Proceeds from issuance of underwriter warrants 1,000
Payments on option (120,000)
----------- -----------
Net cash provided by financing activities 6,722,932 30,608,249
----------- -----------
Net change in cash and cash equivalents 575,142 895,831
Cash and cash equivalents, beginning of year 176,203 751,345
----------- -----------
Cash and cash equivalents, end of year $ 751,345 $ 1,647,176
=========== ===========
</TABLE>
26
<PAGE> 30
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 1 - NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Clearview Cinema Group, Inc. ("Clearview") and its
wholly-owned subsidiaries (collectively referred to as the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
NATURE OF THE BUSINESS - The Company was incorporated November 23, 1994 and
is a regional motion picture exhibitor that acquires and operates in-town
multiplex theaters primarily located in affluent suburban communities in
the New York/New Jersey metropolitan area. As of December 31, 1997, the
Company's 31 theaters with 148 screens show a mix of first-run commercial,
art and family-oriented films. The Company licenses films from distributors
on a film-by-film and theater-by-theater basis. The Company's business is
seasonal with a substantial portion of its revenue and operating income
being derived during the summer months (June through August) and the
holiday season (November and December).
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results, as determined at a
later date, could differ from those estimates.
Film rental costs owed to distributors are estimated as a percentage of the
film's box office receipts and the length of a film's run and are
ultimately settled with distributors within a period approximating three
months.
REVENUE RECOGNITION - The Company recognizes revenues from box office
admissions and concession sales at the time of sale.
CASH EQUIVALENTS - Cash equivalents include commercial paper investments
purchased with original maturities of three months or less.
INVENTORIES - Inventories consist of concession products and are stated at
the lower of cost (first-in, first-out method) or market.
PROPERTY, EQUIPMENT AND LEASEHOLDS - Property, equipment and leaseholds are
stated at cost less accumulated depreciation and amortization. Buildings
and improvements, furniture and equipment are depreciated using the
straight line method over the estimated useful lives of the assets as
follows: buildings and improvements - 40 years; furniture and equipment - 5
to 7 years. Leasehold interests represent acquired rights to operate
theatres under previously existing operating leases. The fair value
assigned to these leasehold interests and lease improvements are
capitalized and amortized using the straight-line method over the shorter
of the term of the lease or the estimated useful life of the assets.
In 1996, the Company adopted Statement of Financial Accounting Standards
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by the
Company be reviewed for impairment whenever there is an indication that the
carrying amount of the asset
27
<PAGE> 31
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
may not be recoverable. Recoverability of these assets is determined by
comparing the forecasted undiscounted net cash flows of the operation to which
the assets relate, to the carrying amount, including associated intangible
assets, of such operation. The adoption of SFAS 121 did not have a significant
effect on the consolidated financial position or results of operations.
INTANGIBLE ASSETS - Intangible assets consist of cost in excess of the tangible
and identifiable intangible assets of the theaters acquired (goodwill), debt
issuance costs, covenants not to compete, and organization costs. Costs are
amortized on a straight line basis over the following lives: goodwill -15 years,
covenants not to compete - 3 to 5 years , organization costs - 5 years. The
Company evaluates the recoverability of goodwill on an ongoing basis in light of
changes in any business conditions, events or circumstances that may indicate
the potential impairment of intangibles. Debt issuance costs are amortized as
interest expense over the term of the related debt.
STOCK-BASED COMPENSATION - The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25") and related interpretations in accounting for stock-based compensation. The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123").
INCOME TAXES - Deferred tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
NET LOSS PER SHARE - In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards 128, Earnings Per Share
("SFAS 128") which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Prior period amounts have been
restated to conform to the requirements of SFAS 128.
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reported for cash and cash equivalents and accounts payable and accrued expenses
approximate fair value due to the short maturities of these assets and
liabilities. The fair value of the long term debt, subordinated notes payable
and Class B redeemable preferred stock are estimated based on discounted future
cash flows using rates currently available for debt and equity instruments with
similar terms. At December 31, 1997, the fair values approximate carrying
values.
28
<PAGE> 32
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2 - THEATER ACQUISITIONS
During 1997, the Company acquired a total of fourteen theaters and 79
screens located in New Jersey and New York. The acquisitions have been
accounted for under the purchase method of accounting. Under the purchase
method of accounting, the purchase price for each transaction has been
allocated based on the estimated fair value of identifiable tangible and
intangible assets (principally property, equipment and leasehold interest)
of the respective theaters with the excess purchase price, together with
acquisition costs approximating $285,000 being allocated to goodwill. The
results of operations of the acquired theaters are included in the
accompanying consolidated financial statements from the respective
acquisition dates.
UA ACQUISITION - In September 1997 the Company acquired substantially all
the assets, including land, building, leasehold interests, equipment and
various operating contracts of five theaters from United Artists Theater
Circuit, Inc. (the "UA Acquisition") for a total purchase price of $8.65
million in cash from proceeds of the initial public offering (Note 7) and
borrowings under the Credit Facility (Note 6). Leasehold interests acquired
are to be amortized over the related theater leases which have remaining
lease terms through December 31, 2019. The purchase price has been
allocated as follows:
Land $ 1,527,000
Buildings 3,665,000
Leasehold interests 2,641,000
Equipment 695,000
Goodwill 122,000
-----------
$ 8,650,000
===========
NELSON FERMAN ACQUISITION - In November 1997 the Company acquired
substantially all the assets, including leasehold interests, equipment and
various operating contracts of two theaters from F&N Cinema, Inc. (the
"Nelson Ferman Acquisition") for a total purchase price of $18.5 million.
The Company paid $12 million in cash from borrowings under the Credit
Facility, issued $6 million in subordinated notes payable (Note 6) and
issued 41,797 shares of common stock with an aggregate market value of
$500,000 based on the closing price of the Company's stock on the ten days
preceding the acquisition. Leasehold interests acquired are to be amortized
over the related theater leases which have remaining lease terms through
December 31, 2016. The purchase price has been allocated as follows:
Leasehold interests $ 6,500,000
Equipment 1,270,000
Non-compete 10,000
Goodwill 10,720,000
------------
$ 18,500,000
============
CJM ACQUISITION - In December 1997 the Company executed four separate
agreements to acquire certain assets, including leasehold interests and
equipment of four theaters from CJM Enterprises (the "CJM Acquisition") for
a total purchase price of approximately $8.7 million. Pursuant to the
agreements, the Company paid $7.25 million in cash from borrowings under
the Credit Facility, issued 62,500 shares of common stock with an aggregate
market value of approximately $703,000 (based on the closing price of the
Company's stock on the date of acquisition) and agreed to issue either 750
shares of Class B redeemable
29
<PAGE> 33
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
preferred stock (Note 7) by March 31, 1998 or pay $750,000 in cash in lieu of
stock if the Company consummated a private placement offering by such date. As
the private placement offering is not likely to occur by March 31, 1998, the 750
shares of Class B redeemable preferred stock will be issued and have been
reflected as such in the accompanying financial statements. The agreements also
provide for additional consideration of 750 additional shares of Class B
redeemable preferred stock valued at $750,000 to be paid to the seller if
another competing theater is not opened in the operating vicinity of the
purchased theaters within two years. However, such consideration is deemed to be
contingent and, as such, will only be recorded on December 12, 1999 if no
competing theater has opened. Leasehold interests acquired in the CJM
Acquisition are to be amortized over the related theater leases which have
remaining lease terms through November 30, 2017. The purchase price has been
allocated as follows:
Leasehold interests $ 1,503,000
Equipment 1,510,400
Non-compete 60,000
Goodwill 5,629,725
------------
$ 8,703,125
============
The shares of common stock issued in the Nelson Ferman Acquisition and the CJM
Acquisition are unregistered shares and are subject to Voting Trust Agreements
whereby the President and Chief Executive Officer has the right to vote the
shares until the shares are sold or registered.
The Company acquired three additional theaters during 1997 in two separate
transactions for $1,975,000 in cash from borrowings under the Credit Facility
and working capital.
The following unaudited pro forma consolidated results of operations for the
year ended December 31, 1997 assumes the UA Acquisition, the Nelson Ferman
Acquisition and the CJM Acquisition had occurred on January 1, 1997 giving
effect to purchase accounting adjustments and financing. The unaudited pro forma
consolidated results of operations for the year ended December 31, 1996 assumes
the UA Acquisition, Nelson Ferman Acquisition and the CJM Acquisition, along
with the Company's 1996 acquisitions, had occurred on January 1, 1996. The pro
forma results have been prepared for informational purposes only and do not
reflect any benefit from economies which might be achieved from combined
operations. The pro forma results do not represent results which would have
occurred if the acquisition had taken place on the basis assumed above, nor are
they indicative of the results of future combined operations.
Year ended December 31,
1996 1997
(Unaudited) (Unaudited)
----------- -----------
Revenues $28,960,499 $32,105,444
Net loss (3,692,950) (3,692,996)
Basic and diluted loss per share $ (1.68) $ (1.67)
30
<PAGE> 34
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 3 - PROPERTY, EQUIPMENT AND LEASEHOLDS
Property, equipment and leaseholds are summarized as follows:
December 31,
1997
--------------
Land $ 1,927,848
Buildings and improvements 5,491,183
Leasehold interest and improvements 21,704,639
Furniture and equipment 7,772,995
------------
36,896,665
Less: Accumulated depreciation and
amortization 2,407,951
------------
$ 34,488,714
============
NOTE 4 - INTANGIBLE ASSETS
Intangible assets are summarized as follows:
December 31,
1997
-------------
Goodwill $ 19,004,450
Debt issuance costs 1,129,166
Covenants not to compete 305,000
Organization costs 42,234
------------
20,480,850
Less: Accumulated amortization 549,295
------------
$ 19,931,555
============
31
<PAGE> 35
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized as follows:
December 31,
1997
------------
Film rental and booking fees payable $1,613,834
Accounts payable 1,936,552
Accrued interest 369,874
Accrued payroll 254,538
Sales taxes payable 100,688
Other accrued expenses 287,147
----------
$4,562,633
==========
NOTE 6 - LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
Long-term debt consists of the following:
Interest December 31,
Description Rate 1997
----------- ---- ----
Term notes A & B under Credit 10% at December 31, 1997 $34,757,271
Facility, interest payable in (floating rate of 1.5%
monthly installments, above prime)
principal due in quarterly
installments through September
2002, net of unamortized debt
discount of $242,729
Note payable to bank, in monthly
installments of principal and
interest of $5,029, due 11-1/4% 313,096
October 2005
Other 41,195
-----------
35,111,562
Less: Current maturities 2,876,607
-----------
$32,234,955
===========
CREDIT FACILITY - In September 1997 the Company entered into an amended and
restated credit agreement with Provident Bank (the "Credit Facility") consisting
of a revolving credit line of $1.0 million, Term Note A of $12 million and Term
Note B of $17 million, the proceeds of which were used to refinance existing
term loans with the same bank of $10.4 million and finance acquisitions (Note
2). In December 1997 the Company further
32
<PAGE> 36
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
increased its Credit Facility to $36 million by increasing the availability
under Term Note B to $23 million through the participation of an additional
bank, the proceeds of which were used to finance acquisitions (Note 2). In
February 1998, the Company increased its Credit Facility by obtaining a $5.8
million Term Note C (Note 14).
The revolving credit line of $1 million bears interest at prime + 1.5%,
terminates on September, 2002 and can be used for refinancing existing debt,
financing working capital, financing acquisitions and for general corporate
purposes. There were no amounts outstanding on the revolving credit line at
December 31, 1997.
The Credit Facility is collateralized by substantially all of the
assets of the Company and contains various restrictive covenants, including
maintenance of specified levels of net worth and debt coverage ratios. All such
covenants were satisfied or waived by the bank at December 31, 1997. The Credit
Facility also restricts certain payments by the Company including the payment of
dividends, retirement of equity securities or retirement of any subordinated
debt through premium payments.
In accordance with the provisions of the Credit Facility, the Company
maintains a $2.5 million key-man life insurance policy on its President and
Chief Executive Officer.
SUBORDINATED NOTES - In November 1997, the Company issued $6 million
in subordinated notes payable to the seller in connection with the Nelson Ferman
Acquisition (Note 2). The notes bear interest at 10-1/2% which is payable
monthly. The principal and any unpaid interest on one note in the amount of $2
million is due on the earliest of the consummation of a private debt offering or
January 1999. The principal on the $4 million note is due the earlier of the
consummation of a private debt offering or December 2002.
During December 1997, the Company converted $600,000 of subordinated
notes payable to related parties into 600 shares of Class B redeemable preferred
stock valued at $600,000 (Note 7).
Long-term debt and subordinated notes payable mature as follows:
Year ending December 31,
- -------------------------
1998 $ 2,876,607
1999 8,984,318
2000 6,989,036
2001 7,024,619
2002 15,091,387
2003 and thereafter 145,595
------------
$ 41,111,562
============
NOTE 7 - STOCKHOLDERS' EQUITY
STOCK SPLIT - In May 1997, the Company's Board of Directors approved a 600
to 1 stock split which has been retroactively reflected in the accompanying
consolidated financial statements.
