<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1998
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
CLEARVIEW CINEMA GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 22-3338356
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
97 MAIN STREET
CHATHAM, NJ 07928
(973) 377-4646
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES AND PRINCIPAL PLACE OF BUSINESS)
------------------------
A. DALE MAYO
CLEARVIEW CINEMA GROUP, INC.
97 MAIN STREET
CHATHAM, NJ 07928
(973) 377-4646
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
JANICE C. HARTMAN ROBERT L. MAZZEO
KIRKPATRICK & LOCKHART LLP SOLOMAN, ZAUDERER, ELLENHORN
1500 OLIVER BUILDING FRISCHER & SHARP
PITTSBURGH, PA 15222-2312 45 ROCKEFELLER PLAZA
(412) 355-6500 SUITE 730
NEW YORK, NY 10111
(212) 956-3700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plan, please check the following box. /x/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share................................ 257,143 shares $20.25 $5,207,145.75 $1,536.11
======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(c) on the basis of the average of the
high and low sales prices for the Common Stock on June 30, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 1, 1998
PROSPECTUS
, 1998
257,143 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
This prospectus provides for the offering by Marshall Capital Management,
Inc. (the 'Selling Stockholder') of up to an aggregate of 257,143 shares (the
'Shares') of the Common Stock, par value $.01 per share ('Common Stock'), of
Clearview Cinema Group, Inc. (the 'Company'). The Shares represent shares of
Common Stock into which the 3,000 outstanding shares of Class C Convertible
Preferred Stock, $.01 par value (the 'Class C Preferred Stock') of the Company
were convertible on June 30, 1998. All of the outstanding Class C Preferred
Stock was acquired by the Selling Stockholder on April 23, 1998. See 'Selling
Stockholder.'
The Shares may be offered or sold by or for the account of the Selling
Stockholder from time to time or at one time, on one or more exchanges or
otherwise, at prices and on terms to be determined at the time of sale, to
purchasers directly or by or through brokers or dealers, who may receive
compensation in the form of discounts, commissions or concessions. The Selling
Stockholder and any such brokers or dealers may be deemed to be 'underwriters'
within the meaning of the United States Securities Act of 1933, as amended (the
'Securities Act'), and any discounts, concessions and commissions received by
any such brokers and dealers may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company will not receive any of the
proceeds from any sale of the Shares offered hereby. See 'Use of Proceeds,'
'Selling Stockholder' and 'Plan of Distribution.'
The Common Stock is listed on the American Stock Exchange (the 'AMEX') and
traded under the symbol 'CLV.' The last reported sale price of the Common Stock
on the AMEX on June 30, 1998 was $20.25 per share.
------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE EIGHT FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the United
States Securities Exchange Act of 1934 (the 'Exchange Act') and in accordance
therewith files periodic reports, proxy solicitation materials and other
information with the United States Securities and Exchange Commission (the
'Commission'). Such reports, proxy solicitation materials and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy and information statements and other information
may be found on the Commission's site address, http://www.sec.gov. The Common
Stock is listed on the AMEX. Such reports, proxy solicitation materials and
other information can also be inspected and copied at the offices of the AMEX at
86 Trinity Place, New York, New York 10006.
CAUTIONARY STATEMENTS
This Prospectus includes 'forward-looking statements' within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities and Exchange
Act of 1934, as amended (the 'Exchange Act'). All statements other than
statements of historical facts included in this Prospectus, including, without
limitation, the statements under 'Prospectus Summary,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and 'Business'
and located elsewhere herein regarding industry prospects, the Company's
prospects and the Company's financial position are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ('Cautionary
Statements') are disclosed in this Prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus
under 'Risk Factors.' All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
(i)
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and financial statements, including
the notes thereto, contained elsewhere in this Prospectus. As used in this
Prospectus, unless the context indicates otherwise, the terms the 'Company' and
'Clearview' refer to Clearview Cinema Group, Inc. and its subsidiaries.
THE COMPANY
Clearview is a major regional first run motion picture exhibitor that
operates primarily community-based multiplex theaters in affluent suburban
communities in the New York/New Jersey metropolitan area. Clearview offers a
broad mix of first run films with a particular focus on films designed to appeal
to sophisticated moviegoers and families with younger children residing in these
communities. As of June 30, 1998, the Company operated 40 theaters with a total
of 193 screens. As of the same date, after giving effect to the Pending
Acquisitions (as defined), the Company would have had 42 theaters with a total
of 200 screens. Through additions of screens to existing theaters and new
theater development, the Company also plans to add a total of 71 new screens by
March 31, 1999. Based on the number of screens currently operated, the Company
believes that it is one of the largest motion picture exhibitors in the New
York/New Jersey metropolitan region and the second largest in New Jersey, thus
enabling it to compete effectively with the major national theater circuits in
its markets. As of June 30, 1998, approximately 70.0% of the Company's theaters
were the sole exhibitors in their film zones, and approximately 18.0% were the
leading exhibitors in their film zones. For the year ended December 31, 1997, on
a pro forma basis after giving effect to the 1997 Acquisitions (as defined), the
1998 Acquisitions (as defined) and the Pending Acquisitions, the Company's
revenues and EBITDA (as defined) would have been approximately $47.6 million and
$9.2 million, respectively. For the three months ended March 31, 1998, on a pro
forma basis after giving effect to the 1998 Acquisitions, other than the Cobble
Hill Acquisition (as defined), and the Pending Acquisitions, the Company's
revenues and EBITDA would have been approximately $11.9 million and $2.3
million, respectively.
Clearview operates clean, comfortable, visually appealing and
service-oriented theaters predominantly located in affluent towns and
communities rather than in shopping malls or near highways. The Company believes
that, in many suburban communities in the Middle Atlantic and New England
states, theaters located in town or in community-based retail centers serve
audiences that prefer the convenience and familiarity of such theaters to the
larger out-of-town megaplex theaters that appear to be the focus of the major
theater circuits. Many of the Company's target markets are in densely populated,
affluent areas consisting of numerous small municipalities with local business
districts that are well-suited to the Company's strategy of operating
community-based theaters. In many of these areas it can be difficult for theater
circuit operators to build or expand theaters into large multiplexes or
megaplexes due to a lack of affordable real estate, zoning laws and community
resistance.
Founded in 1994 with four theaters and eight screens, the Company has grown
through both acquisitions and theater development. Since May 1996, the Company
has completed 13 acquisitions, representing 30 theaters with a total of 158
screens, and entered into agreements to operate or lease an additional five
theaters with a total of 15 screens. Management has successfully integrated
these theaters into its operations by reducing operating expenses and
implementing new operating standards, management controls and information
systems. The Company has also upgraded the seating, improved the sound and
projection equipment, refurbished the interior furnishings and broadened the
concession offerings in most locations. Additionally, since early 1995 the
Company has added seven screens to existing theaters and constructed a new
five-screen theater in an existing building, resulting in an aggregate of 40
theaters with a total of 193 screens as of June 30, 1998. See 'Business--
Existing Theaters and Pending Acquisitions.'
During the past ten years, overall movie theater attendance in the United
States has grown from 1,089 million in 1987 to 1,388 million in 1997. Admission
revenue increased from a total of approximately $4.3 billion in 1987 to
approximately $6.4 billion in 1997, or a compound annual growth rate of 4.1%.
The theatrical exhibition industry is fragmented. Although the eleven largest
theater circuits operated approximately 60% of the screens at May 1, 1997, 268
of the approximately 478 remaining exhibitors operated four or fewer
1
<PAGE>
screens. There is also a strong trend toward consolidation in the motion picture
exhibition industry. Two recent major transactions combined Cineplex Odeon
Corporation ('Cineplex') (approximately 1,729 screens) with Sony/Loews Theater
Exhibition Group ('Sony/Loews') (approximately 1,020 screens), and combined Act
III Cinemas ('Act III') (approximately 832 screens) with Regal Cinemas, Inc.
('Regal') (approximately 2,337 screens). The Company believes that it has an
opportunity to acquire additional theaters as the major circuits seek to divest
theaters which do not fit into their strategic plans and independent theater
operators find it increasingly difficult to compete with larger circuits.
OPERATING STRATEGY
The Company's objective is to expand its position as a major regional first
run motion picture exhibitor operating multiplex theaters based on strict
operating controls, principally at in-town locations or in retail centers that
are the focus of community life. The following are the key elements of the
Company's operating strategy:
Maintain and Expand Strong Regional Focus. Based on the number of screens
currently operated, the Company believes that it is one of the largest motion
picture exhibitors in the New York/New Jersey metropolitan region and is the
second largest in New Jersey, thus enabling it to compete effectively with the
major national theater circuits in its markets. In addition, at June 30, 1998,
based on the number of screens currently operated, the Company is the leading
motion picture exhibitor in such upscale suburban areas as Morris County, New
Jersey; Essex County, New Jersey; and the North Shore of Long Island. The
Company seeks to continue to acquire or develop theaters that are close to the
Company's existing theaters and to acquire or develop similar clusters of
theaters in other target markets in the Middle Atlantic and New England states.
Approximately 80% of the Company's theaters are within a 30 mile radius and all
of the Company's theaters are within a 50 mile radius. By developing clusters of
theaters, the Company generally reduces its operating expenses through the
sharing of skilled personnel and management oversight. Also, with a large number
of screens in one area, the Company can operate separate theaters as if they
were a single larger multiplex, thereby enabling the Company to offer a wide
selection of films, play successful films longer and play films with very strong
demand on a number of screens at one time.
Dominate Film Zones. The Company seeks to operate theaters that will be
the sole or leading exhibitors in their geographic film licensing zones. A
geographic film licensing zone or 'film zone' is a geographic area (typically
having a three to five mile radius in suburban markets) customarily recognized
by film distributors, in which a film is licensed for exhibition at only one
theater. As of June 30, 1998, approximately 70.0% of the Company's theaters were
the sole exhibitors in their film zones and approximately 18.0% were the leading
exhibitors in their film zones. Being the sole or leading exhibitor in a film
zone allows the Company to choose which films to exhibit from among the various
films licensed by the production companies. Management believes that this
flexibility in film selection, combined with management's experience and
expertise in selecting films for its target markets, is an important factor in
the Company's success.
Pursue Community-Based Niche Strategy. Clearview operates clean,
comfortable, visually appealing and service-oriented theaters in predominantly
affluent towns and communities rather than in shopping malls or near highways.
The Company believes that, in many suburban communities in the Middle Atlantic
and New England states, theaters located in town or in community-based retail
centers serve audiences that prefer the convenience and familiarity of such
theaters to the larger out-of-town megaplex theaters that appear to be the focus
of the major theater circuits. By concurrently showing first run commercial, art
and family-oriented films, the Company seeks to appeal to three main groups in
affluent suburban communities: baby boomers, older moviegoers and families with
younger children (10 years of age and younger). Because of its community-based
focus, Clearview can adjust its mix of films based on its sensitivity to the
tastes of the audiences in each community. Examples of successful releases at
Clearview theaters during the past twelve months include Titanic, As Good As It
Gets, L.A. Confidential, Good Will Hunting, The Apostle, Sliding Doors, The
Horse Whisperer, Mousehunt and Paulie. Also as part of its community-based
strategy, Clearview encourages community interaction and involvement through
regular participation in local fund-raising and charity functions and through
the hiring of local employees. Clearview believes that its community-based,
niche strategy is exemplified by the Company's motto, 'We Bring Neighbors to the
Movies.'
Maintain Cost Controls and Pursue Margin Enhancement. The Company seeks to
improve the profitability of its theaters by: (i) controlling theater-level
costs through centralized management; (ii) increasing
2
<PAGE>
efficiencies in concession purchasing; (iii) reducing general and administrative
expenses as a percentage of revenues; and (iv) selecting films that appeal to
Clearview's target audiences but result in relatively low aggregate film rental
costs as a percentage of box office receipts. For the year ended December 31,
1997, Clearview's box office margin (total box office revenues less film rental
and booking fees divided by total box office revenues) was 52.3%, its concession
margin (total concession revenues less cost of concession sales divided by total
concession revenues) was 83.8%, and its theater level cash flow margin (total
revenues less film rental and booking fees, cost of concession sales and theater
operating expenses divided by total sales) was 22.4%. For the three months ended
March 31, 1998, Clearview's box office margin was 56.8%, its concession margin
was 84.4% and its theater level cash flow margin was 29.0%. The Company believes
that such percentages compared favorably with those of the five largest motion
picture exhibitors for the year ended December 31, 1997. The Company believes
that its regional focus, centralized management and emphasis on sophisticated
management information systems also create efficiencies and reduce operating and
general and administrative expenses as a percentage of revenues for most of the
theaters it acquires.
Operate Clean, Modern Theaters which Appeal to Customer Base. Clearview's
theaters generally are multiplexes located in towns and communities rather than
in shopping malls or near highways. Each of the Company's theaters has at least
one auditorium equipped with digital sound. Most locations are surrounded by
stores and restaurants, with available parking nearby. An important aspect of
Clearview's operating strategy is to provide a clean, comfortable and visually
appealing environment, which usually includes chandeliers, a decorative
fireplace and silk flower arrangements. When Clearview acquires a theater, it
typically refurbishes the existing seats and equips them with cup holders. In
addition, Clearview will generally redecorate the lobby, upgrade the concession
stand, provide a courtesy phone so that patrons can make free local telephone
calls and selectively add digital sound. The concession stand at each theater
offers snack and food items designed to appeal to the Company's generally
upscale customer base, such as fruit, bottled water, ice cream, cappuccino and
Swiss chocolates, as well as more traditional theater concession items such as
soft drinks, popcorn and an assortment of candy items. The Company has adopted a
set of procedures designed to keep its theaters clean and to ensure proper film
presentation.
GROWTH STRATEGY
The Company intends to increase revenues and cash flow by: (i) selectively
acquiring theaters in its target markets; (ii) adding screens to its existing
theaters; (iii) developing new theaters; and (iv) increasing other sources of
high margin revenues.
Selectively Acquire Theater Operations. The Company believes that one of
its strengths is its ability to identify available theaters at attractive prices
in appropriate locations. Clearview identifies many of its potential
acquisitions from the following two sources: (i) major circuits seeking to
divest theaters which do not fit into their strategic plans and (ii) independent
theater operators finding it increasingly difficult to compete with larger
circuits. In addition, Clearview believes it is able to acquire these theaters
at favorable prices as compared with prices for acquisitions of theaters that
fit more closely into the strategic plans of many of the larger theater
circuits. Potential acquisition candidates typically exhibit the following
characteristics: (i) location that strengthens Clearview's position in an
existing market or, when combined with other available acquisitions or new
theater development, provides a sufficient entree into a new market; (ii)
position as the sole or a leading exhibitor in a film zone; (iii) demographics
consistent with the Company's other locations; and (iv) availability at
favorable prices. The Company believes that it has improved the profitability of
its acquired theaters by aggressively implementing cost controls and other
measures to enhance EBITDA margins.
Add Screens to Existing Theaters. The Company adds screens to existing
theaters when the Company believes that such additions will increase revenues
and cash flow and provide sufficient return on capital. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Depending on the configuration of an existing theater, the Company may
add screens without necessarily increasing the overall dimensions of the theater
by dividing an individual auditorium into two or more smaller auditoriums.
Dividing an auditorium in this fashion can create additional revenue with only a
marginal increase in expense. In certain instances, the Company may also add
screens by expanding into adjacent space for the buildout of additional screens.
The Company currently plans to add 26 screens to existing theaters by March 31,
1999. See 'Business--Theater Expansion and Development.'
3
<PAGE>
Develop New Theaters. The Company believes that it can successfully
identify locations in suitable communities that can be developed into theaters.
The Company currently plans to develop four theaters with a total of 45 screens
in the New York/New Jersey metropolitan area and the Philadelphia main line by
March 31, 1999. See 'Business--Theater Expansion and Development.' From time to
time, opportunities are presented to Clearview by real estate developers who
wish to enhance the value of their properties with the presence of a movie
theater. These opportunities often require limited direct investment by the
Company. In addition, due to its reputation for operating community-based
theaters, Clearview has been approached by local governments or community
development agencies of towns in the New York/New Jersey metropolitan area and
the Philadelphia main line that are interested in revitalizing parts of their
communities and believe that a movie theater could provide an impetus to such
redevelopment.
Increase Other Sources of Revenues. Clearview seeks to increase revenues
and cash flow from sources other than admissions and concessions, including
party, theater rental and on-screen advertising revenues. For the year ended
December 31, 1997, Clearview had other revenues of approximately $420,000, or
2.4% of total revenues, and for the three months ended March 31, 1998, had other
revenues of approximately $320,000, or 3.3% of total revenues. Clearview intends
to increase these high margin revenue sources in the future. For example, in May
1998 the Company initiated a children's party program designed to maximize use
of its theaters at times when they otherwise would not be operating. In
addition, the Company has recently renegotiated its advertising contracts to
increase the rates for on-screen advertising. See 'Business--Other Sources of
Revenue.'
RECENT AND PENDING ACQUISITIONS
Since its initial acquisition of four theaters in December 1994, Clearview
has completed 13 acquisitions, representing 30 theaters with an aggregate of 158
screens. The Company has agreed to purchase an additional two theaters with an
aggregate of 7 screens. See 'Business--Existing Theaters and Pending
Acquisitions.' Listed below is a summary of the Company's acquisitions during
1997 and 1998 and of the Pending Acquisitions.
1997 ACQUISITIONS
UA I Theaters. On September 12, 1997, the Company purchased from United
Artists Theater Circuits, Inc., for total consideration of approximately $8.7
million in cash, the Mamaroneck Playhouse in Mamaroneck, NY (4 screens), the
Bronxville Cinemas in Bronxville, NY (3 screens), the Larchmont Cinemas in
Larchmont, NY (1 screen), the Cinema 304 in New City, NY (2 screens) and the
Wayne Preakness Cinemas in Wayne, NJ (4 screens) (collectively, the 'UA I
Theaters').
Nelson Ferman Theaters. On November 21, 1997, the Company purchased from
an independent theater operator, for total consideration of $18.5 million paid
in a combination of cash, subordinated notes of the Company and shares of Common
Stock, the Parsippany Cinema 12 in Parsippany, NJ (12 screens) and the
Succasunna Cinema 10 in Succasunna, NJ (10 screens) (together, the 'Nelson
Ferman Theaters').
CJM Theaters. On December 12, 1997, the Company purchased from an
independent theater operator, for total consideration of $8.7 million paid in a
combination of cash, shares of the Company's Class B Nonvoting Cumulative
Redeemable Preferred Stock, $.01 par value (the 'Class B Preferred Stock'), and
shares of Common Stock, the Bellevue Theaters in Upper Monclair, NJ (4 screens),
the Kin Mall Cinemas in Kinnelon, NJ (8 screens), the Cinema 23 in Cedar Grove,
NJ (5 screens) and the Middlebrook Galleria Cinema in Middlebrook, NJ (10
screens) (collectively, the 'CJM Theaters').
Other 1997 Acquisitions. Also during 1997, the Company acquired for an
aggregate of approximately $2.0 million in cash, the Roslyn Cinemas in Roslyn,
NY (3 screens), the Edison Cinemas in Edison, NJ (8 screens) and the Woodbridge
Cinemas in Woodbridge, NJ (5 screens) (collectively, the 'Other 1997
Acquisitions'). The acquisitions of the UA I Theaters, the Nelson Ferman
Theaters and the CJM Theaters, together with the Other 1997 Acquisitions, are
hereinafter referred to as the '1997 Acquisitions.'
1998 ACQUISITIONS
During 1998, the Company has purchased for an aggregate of approximately
$15.3 million, paid in a combination of cash and shares of Common Stock, the
Clairidge Cinemas in Montclair, NJ (6 screens), the Manhasset Cinemas in North
Hempstead, NY (3 screens), the Babylon Cinemas in Babylon, NY (3 screens), the
Cobble Hill Cinemas in Brooklyn, NY (5 screens) (the 'Cobble Hill Acquisition'),
4
<PAGE>
the Headquarters 10 Cinemas in Morristown, NJ (10 screens) (the 'AMC
Acquisition') the Great Neck Squire Cinemas in Great Neck, NY (7 screens), and
the Franklin Square Cinemas in Franklin Square, NY (6 screens) (together, the
'Great Neck/Franklin Square Acquisition', and, collectively, the '1998
Acquisitions').
PENDING ACQUISITIONS
The Company has entered into agreements to purchase, for an aggregate of
$1.5 million in cash, the Colony Cinemas in Livingston, NJ (3 screens), and the
West Milford Cinemas in West Milford, NJ (4 screens) (collectively, the 'Pending
Acquisitions'). As of June 30, 1998, after giving effect to the Pending
Acquisitions, the Company would have had 42 theaters with a total of 200
screens. There can be no assurance that the Pending Acquisitions will be
completed, or, if completed, will prove profitable.