33
<PAGE> 37
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INITIAL PUBLIC OFFERING - In August 1997, the Company consummated an initial
public offering (the "Offering") through the sale of 1,150,000 shares of its
common stock, $.01 par value for total proceeds of approximately $7.1 million,
net of offering costs of approximately $ 2.1 million.
PREFERRED STOCK - The Company's Certificate of Incorporation authorizes the
issuance of up to 2,500,000 shares of preferred stock. The Board of Directors is
authorized to issue shares of preferred stock from time to time in one or more
series and to establish and designate any such series and to determine the
number of shares and the relative conversion rights, voting rights, terms of
redemption and liquidation.
CLASS A PREFERRED STOCK AND WARRANT - In May and July 1996, the Company issued
779 shares of Class A preferred stock and warrants in exchange for $2,500,000.
Each share of Class A preferred stock is convertible at any time at the option
of the holders into 600 shares of common stock. Upon the occurrence of certain
events, the shares of Class A preferred stock will automatically convert into
shares of common stock. The warrants, which entitled the holder to purchase up
to 471 shares of Class A preferred stock were exchanged at the time of the
offering for a new warrant exercisable for 282,600 shares of common stock.
The warrant is not exercisable until June 1, 2001 unless, prior to that date,
the Company sells all or substantially all of its assets, liquidates, dissolves
or merges with another corporation in a transaction which results in a change in
control of the Company's voting stock. The number of shares of common stock for
which the warrant is exercisable is subject to reduction, including not being
exercisable into any shares, based on a formula and the fair value of the
Company's stock as defined, upon the occurrence of certain events.
CLASS B REDEEMABLE PREFERRED STOCK - During 1997 the Company authorized 20,000
shares and issued 1,350 shares of Class B non-voting, 10-1/2% cumulative
redeemable preferred stock with a liquidation value of $1,000 per share. The
holders of the Class B redeemable preferred stock are entitled to receive
preferential dividends, when and as declared by the Board of Directors. So long
as any shares of Class B redeemable preferred stock are outstanding, unless all
dividends on the Class B redeemable preferred stock have been paid, no dividend
or other distribution may be paid or made on the common stock, Class A preferred
stock or any other capital stock of the Company ranking junior as to dividends
to the Class B redeemable preferred stock. In the event of any sale of all or
substantially all of the assets of the Company or any liquidation, dissolution
or winding up of the Company, the holders of the Class B redeemable preferred
stock will be entitled to receive an amount per share equal to a liquidation
value ($1,000) plus all unpaid dividends per share on the Class B redeemable
preferred stock, prior to any distribution to holders of the common stock, Class
A preferred stock or any other capital stock of the Company ranking junior upon
liquidation or dissolution. The holder of Class B redeemable preferred stock can
redeem upon the earlier to occur of dissolution of the Company, within ten
business days after the date of closing of a private placement offering with
aggregate proceeds of $70 million, or five years after the date of issuance of
such shares. The Company can redeem these shares at any time.
WARRANTS - In consideration of services provided at the time of the Offering,
the Company issued to the underwriter of the Offering, for a nominal amount of
$1,000, warrants to purchase 100,000 shares of common stock with an initial
exercise price of $9.60 per share. As provided in the warrant agreement, the
exercise price and the number of shares that may be purchased upon the exercise
of the warrants are subject to modification and adjustment upon the occurrence
of certain events, as defined in the warrant agreement. The warrants are
exercisable for a four year period commencing on August 12, 1998. The fair value
of services provided of
34
<PAGE> 38
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
approximately $200,000 has been determined based on the fair value of the
warrants using an option pricing model in accordance with SFAS 123 and has no
impact on stockholders' equity as the services provided are considered
additional offering costs.
During 1995 and 1996, the Company issued 200 warrants, convertible into 120,000
shares of common stock, together with the issuance of certain subordinated debt.
Concurrent with the consummation of the Offering, holders of warrants to
purchase 97,500 shares of common stock (at exercise prices ranging from $3.33 to
$6.67 per share) exchanged such warrants for 66,000 shares of common stock and
also amended the terms of certain subordinated notes payable. The fair value of
the common stock issued, less the value of the warrants surrendered, was
recorded as interest expense of $104,000 in the accompanying financial
statements. The remaining warrants were canceled upon retirement of the
subordinated debt on December 12, 1997 (Note 6) in accordance with the terms of
the debt and warrant agreement.
In connection with the bank financing as described in Note 6 and pursuant to a
May 1996 warrant agreement (amended in December 1996), the Company issued
seven-year warrants in May and December 1996 to its principal lender to purchase
43,800 and 50,400 shares of the Company's common stock, respectively, at an
exercise price of $.01 per share. In June 1997, the Company repurchased those
warrants for $1 million which approximated the put price at that time. As a
result, the repurchase has been recorded as a charge to additional
paid-in-capital.
TERMINATED REDEMPTION RIGHTS - A certain common stockholder had the right to
sell its shares of common stock at a redemption price based upon a formula. If
such stockholder did not exercise that right, the Company had the right to
purchase those shares of common stock from such stockholder at a price based
upon the same formula. Such stockholder and the Company terminated those rights
upon consummation of the Offering.
The holder of the outstanding shares of the Company's Class A preferred stock,
$.01 par value had the right to sell to the Company all of those shares or the
shares of common stock into which those shares had been converted at a
redemption price determined in accordance with a specified formula. Such holder
terminated that right upon consummation of the Offering in exchange for the
issuance of 60,000 shares of common stock. The fair value of the 60,000 shares
of common stock issued, less the estimated value of the redemption right
terminated, was recorded as a preferred stock dividend of $26,000 during 1997.
NOTE 8 - INCOME TAXES
Deferred income taxes reflect the tax consequences on future years of
differences between the bases of assets and liabilities for financial reporting
purposes and income tax purposes. A valuation allowance is provided when it is
more likely than not that some portion of the deferred tax assets will not be
realized. The Company has determined, based on its recurring net losses since
inception, that a full valuation allowance of $172,000 and $621,000 is
appropriate at December 31, 1996 and 1997.
The income tax effect of temporary differences that give rise to the
deferred tax assets and deferred tax liabilities at December 31, 1997 are as
follows:
35
<PAGE> 39
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Deferred tax assets
Net operating loss carryforwards $ 678,000
Other 46,000
---------
Gross deferred tax assets 724,000
Deferred tax liabilities
Property, equipment and leaseholds (103,000)
---------
621,000
Valuation allowance (621,000)
---------
Net deferred tax assets $
=========
A reconciliation between the statutory federal income tax rate of 34% and the
effective rate of income tax expense for the years ended December 31, 1996 and
1997 follows:
Year ended December 31,
-----------------------
1996 1997
---- ----
Income tax benefit at federal $(74,000) $(452,000)
statutory rate
State income tax benefit, net (13,000) (79,000)
of federal tax effect
Increase in net operating loss 87,000 531,000
carryforwards -------- ----------
Provision (benefit) for income taxes $ $
======== ==========
The Company has available at December 31, 1997 net operating loss carryforwards
totaling approximately $1,698,000 that may be applied against future
consolidated federal and state taxable income of the respective subsidiary
companies. The loss carryforwards will expire through 2012.
Certain losses are subject to limitation by the provisions of Section 382 of the
Internal Revenue Code due to a more than 50% change in ownership which occurred
upon the consummation of the Company's Offering.
NOTE 9 - STOCK BASED COMPENSATION
In August 1997, the Company adopted the Stock Incentive Plan (the "Plan") which
provides for the granting of awards to purchase shares of the Company's common
stock to officers, directors and key employees and
36
<PAGE> 40
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
non-employees at the discretion of a committee of the Board of Directors. Awards
granted under the Plan may be in the form of Non-Qualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Shares and
Performance Awards. The exercise price of each share of stock awarded under the
Plan shall be determined by the committee; provided however, that the exercise
price shall in all cases be equal to or greater than the quoted market price of
the Company's common stock on the date of grant. At December 31, 1997, 200,000
shares of common stock are reserved for issuance under the Plan. Awards granted
under the Plan become fully vested upon a change in control of the Company.
During 1997, the Company granted 122,500 incentive stock options with exercise
prices ranging from $8 to $12 and with a weighted average exercise price of
$8.40 per share. No options became exercisable or were forfeited during 1997.
The awards granted during 1997 terminate in 10 years and have a graded vesting
schedule that provides for 100% vesting in four years as follows: Year 1 - 10%,
Year 2 - 35%, Year 3 - 65%, Year 4 - 100%.
Pro forma information, as required by SFAS 123, has been determined as if the
Company had accounted for stock options awarded under the Plan under the fair
value method as defined by SFAS 123. The fair value of these options was
estimated at the date of grant using the Black Scholes option pricing model with
the following weighted-average assumptions: risk-free rate of 6.5%; expected
common stock market price volatility factor of 30%; and an average expected life
of the options of six years. The weighted average fair value of each option on
the date of grant using the option pricing model was $3.26. If fair value based
accounting in accordance with SFAS 123 had been used to measure stock based
compensation cost, the Company's consolidated net loss would have increased by
$40,000 or $0.03 per share for the year ended December 31, 1997. This pro forma
impact only takes into account options granted since January 1, 1997 and is
likely to increase in future years as additional options are granted and
amortized ratably over the vesting period.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
THEATER LEASES - A substantial portion of the Company's theaters and the
corporate office are operated under lease arrangements with initial lease terms
and renewal options. Future minimum rental payments for all
37
<PAGE> 41
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
non-cancellable operating leases having initial or remaining lease terms in
excess of one year as of December 31, 1997 are:
Year ending December 31,
1998 $ 2,685,334
1999 2,699,106
2000 2,646,440
2001 2,557,795
2002 2,602,006
2003 and thereafter 17,837,239
------------
$ 31,027,920
============
Certain theaters operated by the company have operating leases that contain
escalating clauses. For these leases, the aggregate rent payments over the lease
term are recognized on a straight-line basis over the lease term. The
differences between the expense charged to operations and amounts payable under
such leases are recorded annually as deferred rent expense, which will
ultimately reverse over the lease term. In addition, leases require additional
amounts to be paid for common area maintenance and/or contingent rental payments
based on a percent of net revenues of the theater in excess of a predetermined
amount. Total rent expense for the years ended December 31, 1996 and 1997 was
approximately $802,000 and $1,287,000, respectively.
ACQUISITION COMMITMENTS - During September 1995, the Company entered into an
option agreement providing for the lease of three New York theater locations
with the option to purchase certain assets of the three theaters through
September 2000. In consideration of the option granted, the Company made an
initial $200,000 payment which was financed by the seller. Until exercise of the
option, the Company is required to make annual payments which are recorded as
interest expense in the accompanying financial statements. It is the Company's
intention to ultimately exercise this option.
In November 1997, the Company entered into an agreement to acquire a theater
upon completion of construction of such theater for a price of $1 million to be
paid in common stock of the Company. The closing date under this agreement will
occur within ten business days after receipt of a valid construction permit, but
in no event later than January 1999. Neither the Company nor the seller is
obligated to close on this agreement if a valid construction permit is not
obtained by June 1998.
EMPLOYMENT AGREEMENT - The Company is obligated through May 2003 to pay its
President and Chief Executive Officer an annual base salary of $120,000, plus an
additional amount based on gross revenue, provided that such total does not to
exceed $750,000.
38
<PAGE> 42
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 11 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
1996 1997
-----------------------------
Cash paid for interest $ 623,656 $ 1,179,000
Non-cash investing and financing activities
Issuance of common stock as consideration
for theaters acquired 1,110,000 1,203,125
Issuance of subordinated notes payable as
consideration for theaters acquired 5,000,000 6,000,000
Issuance of Class B redeemable preferred stock
as consideration for theaters acquired 750,000
Conversion of subordinated notes payable
into Class B redeemable preferred stock 600,000
Repurchase of warrants 1,000,000
Common stock issued upon termination of
preferred stock redemption right 26,000
Fair value of warrants issued in connection
with subordinated debt and bank financing 439,533
Conversion of subordinated note payable
(related party) into common stock 80,000
NOTE 12 - SUPPLEMENTAL DISCLOSURE OF LOSS PER SHARE
1996 1997
----------------------------
Net Loss $(218,328) $(1,328,938)
Less: Preferred stock dividends -- (26,000)
--------- -----------
Loss available to common stockholders $(218,328) $(1,354,938)
========= ===========
Weighted average shares outstanding 744,038 1,312,865
--------- -----------
Basic and diluted loss per share $ (0.29) $ (1.03)
========= ===========
The Class A preferred stock and warrant, underwriter warrants and incentive
stock options outstanding are potentially convertible into 972,500 shares of
common stock and have not been included in the computation of diluted loss per
share as the effect would have been antidilutive. The Company's loss per share
for the year ended December 31, 1996 has been restated in accordance with SFAS
128, as described in Note 1.
39
<PAGE> 43
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 13 - RELATED PARTY TRANSACTIONS
In June 1997 the Company entered into a consulting and confidentiality
agreement with a director and stockholder of the Company to assist the
Company in the identification of theater acquisition candidates and provide
other services as requested by the Company. The director/stockholder is
also an executive vice president of First New York Realty Co., Inc. ("First
New York"). To the extent, if any, that the director/stockholder identifies
any person who is interested in leasing a site to the Company in his
capacity as an employee of First New York and the Company determines to
lease that site, First New York could be entitled to a commission from that
person and the director/stockholder would then be entitled to a commission
from First New York. During the years ended December 31, 1996 and 1997 the
Company incurred $12,000 and $17,000, respectively in consulting fees to
the director/stockholder.
In May 1997 the Company renewed its agreement with an affiliated entity who
is a preferred stockholder and whose managing directors are directors of
the Company, to provide business strategy and financial and investment
management services for a fee equal to $60,000 per year. The Company
incurred fees for such services of $30,000 and $50,000 in 1996 and 1997,
respectively.
A director of the Company is an officer of the entity that served as the
underwriter for the Offering. The director was appointed to the Company's
board of directors subsequent to consummation of the Offering. Amounts paid
to the underwriter for services provided at the time of the Offering were
$1,013,000.
NOTE 14 - SUBSEQUENT EVENTS
In February 1998, the Company extended its existing Credit Facility through
the issuance of a Term Note C in the amount of $5.8 million to be used for
additional acquisitions. Interest is due quarterly at prime plus 1.5%.
Principal payments are to be paid quarterly commencing October 1, 1998 with
final payment due September 2002. The Company borrowed $3.8 million under
Term Note C to fund the acquisition of three theaters subsequent to
December 31, 1997. The Company continues to pursue the acquisition of
additional theaters, the development of new theaters and the addition of
screens to existing theaters.
In March 1998, the Company adopted the Clearview Cinema Group 401(K) Plan
(the "401(K) Plan") that covers all employees of the Company who have
reached the age of 21 and have completed one year of service, as defined.
The 401(K) Plan provides for employee elective contributions up to 15% of
annual compensation, with matching contributions by the Company of 50% of
the first 6% of the employees' compensation contributed. Additionally, the
Company, at its discretion may make profit-sharing contributions to the
401(K) Plan. Employees vest 100% in the Company's matching contributions
and profit sharing contributions after three years of service.
40
<PAGE> 44
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
On December 16, 1997, the Board of Directors of the Company approved
the recommendation by the Audit Committee of the Board of Directors to (i)
engage the firm of Price Waterhouse LLP as the Company's principal independent
accountant and (ii) dismiss Wiss & Company LLP ("Wiss & Company") as such
principal accountant.
The Board of Directors retained Wiss & Company to act as the Company's
principal independent accountant in October 1996, after dismissing the firm of
Dorfman, Abrams, Music & Co. as the such principal accountant. The report
prepared by Wiss & Company for the fiscal year ended December 31, 1996 did not
contain any adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal year ended December 31, 1996 and the subsequent
interim period through December 16, 1997, (i) the Company had no disagreements
with Wiss & Company on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements if not resolved to its satisfaction would have caused it to make
reference to the subject matter of such disagreement in connection with its
reports, and (ii) Wiss & Company has not advised the registrant of any
reportable events as defined in subparagraphs (B)(1) through (3) of Regulation
S-B Item 304(a)(1)(iv). A letter from Wiss & Company was attached to the
Company's Current Report on Form 8-K filed December 16, 1997, as Exhibit 16.01.
42
<PAGE> 45
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information concerning the Company's directors and the information
concerning compliance with Section 16(a) of the Exchange Act is incorporated by
reference to the Company's definitive Proxy Statement for the Annual
Stockholders' Meeting to be held June 11, 1998.
The information concerning the Company's executive officers is provided
in Part I hereof.
ITEM 10. EXECUTIVE COMPENSATION.
This information is incorporated by reference to the Company's
definitive Proxy Statement for the Annual Stockholders' Meeting to be held June
11, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This information is incorporated by reference to the Company's
definitive Proxy Statement for the Annual Stockholders' Meeting to be held June
11, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information is incorporated by reference to the Company's
definitive Proxy Statement for the Annual Stockholders' Meeting to be held June
11, 1998.
43
<PAGE> 46
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
2.01 Agreement of Purchase and Sale by and among United Artists Exhibit 2.01 to
Theatre Circuit, Inc., United Artists Properties I Corp., Registration Statement on
Mamaroneck Playhouse Holding Corporation and CCC Form SB-2 filed May 27, 1997
Bronxville Cinema Corp., CCC Mamaroneck Cinema Corp., CCC
Wayne Cinema Corp., CCC BC Realty Corp., CCC Cinema 304
Corp., CCC Larchmont Cinema Corp. and the Company, dated
July 21, 1997
2.02 Asset Purchase Agreement dated as of November 21, 1997 by Exhibit 2.01 to Current
and among Clearview Cinema Group, Inc., CCC Succasunna Report on Form 8-K filed
Cinema Corp., CCC Parsippany Cinema Corp., F&N Cinema, November 21, 1997
Inc., Roxbury Cinema, Inc., John Nelson, Pamela Ferman and
Seth Ferman.
2.03 Merger Agreement dated as of November 21, 1997 by and Exhibit 2.02 to Current
among Clearview Cinema Group, Inc., CCC Mansfield Cinema Report on Form 8-K filed
Corp., Warren County Cinemas, Inc., John Nelson, Pamela November 21, 1997
Ferman and Seth Ferman.
2.04 Agreement and Plan of Reorganization dated as of November Exhibit 2.01 to Current
14, 1997 by and among the Clearview Cinema Group, Inc., Report on Form 8-K filed
CCC Bellevue Cinema Corp., The New Bellevue Theater Corp. December 12, 1997
and Jesse Sayegh
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
2.05 Asset Purchase Agreement dated as of November 14, 1997 by Exhibit 2.02 to Current
and among Clearview Cinema Group, Inc., CCC Cedar Grove Report on Form 8-K filed
Cinema Corp., C.J.M. Enterprises, Inc. and Jesse Sayegh, December 12, 1997
as amended by Amendment No. 1 to Asset Purchase Agreement
dated as of December 12, 1997
2.06 Asset Purchase Agreement dated as of November 14, 1997 by Exhibit 2.03 to Current
and among Clearview Cinema Group, Inc., CCC Kin Mall Report on Form 8-K filed
Cinema Corp., Kin Mall Cinemas, Inc., C.J.M. Enterprises, December 12, 1997
Inc. and Jesse Sayegh, as amended by Amendment No. 1 to
Asset Purchase Agreement dated as of December 12, 1997
2.07 Asset Purchase Agreement dated as of November 14, 1997 by Exhibit 2.04 to Current
and among Clearview Cinema Group, Inc., CCC Middlebrook Report on Form 8-K filed
Cinema Corp., Middlebrook Galleria Cinemas, Inc. and Jesse December 12, 1997
Sayegh, as amended by Amendment No. 1 to Asset Purchase
Agreement dated as of December 12, 1997
3.01 Amended and Restated Certificate of Incorporation of Exhibit 3.01 to Quarterly
Clearview Cinema Group, Inc. Report on Form 10-QSB for
the Quarter ended June 30,
1997
3.02 Amended and Restated By-laws of Clearview Cinema Group, Exhibit 3.02 to Quarterly
Inc. Report on Form 10-QSB for
the Quarter ended June 30,1997
4.01 Specimen Common Stock Certificate Exhibit 4.01 to
Registration Statement on
Form SB-2 filed May 27, 1997
</TABLE>
45
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
4.02 Certificate of Designations, Preferences, Rights and Filed Herewith
Limitations of Class B Nonvoting Cumulative Redeemable
Preferred Stock of Clearview Cinema Group, Inc.
9.01 Voting Trust Agreement by and between Brett E. Marks and Exhibit 9.01 to
A. Dale Mayo as Voting Trustee, dated December 21, 1994 Registration Statement on
Form SB-2 filed May 27, 1997
9.02 Voting Trust Agreement by and between Michael C. Rush and Exhibit 9.02 to
A. Dale Mayo as Voting Trustee, dated June 20, 1995 Registration Statement on
Form SB-2 filed May 27, 1997
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. Exhibit 9.03 to
and A. Dale Mayo as Voting Trustee, dated May 29, 1996 Registration Statement on
Form SB-2 filed May 27, 1997
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay Exhibit 9.04 to
and A. Dale Mayo as Voting Trustee, dated July 31, 1996 Registration Statement on
Form SB-2 filed May 27, 1997
9.05 Voting Trust Agreement by and between Louis G. Novick and Exhibit 9.05 to
A. Dale Mayo as Voting Trustee, dated August 30, 1996. Registration Statement on
Form SB-2 filed May 27, 1997
9.06 Voting Trust Agreement dated as of November 21, 1997 by Exhibit 9.01 to Current
and among F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Report on Form 8-K filed
Dale Mayo, as Trustee November 21, 1997
9.07 Voting Trust Agreement dated as of December 12, 1997 by Exhibit 9.01 to Current
and among The New Bellevue Theater Corp., Jesse Sayegh and Report on Form 8-K filed
A. Dale Mayo, as Trustee December 12, 1997
10.01 Employment Agreement by and between the Company and A. Exhibit 10.08 to
Dale Mayo, dated May 29, 1996 Registration Statement on
Form SB-2 filed May 27, 1997
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.02 Collective Agreement by and among Cinema Grand Avenue, Exhibit 10.36 to
Inc., Triplex Movies at Port Washington, Inc. and the Registration Statement on
Company, CCC Grand Avenue Cinema Corp., CCC Port Form SB-2 filed May 27, 1997
Washington Cinema Corp., dated September 8, 1995
10.03 Management Agreement by and among Cinema Herricks, Inc., Exhibit 10.37 to
the Company, and CCC Herricks Cinema Corp. dated Registration Statement on
September 8, 1995 Form SB-2 filed May 27, 1997
10.04 Letter modifying Management Agreement and Collective Exhibit 10.38 to
Agreement dated November 17, 1995 Registration Statement on
Form SB-2 filed May 27, 1997
10.05 Escrow Agreement by and among Cinema Grand Avenue, Inc., Exhibit 10.39 to
Triplex Movies at Port Washington, Inc., the Company, CCC Registration Statement on
Grand Avenue Cinema Corp. and CCC Port Washington Cinema Form SB-2 filed May 27, 1997
Corp., dated September 8, 1995
10.06 Escrow Agreement by and among Cinema Herricks, Inc., the Exhibit 10.40 to
Company and CCC Cinema Herricks Corp., dated September 8, Registration Statement on
1995 Form SB-2 filed May 27, 1997
10.07 Agreement and Plan of Reorganization among the Company, Exhibit 10.41 to
CCC Emerson Cinema Corp. and Emerson Cinema, Inc., dated Registration Statement on
May 29, 1996 Form SB-2 filed May 27, 1997
10.08 Indemnification Escrow Agreement, by and among the Exhibit 10.42 to
Company, CCC Emerson, Inc. and Jack Wenarsky, dated Registration Statement on
May 29, 1996 Form SB-2 filed May 27, 1997
10.09 Asset Purchase Agreement among the Company, CCC Washington Exhibit 10.43 to
Cinema Corp., CCC Allwood Cinema Corp., CCC New City Registration Statement on
Cinema Corp., Township of Washington Cinema, Inc., Allwood Form SB-2 filed May 27, 1997
Clifton Cinema, Inc. and New City Cinema, Inc., dated
May 29, 1996
</TABLE>
47
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.10 Indemnification Escrow Agreement by and among the Company, Exhibit 10.44 to
CCC Washington Cinema Corp., CCC Allwood Cinema Corp., CCC Registration Statement on
New City Cinema Corp. And Township of Washington Theatre, Form SB-2 filed May 27, 1997
Inc., Allwood Clifton Cinema, Inc., New City Cinema, Inc.
and Jack Wenarsky, dated May 29, 1996
10.11 Non-Competition Agreement, by and among the Company, CCC Exhibit 10.46 to
Emerson Cinema, Inc., and John Nelson, Pamela Ferman and Registration Statement on
Seth Ferman, dated May 29, 1996 Form SB-2 filed May 27, 1997
10.12 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Exhibit 10.47 to
Tenafly Cinema Corp., CCC Bergenfield Cinema Corp., CCC Registration Statement on
Closter Cinema Corp. and the Company, dated December 13, Form SB-2 filed May 27, 1997
1996
10.13 Assignment of Real Estate Lease, by and between Allwood Exhibit 10.48 to
Clifton Cinema, Inc. and CCC Allwood Cinema Corp., dated Registration Statement on
May 29, 1996, assigning that certain lease dated Form SB-2 filed May 27, 1997
November 5, 1986 by and between 96 Market Associates, as
lessor and Assignor, as amended pursuant to the Lease
Modification Agreement dated October 10, 1989.
10.14 Assignment of Real Estate Lease by and between New City Exhibit 10.49 to
Cinemas, Inc. and CCC New City Cinema Corp., dated Registration Statement on
May 29, 1996, assigning that certain lease dated Form SB-2 filed May 27, 1997
January 18, 1965, by and between Bridon Realty Co., as
lessor, and Irving Sherman and David Sanders, as assigned
by Irving Sherman and David Sanders to New City Town
Theatre, Inc. pursuant to an Assignment Agreement dated
February 10, 1981, as further amended pursuant to an
Addendum to Lease dated November 14, 1990, as further
assigned by New City Town Theatre, Inc. to Assignor
pursuant to an Assignment and Assumption of Lease dated
November 14, 1990.