Clearview has financed all of its completed acquisitions through a
combination of borrowings under the Old Credit Facility (as defined), the
issuance of subordinated promissory notes, Class B Preferred Stock and Common
Stock, and the net proceeds from its initial public offering of Common Stock in
August 1997 (the 'Common Stock Offering'), its sale of the Class C Preferred
Stock in April 1998 and its offering of $80,000,000 of 10 7/8% Senior Notes due
2008 (the 'Notes') in June 1998 (the 'Notes Offering'). See the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'
RECENT FINANCING TRANSACTIONS
In August 1997, the Company completed the Common Stock Offering for $7.1
million in aggregate net proceeds. In late 1997 and early 1998, the Company
amended its Credit Agreement with The Provident Bank (as amended, the 'Old
Credit Facility') to, among other things, increase availability under the Term
Loans (as defined) from $11.2 million to $40.8 million, substantially all of
which was used to fund in part the acquisition of additional theaters. In April
1998, the Company completed the sale of the Class C Preferred Stock to the
Selling Stockholder for aggregate consideration of approximately $3.0 million.
See 'Capitalization' and 'Description of Capital Stock--Class C Preferred
Stock'. Additionally, in June 1998 the Company completed the Notes Offering for
$80,000,000 in gross proceeds before fees and expenses. Concurrent with the
closing of the Notes Offering the Company repaid the Old Credit Facility and
entered into the New Credit Facility (as defined) with The Provident Bank, which
provides for a secured revolving line of credit in the aggregate principal
amount of $15.0 million. See 'Description of New Credit Facility.'
References in this Prospectus to the 'Transactions' are to (i) the Notes
Offering and the application of the estimated net proceeds therefrom (including
the Pending Acquisitions); (ii) the issuance of the Class C Preferred Stock; and
(iii) the issuance of shares of Common Stock in connection with the acquisition
of the leasehold interest and related construction permit for a new theater in
Mansfield Township, New Jersey (the 'Mansfield Theater'). The net proceeds from
the sale of the Notes have been used to repay the amount outstanding under the
Old Credit Facility of $40.2 million along with a prepayment premium of
approximately $400,000 and accrued interest of approximately $470,000; to repay
other outstanding indebtedness of approximately $6.3 million; to repurchase 600
shares of the outstanding Class B Preferred Stock for approximately $600,000; to
pay issuance costs on the New Credit Facility of approximately $155,000; to fund
the aggregate purchase price of two acquisitions of approximately $9.3 million;
to purchase the fee real estate interest in a property the Company had been
operating under lease for approximately $700,000; to fund the $350,000 in
construction costs to date of the Mansfield Theater; and to pay $3.4 million in
fees and expenses of the Notes Offering. The remaining net proceeds will be used
to fund the $1.5 million purchase price of the Pending Acquisitions; to fund a
$750,000 escrow account in connection with the acquisition of the CJM Theaters;
to purchase for $1.15 million the fee real estate interest in a property the
Company is currently operating under lease; to repurchase the remaining 750
shares of outstanding Class B Preferred Stock of approximately $750,000; to fund
the $2.75 million remainder of the estimated construction cost of the Mansfield
Theater; to pay the remaining fees and expenses of the Notes Offering; and for
working capital, capital expenditures and general corporate purposes, including
the buildout of additional screens at existing theaters, new theater
developments and possible additional theater acquisitions. See 'Business--New
Theater Expansion and Development.'
5
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary financial data should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' 'Unaudited Pro Forma Combined Financial Information,' and the
historical consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. The summary historical financial data
for the year ended December 31, 1997 presented below are derived from the
Company's consolidated financial statements audited by PricewaterhouseCoopers
LLP, independent accountants, whose report covering the Company's consolidated
financial statements as of December 31, 1997 and for the year then ended and the
related financial statements are included elsewhere herein. The summary
historical financial data for the years ended December 31, 1996 and 1995
presented below are derived from the Company's consolidated financial statements
audited by Wiss & Company, LLP, independent accountants, whose report covering
the Company's consolidated financial statements as of December 31, 1996 and 1995
and for the years then ended and the related financial statements are included
elsewhere herein. The summary pro forma combined financial data presented below
are derived from the unaudited pro forma combined financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------- ----------------------------------------
HISTORICAL PRO FORMA(2) HISTORICAL PRO FORMA(2)
------------------------------------ ------------ ------------------------- ------------
1995 1996(1) 1997(1) 1997 1997 1998 1998
-------- ---------- ---------- ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Theater revenues:
Box office.................. $ 1,759 $ 6,195 $ 12,926 $ 35,095 $ 2,712 $ 7,077 $ 8,743
Concession.................. 555 1,861 3,914 11,315 744 2,284 2,828
Other....................... 31 142 422 1,175 49 320 333
-------- ---------- ---------- -------- --------- ----------- --------
2,345 8,198 17,262 47,585 3,505 9,681 11,904
-------- ---------- ---------- -------- --------- ----------- --------
Operating expenses:
Film rental and booking
fees...................... 824 3,022 6,168 15,874 1,196 3,060 3,782
Cost of concession sales.... 99 279 635 1,860 108 357 444
Theater operating
expenses.................. 1,078 3,298 6,591 17,843 1,227 3,455 4,372
General and administrative
expenses.................. 375 590 1,131 2,805 192 1,010 1,010
Depreciation and
amortization.............. 100 635 2,051 5,866 413 1,263 1,516
-------- ---------- ---------- -------- --------- ----------- --------
2,476 7,824 16,576 44,248 3,136 9,145 11,124
-------- ---------- ---------- -------- --------- ----------- --------
Operating income (loss)....... (131) 374 686 3,337 369 536 780
Interest expense(3)........... 85 592 2,015 7,707 358 1,161 1,876
-------- ---------- ---------- -------- --------- ----------- --------
Net income (loss)............. $ (216) $ (218) $ (1,329) $ (4,370) $ 11 $ (625) $ (1,096)
======== ========== ========== ======== ========= ========== ========
Basic and diluted income
(loss) per share............ $ (.36) $ (.29) $ (1.03) $ (2.72) $ .01 $ (.30) $ (.49)
======== ========== ========== ======== ========= ========== ========
OPERATING DATA:
Box office margin(4).......... 53.2% 51.2% 52.3% 54.8% 55.9% 56.8% 56.7%
Concession margin(5).......... 82.2% 85.0% 83.8% 83.6% 85.5% 84.4% 84.3%
Number of theaters............ 7 16 31 42 16 37 42
Number of screens............. 21 60 148 200 60 169 200
Attendance.................... 315,406 1,167,409 2,322,063 480,529 1,278,273
Average ticket price(6)....... $ 5.58 $ 5.31 $ 5.57 $ 5.64 $ 5.54
Average concession revenue per
patron(7)................... $ 1.76 $ 1.59 $ 1.69 $ 1.55 $ 1.79
OTHER DATA:
Theater level cash flow(8).... $ 344 $ 1,599 $ 3,868 $ 12,008 $ 974 $ 2,809 $ 3,306
Theater level cash flow
margin(9)................... 14.7% 19.5% 22.4% 25.2% 27.8% 29.0% 27.8%
EBITDA(10).................... $ (31) $ 1,009 $ 2,737 $ 9,203 $ 782 $ 1,799 $ 2,296
EBITDA margin(11)............. (1.3)% 12.3% 15.9% 19.3% 22.3% 18.6% 19.3%
Capital expenditures(12)...... $ 631 $ 318 $ 3,486 $ 305 $ 765
Ratios of:
EBITDA to cash interest
expense(13)............... 1.3x 1.3x
Net debt to EBITDA(14)...... 6.6x
Earnings to fixed charges... --(15) --(15)
CASH FLOWS FROM:
Operating activities.......... $ 119 $ 1,147 $ 3,934 $ 780 $ 1,175
Investing activities.......... (1,239) (7,295) (33,647) (399) (6,604)
Financing activities.......... 853 6,723 30,608 299 5,252
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------
HISTORICAL PRO FORMA(2)
----------- ------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 1,470 $ 19,238
Total assets............................................... 63,408 97,610
Total long-term debt, including current maturities......... 46,903 80,039
Redeemable preferred stock................................. 1,350
Total stockholders' equity................................. 9,873 10,295
</TABLE>
- ------------------
(1) See Note 2 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. for the year ended December 31, 1997 with respect to its
acquisitions in 1996 and 1997.
(2) For a discussion of assumptions and adjustments underlying the unaudited
pro forma combined financial information, see 'Unaudited Pro Forma Combined
Financial Information.'
(3) See Note 11 of the Notes to Unaudited Pro Forma Combined Statement of
Operations for the year ended December 31, 1997 and Note 8 of the Notes to
Unaudited Pro Forma Combined Statement of Operations for the quarter ended
March 31, 1998 for pro forma interest expense and pro forma cash interest
expense calculations.
(4) Box office margin represents total box office revenues less film rental and
booking fees divided by total box office revenues.
(5) Concession margin represents total concession revenues less cost of
concession sales divided by total concession revenues.
(6) Average ticket price represents total box office revenue divided by
attendance.
(7) Average concession revenue per patron represents concession revenue divided
by attendance.
(8) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concession sales and theater operating expenses.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, theater level cash flow is
presented because the Company believes that certain investors find it
useful in analyzing companies in the motion picture exhibition industry.
(9) Theater level cash flow margin represents theater level cash flow divided
by Total revenues.
(10) Earnings before interest, taxes, depreciation and amortization ('EBITDA')
is a financial measure commonly used in the Company's industry. Although it
is not a measure of performance calculated in accordance with generally
accepted accounting principles, EBITDA is presented as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities
(as determined in accordance with generally accepted accounting principles)
as a measure of the Company's liquidity.
(11) EBITDA margin represents EBITDA divided by total revenues.
(12) Capital expenditures represent purchase of property, equipment and
leasehold improvements, excluding acquisitions. For the year ended December
31, 1997, capital expenditures included (a) construction of a new theater
in an existing building in Summit, NJ and the addition of four screens to
an existing theater in Chester, NJ; (b) upgrades to Clearview's existing
theaters and to theaters included in the 1997 Acquisitions; and (c)
replacement capital expenditures. For the quarter ended March 31, 1998,
capital expenditures included (a) upgrades to theaters included in the 1997
Acquisitions; (b) additional improvements to the Summit, NJ theater; (c)
furniture and equipment for the Company's expanded corporate offices; and
(d) replacement capital expenditures.
(13) EBITDA to cash interest expense represents EBITDA divided by interest
expense less non-cash amortization of debt issuance costs and discounts.
Non-cash amortization of debt issuance costs and discounts for the year
ended December 31, 1997 and the three month period ended March 31, 1998 on
a pro forma basis would have been $370,000 and $93,000, respectively. For
the pro forma cash interest expense for the periods ended December 31, 1997
and March 31, 1998, pro forma interest expense has been calculated using a
rate of interest on the Notes of 10.875% per annum. See Note 11 of the
Notes to Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1997 and Note 8 of the Notes to Unaudited Pro Forma
Combined Statement of Operations for the quarter ended March 31, 1998 for
pro forma interest expense and pro forma cash interest expense
calculations.
(14) Net debt to EBITDA represents total debt (including redeemable securities)
less cash and cash equivalents divided by EBITDA.