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.15 Assignment of Real Estate Lease by and between Emerson Exhibit 10.50 to
Cinema, Inc. and CCC Emerson Cinema Corp., dated May 29, Registration Statement on
1996, assigning that certain lease by and between Robert Form SB-2 filed May 27, 1997
Nelson, Bernat Nelson and Leo Zucker doing business as
Robert Lee Realty Co., a partnership and Irving Sherman,
David Sanders and Albert Margulies, dated January 18,
1965, as further amended by Lessor and Emerson Town
Theatre, Inc. pursuant to an Extension and Modification of
Lease dated July 12, 1982, as further amended by Lessor
and Emerson Town Theatre, Inc. pursuant to an Addendum to
Lease dated June 1, 1986, and further amended and assigned
by Emerson Town Theatre, Inc. to Emerson Cinema, Inc.
pursuant to an Addendum to Lease dated November 18, 1988
among Lessor, Emerson Town Theatre, Inc. and Assignor.
10.16 Form of Lock-up Agreement Exhibit 10.52 to
Registration Statement on
Form SB-2 filed May 27, 1997
10.17 Form of Consent and Waiver Agreement by and among the Exhibit 10.53 to
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Registration Statement on
Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Form SB-2 filed May 27, 1997
Michael C. Rush, Paul and Cindy Kay and Louis G. Novick
10.18 Form of Termination Agreement for Stockholders and Exhibit 10.54 to
Registration Rights Agreement by and among the Company, Registration Statement on
CMNY Capital II, L.P., MidMark Capital, L.P., A. Dale Form SB-2 filed May 27, 1997
Mayo, Brett E. Marks, Michael C. Rush, Emerson Cinema,
Inc., Paul and Cindy Kay and Louis G. Novick
10.19 Form of Exchange and Termination Agreement by and among Exhibit 10.55 to
the Company, MidMark Capital, L.P., and A. Dale Mayo Registration Statement on
Form SB-2 filed May 27, 1997
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.20 Form of Exchange and Termination Agreement by and among Exhibit 10.56 to
the Company, CMNY Capital II, L.P., CMCO, Inc., Robert G. Registration Statement on
Davidoff, A. Dale Mayo, Brett E. Marks and Michael C. Rush Form SB-2 filed May 27, 1997
10.21 Form of Registration Rights Agreement by and among the Exhibit 10.58 to
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Registration Statement on
Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Form SB-2 filed May 27, 1997
Michael C. Rush, Paul and Cindy Kay and Louis G. Novick
10.22 Form of Consulting Agreement by and between the Company Exhibit 10.59 to
and MidMark Associates, Inc. Registration Statement on
Form SB-2 filed May 27, 1997
10.23 The Provident Bank commitment letter, dated July 30, 1997 Exhibit 10.61 to
Registration Statement on
Form SB-2 filed May 27, 1997
10.24 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan Exhibit 10.63 to
Registration Statement on
Form SB-2 filed May 27, 1997
10.25 Consulting and Confidentiality Agreement by and between Exhibit 10.64 to
the Company and Brett E. Marks Registration Statement on
Form SB-2 filed May 27, 1997
10.26 Amended and Restated Credit Agreement by and among Exhibit 10.01 to Quarterly
Clearview Cinema Group, Inc., its wholly-owned Report on Form 10-QSB for
Subsidiaries, and The Provident Bank, dated September 12, the Quarter ended June 30,
1997 1997
10.27 Agreement, dated as of September 1, 1997, by among Exhibit 10.02 to Quarterly
Clearview cinema Group, Inc., First New York Reality Co. Report on Form 10-QSB for
Inc., and Brett Marks the Quarter ended June 30,
1997
10.28 Subordinated Promissory Note dated as of November 21, 1997 Exhibit 10.01 to Current
in the amount of $4.0 million. Report on Form 8-K filed
November 21, 1997
</TABLE>
50
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.29 Subordinated Promissory Note dated as of November 21, 1997 Exhibit 10.02 to Current
in the amount of $2.0 million. Report on Form 8-K filed
November 21, 1997
10.30 Registration Rights Agreement dated as of November 21, Exhibit 10.03 to Current
1997 by and among Clearview Cinema Group, Inc., F&N Report on Form 8-K filed
Cinema, Inc. and Roxbury Cinema, Inc. November 21, 1997
10.31 Assignment by F&N Cinema, Inc. dated November 7, 1997 Exhibit 10.04 to Current
assigning to CCC Parsippany Cinema Corp. that certain Report on Form 8-K filed
Ground Lease between The Trustees of Net Realty Holding November 21, 1997
Trust and F&N Cinema, Inc. dated May 12, 1993, as amended
by the First Amendment to Ground Lease dated July 11,
1994, and as further amended by Second Amendment to Ground
Lease dated December 19, 1994.
10.32 Assignment, Acceptance of Assignment and Consent to Exhibit 10.05 to Current
Assignment of Lease between Roxbury Cinema Inc. and CCC Report on Form 8-K filed
Succasunna Cinema Corp., dated November 21, 1997, November 21, 1997
assigning that certain Lease between First Roxbury Company
and Roxbury Cinema Inc. dated May 24, 1989, as amended by
Lease Modification Agreement dated May 2, 1990, and as
further amended by Second Lease Modification Agreement
dated December 20, 1994.
10.33 Lease dated December 1997 between Jesse Y. Sayegh and CCC Exhibit 10.01 to Current
Bellevue Cinema Corp. together with Rider to Lease, as Report on Form 8-K filed
amended by Rider Attachment to Lease dated December 12, December 12, 1997
1997
10.34 Registration Rights Agreement dated as of December 12, Exhibit 10.02 to Current
1997 by and among Clearview Cinema Group, Inc., The New Report on Form 8-K filed
Bellevue Theater Corp. and Jesse Sayegh December 12, 1997
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
10.35 Assignment and Assumption and Consent to Assignment of Exhibit 10.03 to Current
Lease dated December 12, 1997 by and among Jesse Sayegh, Report on Form 8-K filed
CCC Cedar Grove Cinema Corp., Clearview Cinema Group, Inc. December 12, 1997
and Leonard Diener Investment Company, assigning that
certain Lease Agreement by and between Beatrice Diener
d/b/a/ Leonard Diener Investment Company and Jesse Sayegh
dated May 29, 1990, as amended by letter dated March 26,
1997
10.36 Assignment and Assumption and Consent to Assignment of Exhibit 10.04 to Current
Lease dated December 12, 1997 by and among Jesse Sayegh, Report on Form 8-K filed
CCC Kin Mall Cinema Corp., Clearview Cinema Group, Inc. December 12, 1997
and C.J.M. Enterprises, Inc., assigning that certain Lease
by and between Lester M. Entin Associates and C.J.M.
Enterprises, Inc. dated December 17, 1991, as amended by
First Amendment to lease dated December 31, 1996
10.37 Assignment and Assumption and Consent to Assignment of Exhibit 10.05 to Current
Lease dated December 12, 1997 by and among Jesse Sayegh, Report on Form 8-K filed
CCC Middlebrook Cinema Corp., Clearview Cinema Group, December 12, 1997
Inc., Westwood Oaks, Inc. and Westwood Oaks Associates,
assigning that certain Lease by and between Westwood Oaks,
Inc. and Jesse Sayegh dated September 28, 1993, together
with Rider LC to Lease
10.38 First Amendment to Amended and Restated Credit Agreement Exhibit 10.07 to Current
dated as of December 12, 1997 by and among Clearview Report on Form 8-K filed
Cinema Group, Inc., et al. and The Provident Bank December 12, 1997
10.39 Second Amendment to Amended and Restated Credit Agreement Filed Herewith
dated as of February 13, 1998, by and among Clearview
Cinema Group, Inc., et al. and The Provident Bank
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
16.01 Letter from Dorfman, Abrams, Music & Co., Exhibit 16.01 to
dated July 30, 1997 Registration Statement on
Form SB-2 filed May 27, 1997
16.02 Letter regarding change in certifying accountants Exhibit 16.01 to Current
Report on Form 8-K filed
December 16, 1997
21.01 Significant Subsidiaries Filed Herewith
23.01 Consent of Price Waterhouse LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
27.01 Financial Data Schedule Filed Herewith
</TABLE>
(b) REPORTS ON FORM 8-K.
The Company filed a report on Form 8-K under Items 2 and 7 thereof
on November 21, 1997 and amended on February 2, 1998, which related to the
Company's acquisition of certain assets from F&N Cinema, Inc. and Roxbury
Cinema, Inc., comprising the operations of two multiplex theaters with a total
of 22 screens located in Morris County, New Jersey. The Company filed a report
of Form 8-K under Items 2 and 7 thereof on December 12, 1997, and amended
February 23, 1998, which related to the Company's acquisition of certain
assets from the New Bellevue Theater Corp., C.J.M. Enterprises, Inc., Kin Mall
Cinemas, Inc. and Middlebrook Galleria Cinemas, Inc., comprising the operations
of four multiplex theaters with a total of 27 screens located in Essex County,
Morris County, and Monmouth County, New Jersey. The Company filed a report on
Form 8-K under Item 4 on December 16, 1997 relating to the Company's change
in accountants.
53
<PAGE> 56
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CLEARVIEW CINEMA GROUP, INC.
Date: March 31, 1998 __________________________________
A. Dale Mayo
Chairman, Chief Executive Officer and
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
________________________ Chairman, Chief Executive Officer and March 31, 1998
A. Dale Mayo President (Principal Executive Officer)
________________________ Treasurer and Chief Financial Officer March 31, 1998
Joan M. Romine (Principal Financial and Accounting Officer)
________________________ Director March 31, 1998
Wayne L. Clevenger
________________________ Director March 31, 1998
Robert G. Davidoff
________________________ Director March 31, 1998
Philip M. Getter
________________________ Director March 31, 1998
Brett E. Marks
________________________ Director March 31, 1998
Sueanne H. Mayo
________________________ Director March 31, 1998
Denis Newman
</TABLE>
54
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ ----------- -------------------
<S> <C> <C>
4.02 Certificate of Designations, Preferences, Rights and Limitations Filed Herewith
of Class B Nonvoting Cumulative Redeemable Preferred Stock of
Clearview Cinema Group, Inc.
10.39 Second Amendment to Amended and Restated Credit Agreement dated Filed Herewith
as of February 13, 1998, by and among Clearview Cinema Group,
Inc., et al. and The Provident Bank
21.01 Significant Subsidiaries Filed Herewith
23.01 Consent of Price Waterhouse LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
27.01 Financial Data Schedule Filed Herewith
</TABLE>
55
<PAGE> 1
Exhibit 4.02
CERTIFICATE OF DESIGNATIONS, PREFERENCES, RIGHTS
AND LIMITATIONS
OF
CLASS B NONVOTING CUMULATIVE REDEEMABLE PREFERRED STOCK
("Certificate of Designations")
OF
CLEARVIEW CINEMA GROUP, INC.
a Delaware corporation
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Clearview Cinema Group, Inc., a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in Section 4
of Article IV of its Amended and Restated Certificate of Incorporation dated
August 18, 1997 (the "Amended and Restated Certificate of Incorporation"), and
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware, its Board of Directors has adopted the following
resolution creating a new class of its Preferred Stock, $.01 par value,
designated as Class B Nonvoting Cumulative Redeemable Preferred Stock:
RESOLVED, that a new class of authorized Preferred Stock of
the Corporation be hereby created and established, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such class, and the
qualifications, limitations or restrictions thereof are as follows:
(a) Designation and Amount. The shares of such class shall be
designated as "Class B Nonvoting Cumulative Redeemable Preferred Stock"
(referred to herein as, the "Class B Redeemable Preferred Stock") and the number
of shares constituting such class shall be 20,000.
(b) Dividends. The holder of each share of Class B Redeemable Preferred
Stock shall be entitled to receive on the 15th day of April, July, October and
January, or the next business day if such 15th business day is not a business
day (each such date being referred to herein as a "Dividend Payment Date"), out
of funds legally available for such purpose, and as declared by the Board of
Directors, cumulative quarterly cash dividends in a per share amount equal to
$.291667 for each day during which such share was outstanding during the
calendar quarter immediately preceding the Dividend Payment Date. In case the
Corporation shall (i) pay a dividend on the Class B Redeemable Preferred Stock
in shares of Class B Redeemable Preferred Stock, (ii) subdivide the outstanding
shares of Class B Redeemable Preferred Stock, or (ii) combine the outstanding
shares of Class B Redeemable Preferred Stock into a smaller number of shares,
the per share dividend rate in effect immediately prior thereto shall be
proportionately adjusted so that the aggregate dividend rate of all shares of
Class B Redeemable Preferred Stock immediately after such event shall equal the
aggregate dividend rate of all shares of Class B Redeemable Preferred Stock
immediately prior thereto. An adjustment made pursuant to this section shall
become effective (x) upon the effective date in the case of a subdivision or
combination or (y) upon the record date in the case of a dividend of shares.