(15) The ratio of earnings to fixed charges is computed by dividing operating
income (loss) before fixed charges by fixed charges. Fixed charges is
calculated as interest expense, including capitalized interest, plus one
third of rental expense. Management believes one third of rental expense
represents an appropriate portion representative of the interest factor.
Earnings were insufficient to cover fixed charges for the historical and
pro forma years ended December 31, 1997 by $1,369,868 and $4,410,579,
respectively.
7
<PAGE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk. The following risk
factors should be considered carefully in addition to the other information in
this Prospectus before purchasing any of the Notes offered hereby.
SUBSTANTIAL LEVERAGE; RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S
INDEBTEDNESS
The Company is highly leveraged. As of March 31, 1998, on a pro forma basis
after giving effect to the Transactions, the Company would have had total
consolidated indebtedness of approximately $80.0 million and total stockholders'
equity of approximately $10.3 million. For the year ended December 31, 1997, on
a pro forma basis after giving effect to the 1997 Acquisitions, the 1998
Acquisitions and the Pending Acquisitions, the Company's earnings would have
been insufficient to cover fixed charges by $4,410,579. For the quarter ended
March 31, 1998, on a pro forma basis after giving effect to the 1998
Acquisitions, other than the Cobble Hill Acquisition, and Pending Acquisitions,
earnings would have been insufficient to cover fixed charges by $1,096,283.
Clearview and its subsidiaries will be permitted to incur additional
indebtedness in the future, including up to $15.0 million under the New Credit
Facility. See 'Capitalization,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,'
'Description of New Credit Facility' and 'Description of Notes.'
The degree to which the Company is leveraged could have important
consequences to holders of the Shares, including, but not limited to: (i)
increasing the Company's vulnerability to general adverse economic and industry
conditions, (ii) limiting the Company's ability to obtain additional financing
to fund future working capital, acquisitions, capital expenditures and other
general corporate requirements, (iii) requiring the dedication of a substantial
portion of the Company's cash flow from operations to the payment of principal
of, and interest on, its indebtedness, thereby reducing the availability of such
cash flow to fund working capital, acquisitions, capital expenditures or other
general corporate purposes, (iv) limiting the Company's flexibility in planning
for, or reacting to, changes in its business and the industry and (v) placing
the Company at a competitive disadvantage compared to less leveraged
competitors.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, its debt obligations, and its ability to refinance any such debt
obligations, or to fund acquisitions or planned capital expenditures, will
depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, regulatory and other factors that are
beyond its control. The Company's growth strategy contemplates substantial
expansion of its theaters and screens. Based on the Company's current operations
and anticipated revenue growth, management believes that cash flow from
operations and other available cash, together with available borrowings under
the New Credit Facility, will be sufficient to fund the Company's growth
strategy through at least the end of 1998. Thereafter, however, or in the event
the Company exceeds its currently anticipated expansion plans, the Company
anticipates that it will need to seek additional equity or debt financing to
fund its growth strategy. Failure to obtain any such financing could have a
material adverse effect on the Company's ability to achieve its growth strategy.
In addition, the Company may need to refinance all or a portion of its
indebtedness on or prior to its scheduled maturity. There can be no assurance
that the Company will generate sufficient cash flow from operations in the
future, that anticipated revenue growth will be realized or that future
borrowings, equity contributions or loans from affiliates will be available in
an amount sufficient to service its indebtedness, fund acquisitions and make
anticipated capital expenditures. In addition, there can be no assurance that
the Company will be able to effect any required refinancings of its indebtedness
on commercially reasonable terms or at all. See '--Expansion Plans' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
The Indenture dated June 12, 1998 pursuant to which the Notes were issued
(the 'Indenture') and the New Credit Facility contain numerous restrictive
covenants, including but not limited to covenants that restrict the Company's
ability to incur indebtedness, pay dividends, create liens, sell assets and
engage in certain mergers and acquisitions. In addition, the New Credit Facility
requires the Company to maintain certain financial ratios. The ability of the
Company to comply with the covenants and other terms of the New Credit Facility
and the Indenture and to satisfy its respective debt obligations (including,
without limitation, borrowings and other obligations under the New Credit
Facility) will depend on the future operating performance of the Company. In
8
<PAGE>
the event the Company fails to comply with the various covenants contained in
the New Credit Facility or the Indenture, as applicable, it would be in default
thereunder, and in any such case, the maturity of substantially all of its
long-term indebtedness could be accelerated. A default under the Indenture would
also constitute an event of default under the New Credit Facility. See
'Description of New Credit Facility' and 'Description of Notes.'
LIMITED OPERATING HISTORY AND RESULTS; NET LOSSES
The Company was incorporated on November 23, 1994 and acquired the
leaseholds of four theaters with eight screens on December 21, 1994. Since May
1996, the Company has acquired the leaseholds of 26 theaters, acquired eight
theaters with the underlying real estate, entered into operating agreements for
five theaters and developed one theater resulting in a total of 193 screens in
operation as of June 30, 1998. As a result of this rapid growth in the number of
screens operated, the Company has a limited combined operating history. In
addition, the Company had net losses of $216,316, $218,328 and $1,328,938 for
the years ended December 31, 1995, 1996 and 1997, respectively, and net income
of $10,622 and a net loss of $625,283 for the quarters ended March 31, 1997 and
1998, respectively. For the year ended December 31, 1997, on a pro forma basis
after giving effect to the 1997 Acquisitions, 1998 Acquisitions and the Pending
Acquisitions, the Company would have had a net loss of $4,369,954. For the three
months ended March 31, 1998, on a pro forma basis after giving effect to the
1998 Acquisitions, other than the Cobble Hill Acquisition, and the Pending
Acquisitions, the Company would have had a net loss of $1,095,520. There can be
no assurance that the Company will generate net income in the future. See
'Unaudited Pro Forma Combined Financial Data,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
EXPANSION PLANS
The Company's growth strategy is to acquire or develop theaters and add
screens to its existing theaters where appropriate. The Company's ability to
implement its expansion plans will depend on a number of factors, including
obtaining any required financing, the selection and availability of suitable
locations, the hiring and training of sufficiently skilled management and other
personnel and other factors, such as general economic and demographic
conditions, that are beyond the control of the Company. There can be no
assurance that the Company will be able to execute this strategy or to operate
profitably the theaters that it develops or acquires. See 'Business--Operating
Strategy' and '--Growth Strategy.'
Need For Additional Financing. Clearview intends to continue to acquire
theaters and is pursuing the acquisition of additional locations. Based on the
Company's current operations and anticipated revenue growth, management believes
that cash flow from operations and other available cash (including the proceeds
of the Notes Offering), together with available borrowings under the New Credit
Facility, will be sufficient to fund the Company's growth strategy through at
least the end of 1998. Thereafter, however, or in the event the Company exceeds
its currently anticipated expansion plans, the Company anticipates that it will
need to seek additional equity or debt financing to fund its growth strategy.
Failure to obtain any such financing could have a material adverse effect on the
Company's ability to achieve its growth strategy. The Company's estimates of its
cash requirements to develop or acquire and renovate theaters and service any
debts incurred in connection with such development or acquisition and renovation
are and will be based upon certain assumptions, including assumptions as to the
Company's revenues and cash flows after any such acquisition or development.
There can be no assurance that such assumptions will prove to be accurate or
that unforeseen costs will not be incurred.
Dependence on Ability to Secure Favorable Locations and Lease Terms. The
success of the Company's growth strategy is dependent on its ability to acquire
or develop theaters in favorable locations, with advantageous lease terms in the
case of leased locations. There can be no assurance that the Company will be
able to locate or develop theaters in appropriate communities or, if it does
locate any such theaters, purchase or lease them on favorable terms. The failure
of the Company to acquire or develop theaters in favorable locations or to
purchase or lease theaters on advantageous terms could result in an inability to
achieve the objectives of its growth strategy.
Possible Risks in Theater Development and Renovation. In connection with
the development of new theaters, the Company either will enter into an agreement
with the property owner/developer who will oversee
9
<PAGE>
most of the construction and completion of a theater or will oversee that
construction and completion itself. When acquiring the right to operate an
existing theater (either by entering into a lease or purchasing the theater and
its underlying real estate), the Company generally will take responsibility for
the completion of any proposed renovations or the construction of new screens.
As a result, the Company will, at times, be subject to the risks inherent in the
development of real estate, many of which are beyond its control. Such risks
include changes in federal, state or local laws or regulations, strikes, adverse
weather, material shortages, increases in the costs of labor and materials and
adverse changes in financial and economic conditions generally. There can be no
assurance that any such theater development or renovation will be successfully
completed in a timely manner.
DEPENDENCE ON PRESIDENT AND CHIEF EXECUTIVE OFFICER
The Company's success depends upon the continued contributions of A. Dale
Mayo, its Chairman of the Board, President and Chief Executive Officer. The loss
or unavailability of Mr. Mayo to the Company for an extended period of time
could have a material adverse effect upon the Company's business and
development. To the extent that the services of Mr. Mayo are unavailable to the
Company for any reason, the Company will be required to hire other personnel to
manage and operate the Company. There can be no assurance that the Company will
be able to locate qualified personnel to manage and operate the Company or to
employ them on acceptable terms. The Company has entered into an employment
agreement with Mr. Mayo that provides for his employment through 2003. In
addition, the Company maintains key man life insurance in the amount of $2.5
million on the life of Mr. Mayo. See 'Management.'
GEOGRAPHIC CONCENTRATION
Each of the Company's current theaters is presently located in the New
York/New Jersey metropolitan area and the theaters that it has agreed to or is
contemplating acquiring or developing are principally in the same area or the
Philadelphia main line. As a result, negative economic or demographic changes in
that area could have a disproportionately large and adverse effect on the
success of the Company's operations when compared to the effect of any such
changes on its competitors that have a wider geographic distribution of
theaters.
CONFLICTS OF INTEREST
Brett E. Marks, who is a director of and a consultant to Clearview, is also
a licensed real estate salesman with First New York Realty Co. Inc. ('First New
York'), a New York City-based realty brokerage firm. Mr. Marks' main consulting
work for Clearview relates to the identification of theaters that could be
suitable acquisition candidates for the Company, because of their locations and
the demographics of their communities, and of communities that could be
appropriate for the development of new theaters, given their demographics and
the available locations in such communities, and the performance of due
diligence with respect thereto. If the Company decides to acquire any such
theater, First New York may be entitled to a commission, which Mr. Marks would
be entitled to share, from the owner of that theater, or Mr. Marks personally
may be entitled to a commission directly from the owner. In connection with
Clearview's acquisition of the UA I Theaters in September 1997, First New York
and Mr. Marks received approximately $259,500 and $77,850, respectively. In
connection with Clearview's acquisitions of a three-screen theater in Roslyn,
New York, the CJM Theaters, the Nelson Ferman Theaters, a six-screen theater in
Montclair, New Jersey, two three-screen theaters in Manhasset and Babylon, New
York, the Cobble Hill Acquisition, and the Great Neck/Franklin Square
Acquisition, Mr. Marks received fees of approximately $100,200 in the aggregate.