Quarterly dividends shall be paid on the basis of 90 days in each full quarter
regardless of the number of actual days in each quarter, but dividends for less
than a full quarter shall be based on the actual number of days during which
each share is outstanding. Each dividend declared by the Board of Directors
shall be paid to
<PAGE> 2
the holders of shares of the Class B Redeemable Preferred Stock as such holders'
names appear on the stock books on the related record date. Such record date
shall be the last day of the calendar quarter immediately preceding the
applicable Dividend Payment Date. Dividends in arrears with respect to any past
Dividend Payment Date with respect to shares of Class B Redeemable Preferred
Stock may be declared by the Board of Directors and paid on the outstanding
shares of the Class B Redeemable Preferred Stock on any date fixed by the Board
of Directors, whether or not a regular Dividend Payment Date, to the holder of
the shares of the Class B Redeemable Preferred Stock on the related record date
fixed by the Board of Directors, which shall not be less than 10 nor more than
45 days before the date fixed for the payment of such dividend. Any dividend
payment made on shares of the Class B Redeemable Preferred Stock shall first be
credited against the dividends accrued with respect to the earliest Dividend
Payment Date for which dividends have not been paid. If full cumulative
dividends have not been paid or declared and set aside for payment on the shares
of the Class B Redeemable Preferred Stock, all cumulative dividends on the
shares of the Class B Redeemable Preferred Stock shall be declared and paid pro
rata to the holders of the outstanding shares of the Class B Redeemable
Preferred Stock entitled thereto, so that in all cases the amount of dividends
declared per share on the shares of the Class B Redeemable Preferred Stock bear
to each other the same ratio that accumulated dividends per share on all shares
of Class B Redeemable Preferred Stock bear to each other. No holder of shares of
Class B Redeemable Preferred Stock shall be entitled to any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends, as
provided in this section (b). No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment on the shares of Class B
Redeemable Preferred Stock that may be in arrears. Except as set forth above,
for so long as any shares of the Class B Redeemable Preferred Stock are
outstanding, no dividends may be paid or declared and set aside for payment or
other distribution made upon the Class A Convertible Preferred Stock, Common
Stock or any other stock of the Corporation ranking junior to the shares of the
Class B Redeemable Preferred Stock as to dividends ("Junior Stock"), nor may any
shares of Junior Stock be redeemed, purchased or otherwise acquired by the
Corporation for consideration (or any payment made to or available for a sinking
fund for the redemption of any shares of such stock), unless full cumulative
dividends on all shares of Class B Redeemable Preferred Stock for all Dividend
Payment Dates accruing on or prior to the date of such transaction have been or
contemporaneously are declared and paid through the most recent Dividend Payment
Date. If dividends are not paid on a Dividend Payment Date, then such dividends
shall accrue and be cumulative from and after such Dividend Payment Date.
Notwithstanding the foregoing, no dividends shall be paid or payable
with respect to any shares of Class B Redeemable Preferred Stock if such payment
is otherwise prohibited by section (h) of this Certificate of Designations or by
the Delaware General Corporation Law. Dividends with respect to shares of Class
B Redeemable Preferred Stock may also be subject to setoff and recoupment as
contemplated by section (k) hereof.
(c) Liquidation Rights. In the event of any Liquidation Event (as
defined herein), the holders of shares of Class B Redeemable Preferred Stock
shall be entitled to receive from the assets of the Corporation, whether
represented by capital stock, paid-in capital or retained earnings, payment in
cash of an amount equal to the aggregate Liquidation Value (as defined herein)
of such Class B Redeemable Preferred Stock, plus a further amount equal to any
dividends that have been (or, pursuant to Section (b) hereof, were required to
have been) declared on the Class B Redeemable Preferred Stock but which remain
unpaid, before any distribution of assets shall be made to the holders of the
Class A Convertible Preferred Stock, Common Stock, or other Junior Stock. If,
upon such Liquidation Event, the assets distributable to the holders of shares
of Class B Redeemable Preferred Stock shall be insufficient to permit the
payment in full to such holders of the preferential amounts to which they are
entitled, then
-2-
<PAGE> 3
such assets shall be distributed ratably among the shares of Class B Redeemable
Preferred Stock. The "Liquidation Value" of each share of Class B Redeemable
Preferred Stock shall be equal to $1,000. In case the Corporation shall (i) pay
a dividend on the Class B Redeemable Preferred Stock in shares of Class B
Redeemable Preferred Stock, (ii) subdivide the outstanding shares of Class B
Redeemable Preferred Stock, or (ii) combine the outstanding shares of Class B
Redeemable Preferred Stock into a smaller number of shares, the "Liquidation
Value" in effect immediately prior thereto shall be proportionately adjusted so
that the aggregate Liquidation Value of all shares of Class B Redeemable
Preferred Stock immediately after such event shall equal the aggregate
Liquidation Value of all shares of Class B Redeemable Preferred Stock
immediately prior thereto. An adjustment made pursuant to this section shall
become effective (x) upon the effective date in the case of a subdivision or
combination or (y) upon the record date in the case of a dividend of shares.
After payment in full of the aggregate Liquidation Value and dividends, as set
forth above, to the holders of shares of Class B Redeemable Preferred Stock, the
remaining assets of the Corporation available for payment and distribution to
stockholders may be paid and distributed to the holders of the Class A
Convertible Preferred Stock, Common Stock and any other Junior Stock. For
purposes hereof, the term "Liquidation Event" shall mean any (A) merger or
consolidation other than a merger or consolidation in which persons who,
immediately prior to the closing of such transaction, were the holders of voting
securities of the Corporation having more than fifty percent (50%) of the voting
power of the outstanding voting securities of the Corporation (which includes
all Common Stock, all Class A Convertible Preferred Stock and all other voting
securities created in or under the Amended and Restated Certificate of
Incorporation) hold, immediately after such transaction, voting securities of
the surviving entity having more than fifty percent (50%) of the voting power of
the outstanding voting securities of the surviving entity, (B) sale of all or
substantially all of the assets of the Corporation, or (C) liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
(d) Voting Rights. Holders of shares of Class B Redeemable Preferred
Stock shall not be entitled to any voting rights except upon matters with
respect to which the holders of shares of Class A Convertible Preferred Stock,
Class B Redeemable Preferred Stock and Common Stock have separate voting rights
as expressly provided in this section (d), the Corporation's Amended and
Restated Certificate of Incorporation or as required by Delaware law. The
affirmative vote of the holders of more than fifty percent (50%) of the
outstanding shares of Class B Redeemable Preferred Stock, voting separately as a
single class, shall be required to authorize any amendment to this Certificate
of Designations or the Corporation's Amended and Restated Certificate of
Incorporation if such amendment would adversely affect the powers, preferences
or rights of the Class B Redeemable Preferred Stock.
(e) Redeemable at Option of the Corporation. The Corporation shall have
the right to redeem any one or more shares of Class B Redeemable Preferred Stock
at any time and from time to time at a redemption price of $1,000 per share plus
an amount equal to all unpaid dividends thereon, including accrued dividends,
whether or not declared, to the redemption date. Notice of any redemption of the
Class B Redeemable Preferred Stock shall be mailed at least 30 days prior to the
date fixed for redemption to each holder of Class B Redeemable Preferred Stock
to be redeemed, at such holder's address as it appears on the books of the
Corporation. In order to facilitate the redemption of the Class B Redeemable
Preferred Stock, the Board of Directors may fix a record date for the
determination of holders of Class B Redeemable Preferred Stock to be redeemed,
or may cause the transfer books of the Corporation to be closed for the transfer
of the Class B Redeemable Preferred Stock, not more than 20 days nor less than
10 days prior to the date fixed for such redemption. Whenever shares of Class B
Redeemable Preferred Stock are to be redeemed, the Corporation shall cause to be
mailed, within the time period specified in this section, a written notice of
redemption (a "Notice of Redemption") by first-class mail, postage prepaid, to
each holder of shares of Class B Redeemable Preferred Stock to be redeemed as
its
-3-
<PAGE> 4
name and address appear on the stock books of the Corporation. Each Notice of
Redemption shall state (i) the redemption date, (ii) the redemption price, (iii)
the number of shares of Class B Redeemable Preferred Stock to be redeemed and
identification (by certificate number, CUSIP number or otherwise) of the shares
of Class B Redeemable Preferred Stock to be redeemed, (iv) the place or places
where shares of Class B Redeemable Preferred Stock are to be surrendered for
payment of the redemption price, (v) that dividends on the shares to be redeemed
will cease to accumulate on such redemption date, and (vi) the provision of this
Certificate of Designations under which the redemption is being made. A Notice
of Redemption shall be deemed given on the day that it is mailed. On or after
the redemption date each holder of shares of Class B Redeemable Preferred Stock
that were called for redemption shall surrender the certificate evidencing such
shares, properly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank, and bearing all necessary
transfer tax stamps thereto affixed and cancel led, to the Corporation at the
place designated in the Notice of Redemption and shall then be entitled to
receive payment of the redemption price for each share. If fewer than all of the
shares are to be redeemed, the Corporation shall issue new certificates for the
shares not redeemed. If fewer than all of the outstanding shares of the Class B
Redeemable Preferred Stock are to be redeemed, the number of shares to be
redeemed shall be determined by the Corporation ratably, by lot or by holder or
by such other method as the Corporation shall deem appropriate. Solely for the
purpose of determining the number of shares of Class B Redeemable Preferred
Stock to be stated in a Notice of Redemption as subject to an optional
redemption, the amount of funds legally available for such redemption shall be
determined as of the date of such Notice of Redemption. The Corporation shall
declare and pay any and all dividends that are due or are in arrears prior to
any such redemption.
(f) Redemption at Option of the Holder. Each holder of shares of Class
B Redeemable Preferred Stock shall have the right to cause the Corporation to
redeem, and upon exercise of such right, the Corporation shall redeem, any
shares of Class B Redeemable Preferred Stock held by such holder at a redemption
price equal to its Liquidation Value plus an amount equal to all unpaid
dividends thereon, including accrued dividends, whether or not declared, to the
redemption date, at any time after the occurrence of any one or more of the
following events:
(i) the Corporation shall (A) file, or consent by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy or insolvency
law of any jurisdiction, (B) make an assignment for the benefit of its
creditors, (C) consent to the appointment of a custodian, receiver, trustee or
other officer with similar powers of itself or of any substantial part of its
property, (D) be adjudicated insolvent or be liquidated, or (E) take corporate
action for the purpose of any of the foregoing;
(ii) a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the
Corporation, a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
if an order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidations of the Corporation, or if any petition for any such relief shall
be filed against the Corporation and such petition shall not be dismissed within
60 days;
(iii) the date five years after the date such shares
of shall have been issued; and
(iv) within ten business days after the date of
closing of the issuance by the Corporation of debt securities aggregating at
least $70 million in an offering governed by Rule 144A issued by the Securities
Exchange Commission under the Securities Act of 1933.
-4-
<PAGE> 5
Notice of any such redemption of the Class B Redeemable Preferred Stock shall be
delivered in writing to the Corporation at least 10 business days prior to the
date fixed for redemption. The record date for the determination of holders of
Class B Redeemable Preferred Stock to be redeemed and the date that the
Corporation may cause the transfer books of the Corporation to be closed for the
transfer of the Class B Redeemable Preferred Stock, shall be the date of
redemption set forth in such written notice. The place or places where shares of
Class B Redeemable Preferred Stock are to be surrendered for payment of the
redemption price shall be the Corporation's executive offices. Dividends on the
shares to be redeemed will cease to accumulate on the redemption date. On or
after the redemption date each holder of shares of Class B Redeemable Preferred
Stock that were required to be redeemed shall surrender the certificate
evidencing such shares, properly endorsed in blank for transfer or accompanied
by proper instruments of assignment or transfer in blank, and bearing all
necessary transfer tax stamps thereto affixed and cancel led, to the Corporation
at its executive offices and shall then be entitled to receive payment of the
redemption price for each share. The Corporation shall declare and pay any and
all dividends that are due or are in arrears prior to any such redemption.
(g) Restrictions on Redemption. Notwithstanding the foregoing, no
shares of Class B Redeemable Preferred Stock may be redeemed if such redemption
is otherwise prohibited by section (h) of this Certificate of Designations or by
the Delaware General Corporation Law. Payments in respect of redemptions with
respect to shares of Class B Redeemable Preferred Stock may also be subject to
setoff and recoupment as contemplated by section (k) hereof.
(h) Subordination to Indebtedness; Restrictions on Transfer. All
dividend payments on and payments for redemptions with respect to shares of
Class B Redeemable Preferred Stock are subordinate and subject in right of
payment, to the prior payment in full of all Indebtedness of the Corporation to
the extent provided in one or more subordination agreements by and among the
Corporation, the holder of the Class B Redeemable Preferred Stock and the holder
of the Indebtedness. For purposes hereof, "Indebtedness" means the principal of,
premium, if any, and interest (including any interest accruing after the filing
of a petition in bankruptcy) on and other amounts due on or in connection with
any indebtedness of the Corporation as defined in and arising under any loan,
credit, security or similar agreement with any bank, insurance company, or other
commercial financial institution, in any case whether arising prior to, on or
after the date of issuance of the Class B Redeemable Preferred Stock, and all
renewals, extensions, and refundings thereof. The certificates representing
outstanding shares of Class B Redeemable Preferred Stock may contain a legend
referring to the subordination agreement or agreements among the Corporation,
the holder of the Class B Redeemable Preferred Stock and the holder of the
Indebtedness. If a holder shares of Class B Redeemable Preferred Stock has
entered into such a subordination agreement and the identity of the holder of
the Indebtedness subsequently changes, then the holder of the Class B Redeemable
Preferred Stock shall from time to time at the Corporation's request enter into
a new subordination agreement or agreements containing terms substantially
similar to the terms of such holder's then existing subordination agreement, and
if such holder fails to do so, then upon notice by the Corporation to such
holder, all dividend payments on and payments for redemptions with respect to
the shares of Class B Redeemable Preferred Stock held by such holder shall be
suspended. Also, if a holder of shares of Class B Redeemable Preferred Stock has
entered into such a subordination agreement, then such holder may not assign any
shares of Class B Redeemable Preferred Stock that are subject to such
subordination agreement unless and until the proposed assignee executes and
delivers a subordination agreement containing terms substantially similar to the
terms of such holder's then existing subordination agreement, and any attempted
transfer of shares of Class B Redeemable Preferred Stock without complying with
the terms hereof shall be null and void.
-5-
<PAGE> 6
(i) Approval of Holders of Class A Convertible Preferred Stock;
Increase in Authorized Shares; Additional Classes of Preferred Stock. The
issuance by the Corporation of any shares of Class B Redeemable Preferred Stock
shall first be approved by the holders of the Class A Convertible Preferred
Stock in the manner and to the extent provided in the Corporation's Amended and
Restated Certificate of Incorporation. Subject to the rights of the holders of
the Corporation's Class A Convertible Preferred Stock as provided in the
Corporation's Amended and Restated Certificate of Incorporation, the Corporation
may at any time and from time to time increase the number of authorized shares
of Class B Redeemable Preferred Stock and create and issue any shares of any
series or class of the Corporation's Preferred Stock that have dividend and
liquidation rights that are senior to or pari passu with the Class B Redeemable
Preferred Stock.
(j) Reacquired Shares. Any shares of Class B Redeemable Preferred Stock
redeemed or purchased or otherwise acquired by the Corporation in any manner
whatsoever shall not be reissued as Class B Redeemable Preferred Stock and shall
be retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new class of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions or restrictions on issuance set forth herein.
(k) Setoff Rights. Shares of Class B Redeemable Preferred Stock may be
issued in connection with the acquisition by the Corporation or its subsidiaries
of certain businesses, and, notwithstanding anything else herein to the
contrary, payments of dividends on such shares of Class B Redeemable Preferred
Stock and payments in respect of redemptions of such shares of Class B
Redeemable Preferred Stock may be subject to the Corporation's rights of setoff
and recoupment to the extent and in the manner expressly set forth in any
agreement related to such acquisition. Any such right of setoff or recoupment
shall survive any transfer or assignment of such shares of Class B Redeemable
Preferred Stock.
IN WITNESS WHEREOF, Clearview Cinema Group, Inc. has caused this
Certificate of Designations, Preferences, Rights and Limitations of Class B
Nonvoting Cumulative Redeemable Preferred Stock to be duly executed by its
President and attested to by its Secretary and has caused its corporate seal to
be affixed hereto this __ day of _______, 199_.
CLEARVIEW CINEMA GROUP, INC.
By______________________________
A. Dale Mayo, President
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<PAGE> 1
Exhibit 10.39
===============================
SECOND AMENDMENT TO
AMENDED AND RESTATED
CREDIT AGREEMENT
BY AND AMONG
CLEARVIEW CINEMA GROUP, ET AL.
AND
THE PROVIDENT BANK,
Agent and Lender
dated as of
February 13, 1998
===============================
<PAGE> 2
JOINDER AGREEMENT AND SECOND AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (as hereinafter
defined) ("Second Amendment") dated as of February 13, 1998, by and among
CLEARVIEW CINEMA GROUP, INC., a Delaware corporation, ("Holdings"), CLEARVIEW
THEATRE GROUP, INC., a New Jersey corporation, CCC ALLWOOD CINEMA CORP., a
Delaware corporation, CCC B.C. REALTY CORP., a Delaware corporation, CCC BAYONNE
CINEMA CORP., a Delaware corporation, CCC BEDFORD CINEMA CORP., a Delaware
corporation, CCC BELLEVUE CINEMA CORP., a Delaware corporation, CCC BERGENFIELD
CINEMA CORP., a Delaware corporation, CCC BRONXVILLE CINEMA CORP., a Delaware
corporation, CCC CEDAR GROVE CINEMA CORP., a Delaware corporation, CCC CHESTER
TWIN CINEMA CORPORATION, a New Jersey corporation, CCC CINEMA 304 CORP., a
Delaware corporation, CCC CLOSTER CINEMA CORP., a Delaware corporation, CCC
EDISON CINEMA CORP., a Delaware corporation, CCC EMERSON CINEMA CORP., a
Delaware corporation, CCC GRAND AVENUE CINEMA CORP., a Delaware corporation, CCC
HERRICKS CINEMA CORP., a Delaware corporation, CCC KIN MALL CINEMA CORP., a
Delaware corporation, CCC KISCO CINEMA CORP., a Delaware corporation, CCC
LARCHMONT CINEMA CORP., a Delaware corporation, CCC MADISON TRIPLE CINEMA CORP.,
a New Jersey corporation, CCC MAMARONECK CINEMA CORP., a Delaware corporation,
CCC MANASQUAN CINEMA CORPORATION, a New Jersey corporation, CCC MANSFIELD CINEMA
CORP., a Delaware corporation, CCC MARBORO CINEMA CORP., a Delaware corporation,
CCC MIDDLEBROOK CINEMA CORP., a Delaware corporation, CCC NEW CITY CINEMA CORP.,
a Delaware corporation, CCC PARSIPPANY CINEMA CORP., a Delaware corporation, CCC
PORT WASHINGTON CINEMA CORP., a Delaware corporation, CCC ROSLYN CINEMA CORP., a
Delaware corporation, CCC SUCCASUNNA CINEMA CORP., a Delaware corporation, CCC
SUMMIT CINEMA CORP. (formerly known as 343-349 Springfield Avenue Corp.), a New
Jersey corporation, CCC TENAFLY CINEMA CORP., a Delaware corporation, CCC
WASHINGTON CINEMA CORP., a Delaware corporation, CCC WAYNE CINEMA CORP., a
Delaware corporation, CCC WOODBRIDGE CINEMA CORP., a Delaware corporation, CCC
BABYLON CINEMA CORP., a Delaware corporation, CCC BALA CYNWYD CINEMA CORP., a
Delaware corporation, CCC CARMEL CINEMA CORP., a Delaware corporation, CCC
CLARIDGE CINEMA CORP., a Delaware corporation, CCC FRANKLIN SQUARE CINEMA CORP.,
a Delaware corporation, CCC GREAT NECK CINEMA CORP., a Delaware corporation, CCC
MANHASSET CINEMA CORP., a Delaware corporation, CCC MORRISTOWN CINEMA CORP., a
Delaware corporation, CCC NARBERTH CINEMA CORP., a Delaware corporation, CCC
SCREENING ZONE CINEMA CORP., a Delaware corporation, and MILLBURN TWIN CINEMA
CORP., formerly known as CCC CRANFORD CINEMA CORP., a Delaware corporation,
(hereinafter, together with their successors in title and assigns called
"Borrowers" and each of which is a "Borrower") and THE PROVIDENT BANK, an Ohio
banking corporation, as Agent ("Agent") for various Lenders as set forth in the
Credit Agreement.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 3
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PRELIMINARY STATEMENT
WHEREAS, Borrowers (as originally executed or joined thereafter), Agent
and Lenders have entered into an Amended and Restated Credit Agreement dated as
of September 12, 1997 as amended by First Amendment to Amended and Restated
Credit Agreement dated as of December 12, 1997 (collectively, "Credit
Agreement"); and
WHEREAS, Borrowers have requested that Provident make available to
Borrowers an additional Five Million Eight Hundred Thousand and 00/100 Dollars
($5,800,000.00) to finance a portion of the purchase price relative to various
Permitted Acquisitions (as defined in the Credit Agreement); and
WHEREAS, in connection with various Permitted Acquisitions, Holdings
wishes to create and capitalize CCC Claridge Cinema Corp., a Delaware
corporation, CCC Babylon Cinema Corp., a Delaware corporation, CCC Bala Cynwyd
Cinema Corp., a Delaware corporation, CCC Carmel Cinema Corp., a Delaware
corporation, CCC Franklin Square Cinema Corp., a Delaware corporation, CCC Great
Neck Cinema Corp., a Delaware corporation, CCC Manhasset Cinema Corp., a
Delaware corporation, CCC Morristown Cinema Corp., a Delaware corporation, CCC
Narberth Cinema Corp., a Delaware corporation, CCC Screening Zone Cinema Corp.,
a Delaware corporation, Millburn Twin Cinema Corp., formerly known as CCC
Cranford Cinema Corp., a Delaware corporation, (collectively the "New
Subsidiaries" and each individually a "New Subsidiary"); and
WHEREAS, pursuant to Section 8.1 of the Credit Agreement, each New
Subsidiary must execute and deliver a Joinder Agreement and such other documents
as Agent shall reasonably require to obligate such New Subsidiaries under the
Credit Agreement and other Loan Documents and to cause such New Subsidiaries to
grant Agent a security interest and lien in all of their respective Property;
and
WHEREAS, Borrowers and Lenders now wish to amend the Credit Agreement
and related documents in accordance with the terms and provisions hereof.
NOW, THEREFORE, the parties hereto agree to supplement and amend the
Credit Agreement upon such terms and conditions as follows:
1. Capitalized Terms. All capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement unless the context hereof
requires otherwise. Any definitions as capitalized terms set forth herein shall
be deemed incorporated into the Credit Agreement as amended by this Second
Amendment.
2. Definitions; Exhibits. (a) The following definitions contained in
Section 1.2 of the Credit Agreement are hereby amended in their entirety to read
as follows:
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 4
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"Applicable Margin" shall mean the Margin Adjustment Rate plus
the amount set forth below, as a percentage, to be added to the Prime
Rate, as the case may be, and used in calculating the rate of interest
for the applicable Loan at any time (the "Base Margin"):
<TABLE>
<CAPTION>
============================================================================================
MARGIN RATIO APPLICABLE MARGIN
Revolving Credit Loan,
Term Loan A, Term Loan B and
Term Loan C
--------------------------------------------- ----------------------------------------------
--------------------------------------------- ----------------------------------------------
<S> <C>
Greater than or equal to 3.25 to 1.00 1.50%
--------------------------------------------- ----------------------------------------------
Greater than or equal to 3.00 to 1.00 1.25%
but less than 3.25 to 1.00
--------------------------------------------- ----------------------------------------------
Greater than or equal to 2.75 to 1.00 1.00%
but less than 3.00 to 1.00
--------------------------------------------- ----------------------------------------------
Greater than or equal to 2.50 to 1.00 .75%
but less than 2.75 to 1.00
--------------------------------------------- ----------------------------------------------
Less than 2.50 to 1.00 .50%
============================================================================================
</TABLE>
The determination of Base Margin hereunder as of any Interest Adjustment Date
shall be based on unaudited quarterly Compliance Certificates required to be
delivered pursuant to Section 6.1(b) hereof, provided that in the event of any
discrepancy between computations based upon any compliance certificate and the
related audited financial statements furnished pursuant to Section 6.1(b), the
computation based upon the audited financial statements shall govern
(retroactive to the Interest Adjustment Date as to which such adjustment
applies). In the event of a retroactive correction of the determinations of the
Base Margin in favor of the Lenders, the amount of interest thereby overdue and
payable by the Borrowers shall be paid to the Lenders within five (5) days after
the date of such retroactive correction. In the event of a retroactive
correction of the determinations of the Base Margin in favor of the Borrowers,
the amount of interest overpaid by the Borrowers shall be applied by the Lender
as a credit against any fees, charges and interest or principal payments then
due hereunder or to become due hereunder to Lenders. No downward adjustment of
the Base Margin shall occur if, at the time such downward adjustment would
otherwise be made, there shall exist any Default or Event of Default, provided
that such downward adjustment shall be made on the first day of the first month
after the date on which any Default or Event of Default shall have been waived
or cease to exist.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 5
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"Notes" mean, collectively, the Revolving Credit Notes, the
Term Loan A Notes, the Term Loan B Notes and the Term Loan C Notes.
"Note" shall mean any one of the Notes, unless specifically identified.
"Term Notes" mean collectively, the Term Loan A Notes, the
Term Loan B Notes and the Term Loan C Notes. "Term Note" shall mean any
one of the Notes, unless specifically identified.
(b) Section 1.2 of the Credit Amendment is hereby amended to
add the following definitions to read in their entirety as follows:
"Margin Adjustment Rate" shall initially mean zero percent
(0.0%); provided, however, that as of November 10, 1998, the Margin
Adjustment Rate shall adjust to two percent (2.0%) and shall increase
by one-half percent (0.5%) every one hundred eighty (180) days
thereafter.