In addition, in connection with the Company's lease of office space in Chatham,
New Jersey, Mr. Marks received a fee of approximately $5,000. See 'Certain
Transactions.'
COMPETITION
The motion picture exhibition industry is highly competitive, particularly
with respect to licensing films, attracting patrons and finding theater sites.
There are a number of well-established theater circuits with substantially
greater financial and other resources than the Company that operate in the New
York/New Jersey metropolitan area and in the Middle Atlantic and New England
states generally. Some of these theater operators have been in existence
significantly longer than the Company and may be better established in the
Company's markets and better capitalized. Moreover, alternative delivery systems
are available for the presentation of filmed
10
<PAGE>
entertainment, including cable television, direct satellite delivery, video
cassettes and pay-per-view television. An expansion or increase in popularity of
such delivery systems could have a material adverse effect on movie theater
attendance in general and upon the Company's business and results of operations
in particular. See 'Business--Industry Overview' and '--Competition.'
DEPENDENCE ON FILMS
The ability of the Company to operate successfully depends upon a number of
factors, the most important of which is the availability of marketable motion
pictures. Poor relationships with film distributors, a disruption in the
production of motion pictures or poor commercial success for motion pictures
could have a material adverse effect upon the Company. See 'Business--Film
Licensing.'
DEPENDENCE ON CONCESSION SALES
Concession sales accounted for approximately 23% of the Company's revenues
in each of the years ended December 31, 1996 and 1997. Accordingly, the
financial success of the Company depends, to a significant extent, on its
ability to successfully generate concession sales in the future. See
'Business--Concessions.'
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
Generally, the most marketable motion pictures have been released during
the summer and the Thanksgiving through year-end holiday season. Thus, the
motion picture exhibition industry's revenues are seasonal, although the
emergence of hit films during other periods can alter this traditional trend. In
any case, the timing of releases is likely to have a substantial effect on the
Company's results of operations and the results for any one quarter may not
necessarily be indicative of results of operations for subsequent quarters. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results and Seasonality.'
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of Clearview's Amended and Restated Certificate of
Incorporation (the 'Certificate') and Amended and Restated By-laws (the
'By-laws') could have the effect of delaying, deferring or preventing a change
of control of Clearview not approved by Clearview's Board of Directors (the
'Board of Directors') or could affect the prices that investors might be willing
to pay in the future for shares of Common Stock. These provisions include (i)
the division of the directors to be elected by the holders of the Common Stock
into three classes; (ii) the right of the holders of the Class A Convertible
Preferred Stock, $.01 par value, of the Company (the 'Class A Preferred Stock')
to elect directors separately as a class; (iii) a requirement that any action to
be taken by the holders of the Common Stock be taken at a meeting of the
stockholders of the Company; (iv) advance notice requirements for stockholder
proposals and nominations; (v) a requirement that the holders of two-thirds of
the Common Stock and the Class A Preferred Stock, voting together, approve the
amendment, alteration or repeal of certain provisions of the Certificate and the
By-laws; and (vi) the authority of the Board of Directors to fix the rights and
preferences of, and issue, additional shares of the preferred stock, $.01 par
value (the 'Preferred Stock'), of the Company without further action by the
holders of the Common Stock. See 'Description of Capital Stock.'
OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL STOCKHOLDERS
The directors and executive officers of the Company (the 'Senior
Management') collectively beneficially own approximately 58.5% of the
outstanding Common Stock assuming the conversion of the outstanding shares of
Class A Preferred Stock (as defined) (approximately 55.2% of the Common Stock
assuming the additional conversion of the outstanding shares of Class C
Preferred Stock), including approximately 24.3% of the outstanding Common Stock
which is subject to voting trusts for which Mr. Mayo is the trustee. As a result
of this ownership, if the directors and executive officers as a group or some
combination thereof act in concert, they will have the ability to exert
significant influence over the policies and affairs of the Company and corporate
actions requiring stockholder approval, including the composition of the Board
of Directors. This concentration of ownership could have the effect of delaying,
deferring or preventing a change of control of the Company, including a business
combination with an unaffiliated party. See 'Management' and 'Principal
Stockholders.'
11
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock could be adversely affected by the
availability for public sale of shares held on June 29, 1998 by security holders
of the Company, including: (i) a total of 958,800 outstanding shares of Common
Stock eligible for sale pursuant to exemptions from registration under the
Securities Acts including exemptions provided by Rule 144 thereunder, all of
which are also subject to agreements pursuant to which the holders have certain
rights to request the Company to register the sale of such holders' Common Stock
under the Securities Act and/or, subject to certain conditions, to include such
shares in other registration statements filed by the Company ('Registration
Rights Agreements'); (ii) 196,002 outstanding shares of Common Stock are subject
to agreements pursuant to which the holders have rights, subject to certain
conditions, to include such shares in certain registration statements filed by
the Company; (iii) 467,400 shares of Common Stock issuable upon conversion of
the Class A Preferred Stock at an initial conversion price of $4.26 per share,
that are subject to a Registration Rights Agreement; (iv) 100,000 shares of
Common Stock issuable pursuant to warrants exercisable for a four-year period
commencing August 22, 1998 at an initial exercise price of $9.60 per share, that
are subject to a Registration Rights Agreement; (v) 282,600 shares of Common
Stock issuable pursuant to the Class A Warrant (the 'Class A Warrant')
exercisable after June 1, 2001 at an initial exercise price of $.01 per share,
that are subject to a Registration Rights Agreement; and (vi) 183,500 shares of
Common Stock issuable upon exercise of options granted pursuant to the Company's
1997 Stock Incentive Plan, becoming exercisable over the four-year period
commencing August, 1998, at exercise prices ranging from $8.00 to $13.50 per
share, that are covered by an effective registration statement under the
Securities Act. None of the foregoing shares may be sold or otherwise disposed
of prior to August 22, 1998, and a total of 327,000 of such shares may not be
sold or otherwise disposed of prior to April 23, 1999 except that 100,000 of
such shares are the subject of a pledge.
YEAR 2000
The Company is currently evaluating the potential impact of the year 2000
on the electronic data processing and other information systems relevant to the
Company's business and is developing a plan to resolve this issue. The year 2000
issue is the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using '00' as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures. This issue creates risk for the Company from unforeseen problems in
its own computer systems and from third parties with whom the Company deals on
various transactions. Based on preliminary information, costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's results of operations, financial position or cash flows.
12
<PAGE>
USE OF PROCEEDS
The Selling Stockholder will receive all of the net proceeds from any sale
of the Shares offered hereby, and none of such proceeds will be available for
use by the Company.
PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the American Stock Exchange and traded under
the symbol 'CLV'. The following table sets forth the range of low and high sales
price for the Common Stock for each calendar quarter indicated since the Common
Stock Offering.
1997: HIGH LOW
----- ------ ------
Third Quarter
(from August 19, 1997)................ $17.25 $ 8.25
Fourth Quarter.......................... $14.50 $10.50
1998:
----
First Quarter........................... $14.13 $11.00
Second Quarter.......................... $22.94 $14.00
On June 30, 1998, the closing sale price of the Common Stock as reported on
the AMEX was $20.25 per share.
As of March 23, 1998, the Company had approximately 30 holders of record of
the Common Stock.
DIVIDEND POLICY
Clearview currently intends to retain its future earnings, if any, to
support its operations and to fund the development and growth of its business
and does not anticipate paying any cash dividends on its Common Stock or Class A
Preferred Stock in the foreseeable future. Clearview paid $30,000 in dividends
in the aggregate in 1995 and $10,000 in dividends in the aggregate in 1996. The
decision whether to pay future dividends on the Common Stock will be in the
discretion of the Board of Directors and will depend upon the Company's
earnings, financial condition, capital requirements, level of indebtedness and
other factors that the Board of Directors deems relevant, subject to any
contractual restrictions with respect to the payment of dividends. The New
Credit Facility and the Indenture restrict the payment of any dividends by
Clearview. Payment of dividends on the Common Stock is also subject to the
requirement that the Company pay dividends on the Class A Preferred Stock at the
same time that dividends are paid on the Common Stock in a per share amount
equal to the product of the dividend payable per share of Common Stock and the
number of shares of Common Stock into which a share of Class A Preferred Stock
is then convertible.
13
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998 the historical
capitalization of the Company and the capitalization of the Company as adjusted
to give effect to the Transactions. See 'Offering Memorandum Summary--Recent
Financing Transactions.' The following table should be read in conjunction with
'Unaudited Pro Forma Combined Financial Information', 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. See also 'Business--Existing Theaters and Pending
Acquisitions.'
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents, including escrow deposit(1)................................... $ 1,470 $19,238
======== =======
Debt (including current maturities):
Senior credit facility(2)........................................................... $ 40,558
Senior Notes due 2008............................................................... $80,000
Subordinated notes payable.......................................................... 6,000
Note payable to bank................................................................ 305
Capital lease obligations........................................................... 39 39
Class B Redeemable Preferred Stock....................................................... 1,350
Stockholders' equity:
Undesignated Preferred Stock, 2,478,697 shares authorized; 2,475,697 shares
authorized on a pro forma basis....................................................
Class A Convertible Preferred Stock, par value $.01, 1,303 shares authorized, 779
shares issued and outstanding...................................................... -- --
Class C Convertible Preferred Stock, par value $.01, 3,000 shares authorized, issued
and outstanding on a pro forma basis(3)............................................ -- --
Common Stock, par value $.01, 10,000,000 shares authorized, 2,227,879 issued and
outstanding, 2,304,802 shares outstanding on a pro forma basis(4).................. 22 23
Additional paid-in-capital(3)(4).................................................... 12,415 18,636
Accumulated deficit(3)(5)........................................................... (2,564) (8,364)
-------- -------
Total stockholders' equity........................................................ 9,873 10,295
-------- -------
Total capitalization.............................................................. $ 58,125 $90,334
======== =======
</TABLE>
- ------------------
(1) For a reconciliation of Historical and Pro Forma As Adjusted cash and cash
equivalents, see Note 1 of Notes to Unaudited Pro Forma Combined Balance
Sheet.
(2) Reflects the aggregate outstanding balance under the Old Credit Facility of
$40.8 million, net of debt discount of $242,000 related to a warrant issued
to The Provident Bank. The Company made a $600,000 payment of principal on
April 1, 1998 under the Old Credit Facility. The Company repaid all amounts
outstanding under the Old Credit Facility from the net proceeds of the Notes
Offering and currently has $15.0 million of availability under the New
Credit Facility.