"Term Loan C" means the loan made pursuant to Section 2.2(d).
"Term Loan C Notes" mean, collectively, with respect to the
Term Loan C, the promissory notes of Borrowers in the aggregate amount
not to exceed the Term Loan C in or substantially in the form of
Exhibit K-4 hereto.
(c) Exhibit K-4 to this Agreement is hereby added in its
entirety as Exhibit K-4 to the Credit Agreement.
3. Schedules. (a) The following Schedules to the Credit Agreement are
amended in their entirety by the corresponding Schedules to this Second
Amendment:
i. Schedule 1 - Lenders
ii. Schedule 5.9 - Indebtedness for Borrowed Money
(b) The following Schedules to the Credit Agreement are
amended to add the information contained in the corresponding Schedules to this
Second Amendment:
i. Schedule 3.1 - Mortgaged Property and Leasehold Interests
ii. Schedule 5.1(a) - Jurisdictions where qualified to do business
iii. Schedule 5.1(b) - Capital Stock
iv. Schedule 5.1(c) - Subsidiaries
v. Schedule 5.9 - Indebtedness for Borrowed Money
vi. Schedule 5.21 - UCC Filing Offices
4. Commitments. Section 2.1 of the Credit Agreement is hereby
amended to read in its entirety as follows:
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 6
-5-
Section 2.1 Commitments. Each Lender, severally and not
jointly, agrees, upon the terms and subject to the conditions contained
in this Agreement, (i) to make the Revolving Credit Loans to Borrowers
from time to time prior to the Termination Date, in a principal amount
equal to such Lender's Participation Percentage of the aggregate
principal amount of such Loan requested by Borrowers on each occasion;
(ii) to make the Term Loan B upon satisfaction of the conditions
contained in Section 4.3 of this Agreement; and Provident agrees upon
the terms and subject to the conditions contained in this Agreement, to
make the Term Loan C upon satisfaction of the conditions contained in
Sections 4.3 and of this Agreement; and
5. Making the Loans. Section 2.2 of the Credit Agreement is hereby
amended to add a new Section 2.2(d) to read in its entirety as follows:
Section 2.2(d) Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
each Borrower herein set forth, Provident agrees to lend to Borrowers
the Term Loan C in the aggregate amount of Five Million Eight Hundred
Thousand and 00/100 Dollars ($5,800,000.00). Amounts borrowed under
this subsection 2.2(d) and repaid or prepaid may not be reborrowed.
6. Draws, Advances and Settlement of Payments and Advances. Section
2.3(c) of the Credit Agreement is hereby amended to read in its entirety as
follows:
Section 2.3(c) All advances or disbursements of the Term Loan
B proceeds and the Term Loan C proceeds shall be effectuated at
Borrowers' request and shall be subject to the conditions set forth in
Section 4.3 hereof.
7. The Notes. The first paragraph of Section 2.4 of the Credit
Agreement is hereby amended to read in its entirety as follows, the second
paragraph remains unchanged:
Section 2.4 The Notes. The absolute and unconditional
obligation of Borrowers to (i) repay to each Lender its respective Pro
Rata Share of the principal of the Revolving Credit Loan, the Term Loan
A and the Term Loan B, and the interest thereon; and (ii) to repay to
Provident the Term Loan C and the interest thereon, shall be evidenced
by a separate Revolving Credit Note, Term Loan A Note, Term Loan B
Note, as and to the extent supplemented by each Term B Note Supplement,
and Term Loan C Note for each Lender, as applicable, in the amount of
its respective Credit Commitment for each Loan.
8. Repayments and Prepayments of Principal.
(a) Section 2.6(c) of the Credit Agreement is hereby amended
in its entirety to read as follows:
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 7
-6-
Section 2.6(c) Repayments on the Term Loan C.
Borrowers shall pay to Agent, and Borrowers hereby authorize
Agent to charge the respective accounts of Borrowers
maintained with Agent, commencing on October 1, 1998 and on
each Principal Payment Date thereafter, quarterly installments
of principal in the amount of one-twentieth (1/20th) of the
aggregate face amounts of the Term Loan C Notes (or such
lesser principal amount of the Term Loan C as shall then be
outstanding), plus accrued interest thereon at the Interest
Rate applicable to the Term Loan C; provided that in any event
the last installment of principal on the Term Loan C shall be
due and payable on the Termination Date (if not earlier
prepaid) and shall be in an amount sufficient to pay in full
the entire unpaid principal amount, plus accrued interest
thereon, of the Term Loan C. Borrowers shall have the right to
repay the principal of the Term Loan C in full or in part at
any time and from time to time without any penalty or premium,
unless such payment is made in connection with the prepayment
of the Term Loans under conditions described in Sections
2.2(a) and 2.6(l) and the termination of the Lenders'
Commitments hereunder.
(b) Section 2.6(d) of the Credit Agreement is hereby amended
in its entirety to read as follows:
Section 2.6(d) Repayments on the Revolving Credit
Loan; Revolving Credit Loan Overadvance. (i) Borrowers shall
have the right to repay the principal of the Revolving Credit
Loan in full or in part at any time and from time to time
without any penalty or premium, unless such payment is made in
connection with the prepayment of the Term Loans under
conditions described in Sections 2.2(a) and 2.6(l) and the
termination of the Lenders' Commitments hereunder.
(ii) If at any time the aggregate amount of
the Revolving Credit Loan outstanding to Borrowers exceeds the
Maximum Revolving Commitment, Borrowers shall be obligated to
immediately prepay the amount that exceeds the Maximum
Revolving Commitment.
(c) Section 2.6(j) of the Credit Agreement is hereby amended
in its entirety to read as follows:
Section 2.6(j) Maturity. Subject to the terms and
conditions of this Agreement, Borrowers will be entitled to
reborrow all or any part of the principal of the Revolving
Credit Notes repaid or prepaid prior to the Termination Date.
The Credit Commitments shall terminate and all of the
indebtedness evidenced by the Revolving Credit Notes and the
Term Notes, shall, if not sooner paid, be in any
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 8
-7-
event absolutely and unconditionally due and payable in full
by Borrower on September 12, 2002, the date of the final
maturity of such Notes.
(d) Section 2.6(k) of the Credit Agreement is hereby amended
in its entirety to read as follows:
Section 2.6(k) Application of Proceeds. With respect
to mandatory prepayments described in paragraphs 2.6(f)
through 2.6(h) above, such prepayments shall first be applied
in the inverse order of maturity to the payment of the Loans
in accordance with each Lenders' Pro Rata Share.
9. Payments and Computations.
(a) Section 2.7(b)(i) of the Credit Agreement is hereby
amended in its entirety to read as follows:
Section 2.7(b)(i)No Default. If the Notes have not
been accelerated pursuant to Section 9.2(b) and if no Default
or Event of Default hereunder or under the Notes or any of the
other Loan Documents shall have occurred and be continuing at
the time Agent receives such funds, in the following manner:
(a) first, to the payment of all fees, charges, and other sums
(with exception of principal and interest) due and payable to
Agent or Lenders under the Notes, this Agreement or the other
Loan Documents at such time; (b) second, to the payment of all
of the interest which shall be due and payable on the
principal of the Notes at the time of such payment in
accordance with each Lender's Pro Rata Share; (c) third, to
the payment of all the principal of the Notes at the time of
such payment in accordance with each Lender's Pro Rata Share;
and (d) fourth, to Borrowers.
10. Indemnification.
(a) Section 10.11 of the Credit Agreement is hereby amended in
its entirety to read as follows:
Section 10.11 Indemnification. Each Lender agrees to
indemnify Agent (to the extent Agent is not promptly
reimbursed by Borrower), in an amount equal to its Pro Rata
Share of all Obligations from and against any and all
liabilities, obligations, losses, damages, penalties,
interests, actions, judgments and suits of any kind or nature
whatsoever which may be imposed on, incurred by or asserted
against Agent relating to or arising out of this Agreement or
any of the other Loan Documents or relating to any action
taken or omitted by such Agent under this Agreement or any of
the other Loan Documents, provided that no Lender shall be
liable for any portion of such liabilities, obligations,
losses, damages, penalties,
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 9
-8-
interest, actions, judgments or suits resulting from Agent's
own gross negligence or willful misconduct.
11. Conditions Precedent to Subsequent Lending under the Term Loan B
and Term Loan C.
(a) The first sentence of Section 4.3 of the Credit Agreement
is hereby amended in its entirety to read as follows:
Section 4.3 Conditions Precedent to Subsequent
Lending under the Term Loan B and Term Loan C. Advances under
the Term Loan B and Term Loan C shall be subject to the
discretion of Agent, are subject to the conditions precedent
in Sections 4.2 hereof, and the proceeds thereof shall be used
solely for such purposes as Agent may from time to time
approve and are further subject to the satisfaction, prior
thereto or concurrently therewith, of each of the following
conditions precedent:
(b) Section 4.3(a) of the Credit Agreement is hereby amended
in its entirety to read as follows:
(a) Disbursements under the Term Loan B and the Term
Loan C shall be made only in connection with a Permitted
Acquisition.
(c) Section 4.3(b) of the Credit Agreement is hereby amended
in its entirety to read as follows:
(b) Disbursements under the Term Loan C shall be made
prior to May 14, 1998 and disbursements under the Term Loan B
shall be made prior to October 1, 2000.
(d) Section 4.3(h) of the Credit Agreement is hereby amended
in its entirety to read as follows:
(h) The ratio of Consolidated Senior Indebtedness for
Borrowed Money outstanding after such proposed funding to
Consolidated EBITDA, determined on a proforma basis taking
into account such transaction using historical proforma
adjustments acceptable to Agent, shall not exceed 4.5 to 1.
(e) Section 4.3(i) of the Credit Agreement is hereby amended
in its entirety to read as follows:
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 10
-9-
Section 4.3(i) Each Borrower has executed and
delivered to Agent a Term B Note Supplement, or a Term Loan C
Note , as the case may be, and such Loan Documents as Agent
requires pursuant to the Permitted Acquisition.
12. Debt to EBITDA. Section 7.4 of the Credit Agreement is hereby
amended in its entirety to read as follows:
Section 7.4 Debt to EBITDA. As of the last day of each fiscal
quarter of Holdings, the ratio of Consolidated Indebtedness for
Borrowed Money outstanding as of such date to Consolidated EBITDA for
the twelve (12) months ending on each Computation Date shall not exceed
5.0 to 1.0.
13. Senior Debt to EBITDA. Section 7.5 of the Credit Agreement is
hereby amended in its entirety to read as follows:
Section 7.5 Senior Debt to EBITDA. As of the last day of each
fiscal quarter of Holdings, the ratio of Consolidated Senior
Indebtedness for Borrowed Money outstanding as of such date to
Consolidated EBITDA for the twelve (12) months ending on each
Computation Date shall not exceed 4.5 to 1.0.
14. Joinder Agreement. Each New Subsidiary hereby covenants and
agrees as follows:
(a) Each new Subsidiary hereby enters into this Second
Amendment in order to comply with Sections 6.14 and 8.1 of the Credit
Agreement.
(b) Each New Subsidiary hereby adopts the Credit Agreement, as
amended, agrees to be bound by all of the terms, conditions and
provisions thereof and of each of the Notes as if it was an original
party thereto, including without limitation the affirmative and
negative covenants in Articles 6 and 7 of the Credit Agreement, assumes
all of the duties and obligations of a Borrower to the Credit
Agreement, and reconfirms the representations and warranties set forth
in Article 5 of the Credit Agreement on and as of the date hereof as if
fully set forth herein.
(c) Each New Subsidiary shall be considered, and deemed to be,
for all purposes, a "Borrower" under the Credit Agreement and a maker
on the Notes as if each New Subsidiary had signed the Notes at the time
originally issued under the Credit Agreement and hereby, jointly and
severally, promises to pay or prepay when due all principal and
interest on the Notes whether at stated maturity or otherwise and to
pay or perform all of the Obligations of a Borrower under the Credit
Agreement in accordance with their respective terms, and each New
Subsidiary further agrees to execute and deliver to the Lenders the
Notes, upon the request of the Lenders, and if the Notes are reissued,
amended or restated for any reason after the date hereof to execute and
deliver such reissued, amended or restated Notes; provided, however,
that the liability of each New
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 11
-10-
Subsidiary shall not exceed the liability limitation applicable to New
Subsidiary in accordance with Section 2.12 of the Credit Agreement.
(d) To secure the prompt repayment of the Notes and the
Obligations, each New Subsidiary hereby grants, pledges and
collaterally assigns to Agent, on behalf of the Lenders, a lien and
security interest in and to all of each New Subsidiary's respective
personal property and fixtures, wherever located, whether now or
hereafter owned, existing or acquired or hereafter arising, including,
without limitation, the Collateral of each new subsidiary. Each New
Subsidiary shall execute UCC Financing Statements and such other
security documents as reasonably required by Agent to perfect the first
Lien (subject only to the Permitted First Liens) and security interest
in the Collateral.