(3) On April 23, 1998, the Company issued 3,000 shares of Class C Preferred
Stock to the Selling Stockholder for aggregate consideration of
approximately $3.0 million resulting in a non-cash preferred stock dividend
of $1.7 million which has been reflected in stockholders' equity. See Note 7
to Unaudited Pro Forma Combined Balance Sheet.
(4) On April 30, 1998, the Company acquired the leasehold interest and related
construction permit for the Mansfield Theater in exchange for the issuance
of approximately $1,548,000 in Common Stock (76,923 shares of Common Stock).
(5) In connection with the repayment of the Old Credit Facility, the Company was
required to pay a prepayment premium of $412,000. The prepayment premium,
taken together with the write-off of unamortized debt discount and debt
issuance costs of $242,000 and $1,439,000, respectively, will result in an
extraordinary loss of $2,093,000. In addition, interest expense on the
$14,658,000 of proceeds of the Notes Offering to be used for the
construction of the Mansfield Theater and for general corporate purposes,
has been reflected in stockholders' equity, but has not been included in the
pro forma combined statements of operations included elsewhere herein. Such
interest expense was $1,594,000 for the year ended December 31, 1997 and
$399,000 for the three month period ended March 31, 1998.
14
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information presents
the Pro Forma Combined Balance Sheet of the Company at March 31, 1998 and the
Pro Forma Combined Statements of Operations of the Company for the year ended
December 31, 1997 and the three months ended March 31, 1998.
The Unaudited Pro Forma Combined Balance Sheet is based on the historical
consolidated balance sheet of the Company as of March 31, 1998, which includes
the 1997 Acquisitions and the 1998 Acquisitions, and gives effect to the
Transactions as if they had been consummated at March 31, 1998.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1997 is based on the historical combined statements of operations
of the Company, the UA I Theaters, the CJM Theaters, the Nelson Ferman Theaters,
the Other 1997 Acquisitions, and the 1998 Acquisitions and gives effect to the
Transactions, the 1997 Acquisitions and the 1998 Acquisitions as if they had
been consummated at January 1, 1997.
The Unaudited Pro Forma Combined Statement of Operations for the three
months ended March 31, 1998 is based on the historical combined statements of
operations of the Company and the 1998 Acquisitions and gives effect to the
Transactions and the 1998 Acquisitions as if they had been consummated at
January 1, 1997.
In the opinion of the Company's management, all adjustments necessary to
present fairly such unaudited pro forma combined financial information have been
made.
The pro forma acquisition adjustments give effect to the acquisitions under
the purchase method of accounting and the assumptions and adjustments (which the
Company believes to be reasonable) described in the accompanying Notes to
Unaudited Pro Forma Combined Financial Information. Under the purchase method of
accounting, assets acquired and liabilities assumed will be recorded at their
estimated fair value at the date of acquisition. The pro forma adjustments set
forth in the following Unaudited Pro Forma Combined Financial Information are
estimated and may differ from the actual adjustments when they become known.
The Pro Forma Combined Financial Information is provided for comparative
purposes only. It does not purport to be indicative of the results that actually
would have occurred if the acquisitions of the UA I Theaters, the CJM Theaters,
the Nelson Ferman Theaters, the Other 1997 Acquisitions, the 1998 Acquisitions,
and the Pending Acquisitions had been consummated on the dates indicated or that
may be obtained in the future. The Unaudited Pro Forma Combined Financial
Information should be read in conjunction with the notes thereto, the financial
statements of the UA I Theaters, the CJM Theaters, and the Nelson Ferman
Theaters and the notes thereto, included elsewhere herein, and the Company's
consolidated financial statements and the notes thereto, included elsewhere
herein.
15
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
PRO FORMA
OFFERING AND PRO
HISTORICAL ACQUISITION FORMA
CLEARVIEW ADJUSTMENTS AS ADJUSTED
--------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including escrow deposit...................... $ 1,470 $ 17,768(1) $19,238
Inventories.............................................................. 163 163
Other current assets..................................................... 434 434
------- -------- -------
Total current assets................................................... 2,067 17,768 19,835
Property, equipment and leaseholds, net.................................... 36,549 6,672(2) 43,221
Intangible assets, net..................................................... 23,877 9,762(2) 33,639
Other non-current assets................................................... 915 915
------- -------- -------
$63,408 $ 34,202 $97,610
======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..................................... $ 5,205 $ (5,205)(3) --
Subordinated notes payable............................................... 2,000 (2,000)(3) --
Accounts payable and accrued expenses.................................... 5,283 1,993 (4) $ 7,276
------- -------- -------
Total current liabilities.............................................. 12,488 (5,212) 7,276
Long-term debt and capital leases, less current maturities................. 35,697 (35,658)(3) 39
Senior Notes............................................................... 80,000 (5) 80,000
Subordinated notes payable................................................. 4,000 (4,000)(3)
Class B redeemable preferred stock......................................... 1,350 (1,350)(3)
Stockholders' equity:
Undesignated Preferred Stock, 2,478,697 shares authorized; 2,475,697
shares authorized on a pro forma basis................................. -- --
Class A Preferred Stock, par value $.01, 1,303 shares authorized, 779
shares issued and outstanding.......................................... -- --
Class C Preferred Stock, par value $.01, 3,000 shares authorized, issued
and outstanding on a pro forma basis................................... -- --
Common Stock, par value $.01, 10,000,000 shares authorized; 2,227,879
shares issued and outstanding, 2,304,802 shares issued and outstanding
on a pro forma basis................................................... 22 1 (6) 23
Additional paid-in capital............................................... 12,415 6,221 (7) 18,636
Accumulated deficit...................................................... (2,564) (5,800)(8) (8,364)
------- -------- -------
Total stockholders' equity................................................. 9,873 422 10,295
------- -------- -------
$63,408 $ 34,202 $97,610
======= ======== =======
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(1) Cash and cash equivalents, including escrow deposit, has been adjusted for
the following (in thousands):
<TABLE>
<S> <C> <C>
Proceeds from issuance of Senior Notes........................................ $ 80,000
Proceeds from issuance of Class C Preferred Stock, net of issuance costs...... 2,960
Less:
o Repayment of Old Credit Facility, including a $412,000 prepayment premium
and a $600,000 principal payment made on April 1, 1998.................... (41,212)
o Repayment of other indebtedness........................................... (6,305)
o Redemption of Class B Preferred Stock..................................... (1,350)
o Purchase price of the Great Neck/Franklin Square Acquisition, the AMC
Acquisition and the Pending Acquisitions.................................. (10,775)
o Purchase of real estate presently under lease............................. (1,850)
Less: estimated fees and expenses............................................. (3,700)
--------
Net change in cash............................................................ $ 17,768
========
</TABLE>
Cash and cash equivalents includes $750,000 which is restricted and which
will be held in escrow to fund the contingent additional consideration to be
paid to a seller in connection with the acquisition of the CJM Theaters.
(2) Reflects the following:
(a) Preliminary allocation of purchase price paid in connection with the
Great Neck/Franklin Square Acquisition, the AMC Acquisition and the
Pending Acquisitions based on the estimated fair values of the assets
acquired or to be acquired, which includes only land, buildings and
improvements or leasehold interests, furniture and equipment and
intangible assets as follows (in thousands):
<TABLE>
<CAPTION>
GREAT NECK/ WEST
AMC FRANKLIN SQUARE LIVINGSTON MILFORD TOTAL
------ --------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Land...................................... $ 150 $ 150
Buildings and improvements................ 600 600
Leasehold interests....................... $ 242 $ 458 $ 39 739
Furniture and equipment................... 460 1,022 175 128 1,785
------ ------- ------ ----- -------
Total property, equipment and
leaseholds, net................. 702 1,480 925 167 3,274
Covenant non-compete...................... 23 23
Goodwill.................................. 2,073 4,997 125 283 7,478
------ ------- ------ ----- -------
Total intangible assets............ 2,073 5,020 125 283 7,501
------ ------- ------ ----- -------
Total purchase price...................... $2,775 $ 6,500 $1,050 $ 450 $10,775
====== ======= ====== ===== =======
</TABLE>
(b) The adjustment to property, equipment and leaseholds, net, represents
(i) the estimated fair value of property, equipment and leaseholds,
net, acquired or to be acquired in connection with the Great
Neck/Franklin Square Acquisition, the AMC Acquisition and the Pending
Acquisitions set forth in (a) above of $3,274,000, (ii) the combined
purchase price of $1,850,000 for the underlying real estate of two
theaters presently under lease and (iii) the purchase price of
$1,548,000 for the acquisition of the Warren County Cinemas which owned
the construction permit for the Mansfield Theater. Such purchase price
of $1,548,000 has been allocated as such in the pro forma balance sheet
because the Company has commenced construction of this theater.
(c) The adjustment to intangible assets represents (i) the estimated fair
value of intangible assets acquired or to be acquired in connection
with the Great Neck/Franklin Square Acquisition, the AMC Acquisition
and the Pending Acquisitions set forth in (a) above of $7,501,000, (ii)
the write-off of unamortized debt issuance costs of $1,439,000 incurred
in connection with the issuance of the Old Credit Facility and (iii)
the capitalization of $3,700,000 of estimated fees and expenses to be
incurred in connection with the Notes Offering.
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET--(CONTINUED)
AS OF MARCH 31, 1998
(3) Reflects the application of the proceeds from the Notes Offering to repay
indebtedness and to redeem Class B preferred stock as follows (in
thousands):
<TABLE>
<S> <C> <C>
(a) Repayment of Old Credit Facility, including $600 principal payment made on
April 1, 1998, net of discounts of $242........................................ $40,558
Repayment of note payable to bank.............................................. 305
-------
40,863
Less: current portion.......................................................... (5,205)
-------
$35,658
-------
-------
(b) Repayment of subordinated notes payable........................................ $ 6,000
Less: current portion.......................................................... (2,000)
-------
$ 4,000
-------
-------
(c) Redemption of Class B Preferred Stock.......................................... $ 1,350
-------
-------
</TABLE>
(4) Reflects pro forma interest expense for the period from January 1, 1997
through March 31, 1998 of approximately $1,993,000 on the $14,658,000 of the
Notes to be used for the construction of the Mansfield Theater and for
general corporate purposes. See also note (8) below.
(5) Represents $80 million aggregate principal amount of the Notes.
(6) Reflects the par value of the 76,923 shares of Common Stock issued on April
30, 1998 in connection with the merger with Warren County Cinemas which
owned the construction permit for the Mansfield Theater.
(7) Reflects the 76,923 shares of Common Stock issued on April 30, 1998 in
connection with the merger with Warren County Cinemas which owned the
construction permit for the Mansfield Theater. Such 76,923 shares of Common
Stock had an aggregate fair market value of approximately $1,548,000 based
upon the quoted market price of the Common Stock on that date. In addition,
the adjustment reflects the issuance on April 23, 1998 of 3,000 shares of
Class C Preferred Stock in exchange for approximately $2,960,000 in cash,
net of offering costs. In accordance with the Emerging Issues Task Force
Abstract D-60: Accounting for the Issuance of Convertible Preferred Stock
and Debt Securities with a Non-Detachable Conversion Feature, the intrinsic
value of the beneficial conversion feature of the Class C Preferred Stock,
which is measured as the difference between the conversion price and fair
value of the Common Stock on the date of issuance, is recognized as a
non-cash preferred stock dividend over the period from issuance to earliest
conversion (90 days) in the statement of changes in shareholders' equity.
Based on the Company's stock price on April 23, 1998, the fair value of the
conversion feature is $1,714,000, which will be reflected as a preferred
stock dividend over the period from issuance through July 21, 1998, the
earliest conversion date. Such preferred stock dividend has been reflected
in the adjustment to additional paid-in capital on the pro forma combined
balance sheet. The effect on the Company's income (loss) per share through
July 21, 1998 will be a reduction in net income (increase in net loss)
available to common shareholders to the extent of the preferred stock
dividend.
(8) Reflects an adjustment to stockholders' equity (which is not included in the
pro forma combined statements of operations) to include an extraordinary
loss of $2,093,000, reflecting (i) a prepayment premium on the Old Credit
Facility of $412,000, (ii) the write-off of associated unamortized debt
discount and debt issuance costs of $242,000 and $1,439,000 respectively.
The adjustment also includes pro forma interest expense for the period from
January 1, 1997 through March 31, 1998 of approximately $1,993,000 on the
$14,658,000 of the Notes to be used for the construction of the Mansfield
Theater and for general corporate purposes which has been reflected in
accounts payable and accrued expenses. The adjustment also includes the
effect of the preferred stock dividend described in note (7) above.
18
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------------------------------- --------------
OTHER PRO FORMA
NELSON COMPLETED PENDING ACQUISITION
CLEARVIEW UA I(1) CJM(2) FERMAN(3) ACQUISITIONS(4) ACQUISITIONS(5) ADJUSTMENTS
--------- ------- ------ --------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Theater revenues
Box office............... $ 12,926 $2,599 $4,382 $ 4,594 $ 9,839 $ 755
Concession............... 3,914 759 1,259 1,095 2,732 292 $ 1,264(6)
Other.................... 422 178 15 96 437 27
--------- ------- ------ -------- ------- ------- --------
17,262 3,536 5,656 5,785 13,008 1,074 1,264
--------- ------- ------ -------- ------- ------- --------
Operating expenses
Film rental and booking
fees................... 6,168 1,167 1,999 1,990 4,486 342 (278)(7)
Cost of concession
sales.................. 635 126 241 365 47 446 (6)
Theater operating
expenses............... 6,591 1,288 2,101 1,768 5,689 456 (50)(8)
General and
administrative
expenses............... 1,131 181 145 820 603 (75)(9)
Depreciation and
amortization........... 2,051 132 242 356 867 86 2,132(10)
--------- ------- ------ -------- ------- ------- --------
16,576 2,894 4,728 4,934 12,010 931 2,175
--------- ------- ------ --------- ------- ------- --------
Operating income (loss).... 686 642 928 851 998 143 (911)
Interest expense, net...... 2,015 306 191 176 306 12 2,176 (11)
Provision for income
taxes.................... 26 (26)
--------- ------- ------ -------- ------- ------- --------
Net income (loss)(12)...... $ (1,329) $ 336 $ 711 $ 675 $ 692 $ 131 $ (3,061)
========= ====== ====== ======= ======= ======= ========
Basic and diluted loss per
share(13)................ $ (1.03)
Theater level cash
flow(14).................
Theatre level cash flow
margin(15)...............
EBITDA(16).................
EBITDA margin(17)..........
Ratio of EBITDA to cash
interest expense(18).....
Ratio of net debt to
EBITDA(19)...............
<CAPTION>
PRO FORMA
PRO FORMA NOTES OFFERING PRO FORMA
COMBINED ADJUSTMENT AS ADJUSTED
--------- ------------------ -----------
<S> <C> <C> <C>
Theater revenues
Box office............... $ 35,095 $ 35,095
Concession............... 11,315 11,315
Other.................... 1,175 1,175
-------- -------- ---------
47,585 47,585
-------- -------- ---------
Operating expenses
Film rental and booking
fees................... 15,874 15,874
Cost of concession
sales.................. 1,860 1,860
Theater operating
expenses............... 17,843 17,843
General and
administrative
expenses............... 2,805 2,805
Depreciation and
amortization........... 5,866 5,866
-------- -------- ---------
44,248 44,248
-------- -------- ---------
Operating income (loss).... 3,337 3,337
Interest expense, net...... 5,182 2,525(11) 7,707
Provision for income
taxes....................
-------- -------- ---------
Net income (loss)(12)...... $ (1,845 ) $ (2,525) $ (4,370)
======== ======== =========
Basic and diluted loss per
share(13)................ $ (2.72)
Theater level cash
flow(14)................. $ 12,008
Theatre level cash flow
margin(15)............... 25.2%
EBITDA(16)................. $ 9,203
EBITDA margin(17).......... 19.3%
Ratio of EBITDA to cash
interest expense(18)..... 1.3x
Ratio of net debt to
EBITDA(19)............... 6.6x
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(1) Derived from the unaudited financial statements of United Artists
Theaters at Bronxville, Larchmont, Wayne, New City and Mamaroneck for
the period from January 1, 1997 through September 12, 1997, the date
of acquisition of the UA I Theaters.
(2) Derived from the audited combined financial statements of the CJM
Theaters at Kin-Mall, Middlebrook, Cedar Grove and Bellevue for the
period from January 1, 1997 through September 30, 1997 and the
unaudited results for the period from October 1, 1997 through December
11, 1997.
(3) Derived from the audited combined financial statements of Nelson
Ferman Theaters at Parsippany and Roxbury for the period from January
1, 1997 through September 30, 1997 and the unaudited combined
financial statements for the period from October 1, 1997 through the
acquisition date of November 21, 1997.
(4) Other Completed Acquisitions includes combined results of the Other
1997 Acquisitions and the 1998 Acquisitions. The historical results
were derived from:
(a) Unaudited historical financial information of the Roslyn Cinemas
in Roslyn, NY for the period from January 1, 1997 through the
acquisition date of November 3, 1997.
(b) Unaudited historical financial information for Edison Cinemas in
Edison, NJ and Woodbridge Cinemas in Woodbridge, NJ for the period
from January 1, 1997 through the acquisition dates of December 12,
1997.
(c) Unaudited historical financial information for Clairidge Cinemas
in Montclair, NJ; Manhasset Cinemas in North Hempstead, NY;
Babylon Cinemas in Babylon, NY; and Cobble Hill Cinemas in
Brooklyn, NY for the year ended December 31, 1997.
(d) Unaudited historical financial information of the Great Neck
Squire Cinemas in Great Neck, NY for the twelve month period from
February 14, 1997 through February 11, 1998.
(e) Unaudited historical financial information of the Franklin Square
Cinemas in Franklin Square, NY for the year ended December 31,
1997.
(f) Unaudited historical financial information of the Headquarters 10
Cinemas in Morristown, NJ for the fiscal year period from March
28, 1997 through March 27, 1998.
(5) Pending Acquisitions include combined historical results derived from
unaudited historical financial information of the Colony Cinemas in
Livingston, NJ and the West Milford Cinemas in West Milford, NJ for
the year ended December 31, 1997.
(6) Reflects an increase in historical concession revenue of approximately
$1,264,000, representing revenues that were not recognized by the
sellers for the Nelson Ferman Theaters, Clairidge Cinemas, Franklin
Square Cinemas and Great Neck Squire Cinemas because each of the
sellers operated the respective concession stands through independent
third party concessionaires. The cost of concession sales of
approximately $446,000 is estimated based on the historical costs of
the concession sales of the Company. Upon acquisition of such theaters
by the Company, theater management began operating the concession
stands, and the respective agreements with the independent third party
concessionaires were terminated.
(7) In February 1998, the Company employed three professionals to perform
film booking services in-house for all screens operated by the Company
and, in March 1998, terminated its arrangements for third party film
booking services. The pro forma adjustment of approximately $278,000
in film rental and booking fees represents amounts paid for third
party film booking services by the Company, the Nelson Ferman Theaters
and the CJM Theaters during 1997. The pro forma adjustment to
general and administrative expenses includes an increase of
approximately $190,000 representing costs of the Company's three film
booking professionals assuming that such professionals were hired on
January 1, 1997. See note (9) below.
(8) Reflects a reduction of rent of $50,000 for the Roslyn Cinemas as the
application of net proceeds from the Notes Offering includes the
acquisition of the underlying fee real estate of this theater.
(9) The former owners of the Franklin Square Cinemas, the Cobble Hill
Cinemas and the CJM Theaters provided management advisory services to
the theaters and received compensation for such services of
approximately $100,000, $100,000 and $70,000, respectively during the
year ended December 31, 1997. Upon acquisition of these theaters, the
owner/manager of each no longer provide such services to the theaters
as the Company is able to support the operations of these seven
theaters under its current
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
management structure. These decreases in expenses have been offset by
$190,000 in general and administrative expenses related to the
employment of the three film booking professionals referred to in note
(7) above.
(10) Reflects an increase in depreciation and amortization expense of
$2,132,000 for property and equipment, leasehold interests and
intangible assets acquired in the 1997 Acquisitions, the 1998
Acquisitions, and to be acquired in the Pending Acquisitions,
including amortization of the excess of the purchase price (or
expected purchase price) over the estimated fair values of the assets
acquired. The Company estimates the useful lives to be 40 years for
buildings and improvements and five to seven years for furniture and
equipment. Leasehold interests represent acquired rights to operate
theaters under previously existing operating leases. The fair value
assigned to these leasehold interests is amortized over the term of
the lease. Goodwill represents the excess of the purchase price,
including acquisition costs, over the fair value of the tangible and
identifiable intangible assets acquired which is amortized over
fifteen years.