(e) Each New Subsidiary shall be considered and deemed to be,
for all purposes a Borrower and Indemnitee under the Environmental
Indemnity Agreement dated May 29, 1996, as amended by the Amended and
Restated Environmental Indemnity Agreement dated September 12, 1997,
and agrees to be bound by the terms thereby as the same relates to any
Property.
(f) To secure further such liabilities and obligations, each
New Subsidiary shall grant to Agent, on behalf of the Lenders, a first
Lien, subject to the Permitted First Liens, upon all real property
owned or hereinafter acquired by such New Subsidiary and a first Lien,
subject to Permitted First Liens, on all leasehold interests of such
New Subsidiary now owed or hereinafter acquired, each of which are
identified on Schedule 3.1 attached hereto, and each such New
Subsidiary shall execute and deliver to Agent, on behalf of the
Lenders, the Leasehold Mortgages, Mortgages and valid assignments of
all other Property rights which now exist or arise hereafter from time
to time.
15. Reaffirmation of Covenants, Warranties and Representations.
Borrowers hereby agree and covenant that all representations and warranties in
the Credit Agreement, including without limitation all of those warranties and
representations set forth in Article 5, are true and accurate as of the date
hereof. Each Borrower further reaffirms all covenants in the Credit Agreement,
and reaffirm each of the affirmative covenants set forth in Article 6 and
financial covenants set forth in Article 7 and negative covenants set forth in
Article 8 thereof, as if fully set forth herein, except to the extent modified
by this Agreement.
16. Conditions Precedent to Closing of Second Amendment . On or prior
to the closing of the Second Amendment to Amended and Restated Credit Agreement
(hereinafter the "Second Amendment Closing Date"), each of the following
conditions precedent shall have been satisfied:
(a) Proof of Corporate Authority. Agent shall have received
from each Borrower (i) copies, certified by a duly authorized officer
to be true and complete on and as of the Second Amendment Closing Date,
of records of all action taken by such
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 12
-11-
Borrower to authorize the execution and delivery of this Agreement and
all other certificates, documents and instruments to which it is or is
to become a party as contemplated or required by this Second Amendment,
and its performance of all of its obligations under each of such
documents; (ii) certificates of good standing under the laws of the
state of such Borrower's incorporation and its good standing in each
state where such Borrower is required to qualify to conduct business;
and (iii) such other certificates as Agent in its sole discretion shall
require.
(b) Organizational Documents. Agent shall have received (i)
copies, certified by the Secretary or Assistant Secretary of such New
Subsidiary to be true and complete on and as of the Second Amendment
Closing Date, of the charter or other organizational documents and
by-laws of such New Subsidiary as in effect on the Second Amendment
Closing Date (together with all, if any, amendments thereto); and (ii)
the charter or other organizational documents of such New Subsidiary
certified by the applicable Secretary of State from each New
Subsidiary.
(c) Documents. Each of the documents to be executed and
delivered at the closing of the Second Amendment and all other
certificates, documents and instruments to be executed in connection
herewith shall have been duly and properly authorized, executed and
delivered by Borrower and shall be in full force and effect on and as
of the Second Amendment Closing Date.
(d) Legality of Transactions. No change in applicable law
shall have occurred as a consequence of which it shall have become and
continue to be unlawful (i) for Agent and each Lender to perform any of
its agreements or obligations under any of the Loan Documents, or (ii)
for any Borrower to perform any of its agreements or obligations under
any of the Loan Documents.
(e) Performance, Etc. Except as set forth herein, each
Borrower shall have duly and properly performed, complied with and
observed each of its covenants, agreements and obligations contained in
each of the Loan Documents. Except as set forth herein, no event shall
have occurred on or prior to the Second Amendment Closing Date, and no
condition shall exist on the Second Amendment Closing Date, which
constitutes a Default or an Event of Default.
(f) Payment of Closing Fees. Borrowers shall have paid to
Agent and each Lender the closing fees separately agreed to between
Agent, each Lender and Borrowers.
(g) Proceedings and Documents. All corporate, governmental and
other proceedings in connection with the transactions contemplated on
the Second Amendment Closing Date, each of the other Loan Documents and
all instruments and documents incidental thereto shall be in form and
substance reasonably satisfactory to Provident.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 13
-12-
(h) Changes; None Adverse. Since the date of the most recent
balance sheets of Borrowers delivered to Provident, no changes shall
have occurred in the assets, liabilities, financial condition,
business, operations or prospects of Borrowers which, individually or
in the aggregate, are material to a Borrower, and Provident shall have
completed such review of the status of all current and pending legal
issues as Agent shall deem necessary or appropriate.
17. Miscellaneous. (a) Borrowers shall reimburse Agent for all
fees and disbursements of legal counsel to Agent which shall have been
incurred by Agent in connection with the preparation, negotiation, review,
execution and delivery of this Second Amendment and the handling of any other
matters incidental hereto.
(b) All of the terms, conditions and provisions of the
Agreement not herein modified shall remain in full force and effect. In
the event a term, condition or provision of the Agreement conflicts
with a term, condition or provision of this Second Amendment, the
latter shall govern.
(c) This Second Amendment shall be governed by and shall be
construed and interpreted in accordance with the laws of the State of
Ohio.
(d) This Second Amendment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns.
(e) This Second Amendment may be executed in several
counterparts, each of which shall constitute an original, but all which
together shall constitute one and the same agreement.
[Remainder of page intentionally left blank. Signature page follows.]
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC.
<PAGE> 14
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
by or on behalf of each of the parties as of the day and in the year first above
written.
CLEARVIEW CINEMA GROUP, INC.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CLEARVIEW THEATRE GROUP, INC.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC ALLWOOD CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC B.C. REALTY CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BAYONNE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/1 of 9
<PAGE> 15
CCC BEDFORD CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BCCC BELLEVUE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BERGENFIELD CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BRONXVILLE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC CEDAR GROVE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC CHESTER TWIN CINEMA CORPORATION
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/2 of 9
<PAGE> 16
CCC CINEMA 304 CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC CLARIDGE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC CLOSTER CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC EDISON CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC EMERSON CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC GRAND AVENUE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/3 of 9
<PAGE> 17
CCC HERRICKS CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC KIN MALL CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC KISCO CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC LARCHMONT CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MADISON TRIPLE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MAMARONECK CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/4 of 9
<PAGE> 18
CCC MANASQUAN CINEMA CORPORATION
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MANSFIELD CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MARBORO CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MIDDLEBROOK CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC NEW CITY CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC PARSIPPANY CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/5 of 9
<PAGE> 19
CCC PORT WASHINGTON CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC ROSLYN CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC SUCCASUNNA CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC SUMMIT CINEMA CORP.
(formerly known as 343-349
Springfield Avenue Corp.)
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC TENAFLY CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC WASHINGTON CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/6 of 9
<PAGE> 20
CCC WAYNE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC WOODBRIDGE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BABYLON CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC BALA CYNWYD CINEMA, CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC CARMEL CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC FRANKLIN SQUARE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/7 of 9
<PAGE> 21
CCC MANHASSET CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC GREAT NECK CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC MORRISTOWN CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC NARBERTH CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
CCC SCREENING ZONE CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
MILLBURN TWIN CINEMA CORP.
By:
--------------------------
Name: A. Dale Mayo
Title: President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/8 of 9
<PAGE> 22
THE LENDERS:
THE PROVIDENT BANK
By:
------------------------------
Name: Christopher B. Gribble
Title: Vice President
THE BANK OF NEW YORK
By:
------------------------------
Name: Geoffrey C. Brooks
Title: Vice President
AGENT:
THE PROVIDENT BANK, as Agent
By:
------------------------------
Name: Christopher B. Gribble
Title: Vice President
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
CLEARVIEW CINEMA GROUP, INC. Signature Pages/9 of 9
<PAGE> 23
SCHEDULE 3.1
REAL PROPERTY INTERESTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------- ----------------------------------------
TYPE ON INTEREST NEW SUBSIDIARY PROPERTY LOCATION
- ---------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C>
Leasehold Estate CCC Claridge Cinema Corp.
-----------------------------------
-----------------------------------
-----------------------------------
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Babylon Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Bala Cynwyd Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Franklin Square Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Great Neck Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Manhasset Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Millburn Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Morristown Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Narberth Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
CCC Screening Zone Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
Millford Twin Cinema Corp. No real property acquired at this Time
- ---------------------------------------------------------------------------- ----------------------------------------
</TABLE>
<PAGE> 24
SCHEDULE 1
<TABLE>
<CAPTION>
PARTICIPATION
LENDER CREDIT COMMITMENT PERCENTAGE
=====================================================================================================================
<S> <C> <C>
THE PROVIDENT Revolving Credit Loan 72.22%
One East Fourth Street
___ Floor $722,222.22 72.22%
Cincinnati, Ohio 45202
Term Loan A
Christopher B. Gribble
(513) 579-2750 $8,666,666.67 72.22%
Fax: (513) 579-2858
Term Loan B
$16,611,111.11 72.22%
Term Loan C
$4,188,888.89
=====================================================================================================================
THE BANK OF NEW YORK Revolving Credit Loan 27.78%
One Wall Street
New York, New York 10286 $277,777.78
Geoffrey C. Brooks Term Loan A 27.78%
(212) 635-8475
Fax: (212) 635-8595 $3,333,333.33
Term Loan B 27.78%
$6,388,888.89
Term Loan 27.78%
$1,611,111.11
</TABLE>
<PAGE> 1
Exhibit 21.01
================================================================================
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
(all Delaware corporations except where noted otherwise)
================================================================================
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ===========================================================
<C> <C>
1. Clearview Cinema Group, Inc. 24. CCC Wayne Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
2. CCC Grand Avenue Cinema Corp. 25. CCC Bayonne Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
3. CCC Port Washington Cinema Corp. 26. CCC Marboro Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
4. CCC Herricks Cinema Corp. 27. CCC Roslyn Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
5. CCC Madison Triple Cinema Corp.- NJ 28. CCC Bellevue Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
6. CCC Manasquan Cinema Corp. - NJ 29. CCC Cedar Grove Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
7. Clearview Theatre Group, Inc. - NJ 30. CCC Kin Mall Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
8. CCC Chester Twin Cinema Corp. - NJ 31. CCC Mansfield Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
9. CCC Summit Cinema Corp. - NJ 32. CCC Middlebrook Cinema Corp.
(f/k/a 343-349 Springfield Avenue Corp.)
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
10. CCC Emerson Cinema Corp. 33. CCC Parsippany Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
11. CCC Allwood Cinema Corp. 34. CCC Succasunna Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
12. CCC New City Cinema Corp. 35. CCC Edison Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
13. CCC Washington Cinema Corp. 36. CCC Woodbridge Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
14. CCC Kisco Cinema Corp. 37. CCC Babylon Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
15. CCC Bedford Cinema Corp. 38. CCC Manhasset Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
16. CCC Tenafly Cinema Corp. 39. Millburn Twin Cinema Corp.
(f/k/a CCC Cranford Cinema Corp.)
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
17. CCC Bergenfield Cinema Corp. 40. CCC Morristown Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
18. CCC Closter Cinema Corp. 41. CCC Narberth Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
19. CCC B.C. Realty Corp. 42. CCC Bala Cynwyd Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
20. CCC Bronxville Cinema Corp. 43. CCC Great Neck Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
21. CCC Larchmont Cinema Corp. 44. CCC Franklin Square Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
22. CCC Mamaroneck Cinema Corp. 45. CCC Claridge Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
23. CCC Cinema 304 Corp. 46. CCC Screening Zone Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
47. CCC Carmel Cinema Corp.
- ----------------------------------------------------------- ===========================================================
- ----------------------------------------------------------- ===========================================================
48. CCC Cobble Hill Cinema Corp.
- ----------------------------------------------------------- ===========================================================
</TABLE>
<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-46879) of Clearview Cinema Group, Inc. of our
report dated March 19, 1998 included in Item 7 of this Form 10-KSB.
PRICE WATERHOUSE LLP
New York, New York
March 19, 1998
<PAGE> 1
Exhibit 23.02
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our reports dated February 10, 1997 relating to the
consolidated financial statements of Clearview Cinema Group, Inc., which is
included in Item 7 of this Form 10-KSB; April 1, 1997 relating to the combined
financial statements of the Nelson Ferman Theaters at Emerson, New City,
Allwood and Washington Township; April 10, 1997 relating to the combined
financial statements of Magic Cinemas at Bergenfield, Tenafly and Closter;
June 4, 1997 relating to the combined financial statements of United Artists
Theaters at Bronxville, Larchmont, Wayne, New City and Mamaroneck;
October 22, 1997 relating to the combined financial statements of the Nelson
Ferman Theaters at Parsippany and Roxbury; and December 4, 1997 relating to the
combined financial statements of the CJM Theaters at Kin-Mall, Middlebrook,
Cedar Grove and Bellevue.
WISS & COMPANY, LLP
Woodbridge, New Jersey
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CLEARVIEW CINEMA GROUP, INC. DECEMBER 31, 1997 CONSOLIDATED FINANCIAL STATEMENTS
AND IS QUANTIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001038754
<NAME> CLEARVIEW CINEMA GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
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<PERIOD-END> DEC-31-1997
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0
1,350
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</TABLE>