(11) Pro forma interest expense is calculated as follows:
<TABLE>
<S> <C> <C>
Historical combined interest expense, net (pre-acquisition basis)........................ $3,006
Interest expense assuming all acquisitions were consummated on January 1, 1997 under the
Old Credit Facility....................................................................... 2,176
------
Pro forma combined interest expense...................................................... 5,182
------
Less: amounts in historical combined interest expense for refinanced debt................ (4,951)
Add: interest expense on the Notes at 10.875%............................................ 7,106
Amortization of debt issuance costs...................................................... 370
------
Pro forma Notes Offering adjustment...................................................... 2,525
------
Pro forma interest expense............................................................... $7,707
------
------
Pro forma cash interest expense.......................................................... $7,337
------
------
</TABLE>
Pro forma interest expense has been calculated based on the amount of
the Notes which was or will be used to repay the Old Credit Facility,
repay other indebtedness, redeem the Class B Preferred Stock, pay the
escrow deposit, close the Great Neck/Franklin Square Acquisition, the
AMC Acquisition and the Pending Acquisitions, acquire the real estate
presently under lease and pay fees and expenses of the Notes Offering
of $65.3 million. Pro forma interest expense is not indicative of
results that will actually occur upon issuance of the $80 million of
Notes as it does not include interest expense of approximately
$1,594,000 on $14,658,000 of the Notes to be used for the construction
of the Mansfield Theater and for general corporate purposes. However,
such costs have been reflected in stockholders' equity. See the
Unaudited Pro Forma Combined Balance Sheet.
(12) In connection with the repayment of the Old Credit Facility, the
Company was required to pay a prepayment premium of $412,000. The
prepayment premium, taken together with the write-off of unamortized
debt discount and debt issuance costs of $242,000 and $1,439,000,
respectively, will result in an extraordinary loss of $2,093,000,
which has not been reflected in the pro forma combined statement of
operations, but has been reflected in stockholders' equity. See the
Unaudited Pro Forma Combined Balance Sheet.
(13) Basic income (loss) per share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding during the
period. Diluted earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares
outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Unaudited pro forma
basic and diluted loss per share has been calculated for the year
ended December 31, 1997 by dividing unaudited pro forma net loss
available to common shareholders by the weighted average number of
shares outstanding during the period. Unaudited pro forma net loss
available to common shareholders is computed as unaudited pro forma
net loss less preferred stock dividends. Unaudited pro forma net loss
available to common shareholders, includes recognition of non-cash
preferred stock dividends on the Class C Preferred Stock issued on
April 23, 1998. The non-cash preferred stock dividend of $1.7 million
represents the amount that will be reflected in
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
stockholders' equity during 1998 (the period from issuance to earliest
conversion date in July 1998) based on the fair value of the
conversion feature as measured on the date of issuance. The pro forma
weighted average number of common shares outstanding used to calculate
pro forma basic and diluted loss per share for the year ended December
31, 1997 is 2,304,802 shares.
(14) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concessions and theater operating expenses.
Although it is not a measure of performance calculated in accordance
with generally accepted accounting principles, theater level cash flow
is presented because the Company believes that certain investors find
it useful in analyzing companies in the motion pictures exhibition
industry.
(15) Theater level cash flow margin represents theater level cash flow
divided by total revenues.
(16) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance
with generally accepted accounting principles, EBITDA is presented as
an alternative to operating income (as determined in accordance with
generally accepted accounting principles) as an indicator of the
Company's operating performance or as an alternative to cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's
liquidity.
(17) EBITDA margin represents EBITDA divided by total revenues.
(18) Ratio of EBITDA to cash interest expense represents EBITDA divided by
interest less non-cash amortization of debt issuance costs and
discounts. For the pro forma ratio of EBITDA to cash interest expense
for the year ended December 31, 1997, pro forma interest expense has
been calculated using a rate of interest on the Notes of 10.875% per
annum.
(19) Ratio of Net debt to EBITDA represents total debt (including
redeemable securities) less cash and cash equivalents divided by
EBITDA.
22
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------------- ------------------------
PRO FORMA
1998 PENDING ACQUISITION PRO FORMA
CLEARVIEW ACQUISITIONS(1) ACQUISITIONS(2) ADJUSTMENTS COMBINED
--------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Theater revenues
Box office............................. $ 7,077 $ 1,499 167 $ 8,743
Concession............................. 2,284 381 64 99(3) 2,828
Other.................................. 320 10 3 333
-------- --------- ----- ----- -------
9,681 1,890 234 99 11,904
-------- --------- ----- ----- -------
Operating expenses
Film rental and booking fees........... 3,060 700 68 (46)(4) 3,782
Cost of concession sales............... 357 45 10 32 (3) 444
Theater operating expenses............. 3,455 818 113 (14)(5) 4,372
General and administrative expenses.... 1,010 89 (89)(6) 1,010
Depreciation and amortization.......... 1,263 128 20 105 (7) 1,516
-------- --------- ----- ----- -------
9,145 1,780 211 (12) 11,124
-------- --------- ----- ----- -------
Operating income (loss).................. 536 110 23 111 780
Interest expense, net.................... 1,161 72 5 2 (8) 1,240
Provision for income taxes...............
-------- --------- ----- ----- -------
Net income (loss)........................ $ (625) $ 38 $ 18 $ 109 $ (460)
======== ========= ===== ===== =======
Basic and diluted loss per share(9)...... $ (.30)
Theater level cash flow(10)..............
Theater level cash flow margin(11).......
EBITDA(12)...............................
EBITDA margin(13)........................
Ratio of EBITDA to cash interest
expense(14)............................
<CAPTION>
PRO FORMA
OFFERING PRO FORMA
ADJUSTMENT AS ADJUSTED
------------- -----------
<S> <C> <C>
Theater revenues
Box office............................. $ 8,743
Concession............................. 2,828
Other.................................. 333
-----------
11,904
-----------
Operating expenses
Film rental and booking fees........... 3,782
Cost of concession sales............... 444
Theater operating expenses............. 4,372
General and administrative expenses.... 1,010
Depreciation and amortization.......... 1,516
-----------
11,124
-----------
Operating income (loss).................. 780
Interest expense, net.................... 636(8) 1,876
Provision for income taxes...............
------- ---------
Net income (loss)........................ $ (636) $ (1,096)
======= =========
Basic and diluted loss per share(9)...... $ (.49)
Theater level cash flow(10).............. $ 3,306
Theater level cash flow margin(11)....... 27.8%
EBITDA(12)............................... $ 2,296
EBITDA margin(13)........................ 19.3%
Ratio of EBITDA to cash interest
expense(14)............................ 1.3x
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(1) The historical results of the 1998 Acquisitions were derived from:
(a) Unaudited historical financial information for Clairidge Cinemas in
Montclair, NJ for the period from January 1, 1998 through the
acquisition date of February 12, 1998.
(b) Unaudited historical financial information for Manhasset Cinemas in
North Hempstead, NY and Babylon Cinemas in Babylon, NY for the period
from January 1, 1998 through the acquisition date of March 6, 1998.
(c) Unaudited historical financial information for the quarter ended March
31, 1998 for Franklin Square Cinemas in Franklin Square, NY and the
Great Neck Squire Cinemas in Great Neck, NY.
(d) Historical financial information for Cobble Hill Cinemas in Brooklyn,
NY for the period from January 1, 1998 through the acquisition date of
March 23, 1998 has not been included as no financial information was
available.
(e) Unaudited historical financial information for the quarter ended March
31, 1998 for the Headquarters 10 Cinemas in Morristown, NJ.
(2) Pending Acquisitions includes combined historical results derived from
unaudited historical financial information for the quarter ended March 31,
1998 of the Colony Cinemas in Livingston, NJ, and the West Milford Cinemas
in West Milford, NJ.
(3) Reflects an increase in historical concession revenue of approximately
$99,000, representing revenues that were not recognized by the sellers, for
the Clairidge Cinemas, Franklin Square Cinemas and Great Neck Squire Cinemas
because each of the sellers operated the respective concession stands
through independent third party concessionaires. The cost of concession
sales of approximately $32,000 is estimated based on the historical costs of
the concession sales of the Company. Upon acquisition of such theaters by
the Company, theater management began operating the concession stands and
the respective agreements with the independent third party concessionaires
have been terminated.
(4) In February 1998, the Company employed three professionals to perform film
booking services in-house for all screens operated by the Company and, in
March 1998, terminated its arrangements for third party film booking
services. The pro forma adjustment of approximately $46,000 in film rental
and booking fees represents amounts paid for third party film booking
services by the Company during 1998. The pro forma adjustment to general and
administrative expenses includes an increase of approximately $48,000
representing costs of the Company's three film booking professionals
assuming that such professionals were hired on January 1, 1997.
(5) Reflects a reduction of rent of $14,000 for the Roslyn Cinemas as the
application of net proceeds of the Offering includes the acquisition of the
underlying fee real estate of this theater.
(6) The net decrease in general and administrative expenses is due to management
advisory services provided by the former owner of the Franklin Square
Cinemas and the addition of film booking professionals for the three months
ended March 31, 1998 as more fully described in note (9) to the Unaudited
Pro Forma Combined Statement of Operations for the year ended December 31,
1997.
(7) Reflects an increase in depreciation and amortization expense of $105,000
for property and equipment, leasehold interests and intangible assets
acquired in connection with the 1998 Acquisitions and the Pending
Acquisitions, including amortization of the excess of the purchase price (or
expected purchase price) over the estimated fair values of the assets
acquired. The Company estimates the useful lives to be 40 years for
buildings and improvements and five to seven years for furniture and
equipment. Leasehold interests represent acquired rights to operate theaters
under previously existing operating leases. The fair value assigned to these
leasehold interests is amortized over the term of the lease. Goodwill
represents the excess of the purchase price, including acquisition costs,
over the fair value of the tangible and identifiable intangible assets
acquired which is amortized over fifteen years.
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(8) Pro forma interest expense is calculated as follows:
<TABLE>
<S> <C>
Historical combined interest expense, net (pre-acquisition basis).......... $1,238
Interest expense assuming all acquisitions were consummated on January 1,
1997 under the Old Credit Facility....................................... 2
------
Pro forma combined interest expense, net................................... 1,240
------
Less: amounts in historical combined interest expense
for refinanced debt...................................................... (1,233)
Add: interest expense on the Notes at 10.875%.............................. 1,776
Amortization of debt issuance costs........................................ 93
------
Pro forma Notes Offering adjustment........................................ 636
------
Pro forma interest expense................................................. $1,876
======
Pro forma cash interest expense............................................ $1,783
======
</TABLE>
Pro forma interest expense has been calculated based on the amount of the
Notes which was or will be used to repay the Old Credit Facility, repay other
indebtedness, redeem the Class B Preferred Stock, pay the escrow deposit,
close the Great Neck/Franklin Square Acquisition, the AMC Acquisition and the
Pending Acquisitions, acquire the real estate presently under lease and pay
fees and expenses of the Notes Offering of $65.3 million. Pro forma interest
expense is not indicative of results that will actually occur upon issuance
of the $80 million of Notes as it does not include interest expense of
approximately $399,000 on the $14,658,000 of the Notes to be used for the
construction of the Mansfield Theater and for general corporate purposes.
(9) Basic income (loss) per share is calculated by dividing net income (loss) by
the weighted average number of shares outstanding during the period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding, while also giving
effect to all dilutive potential common shares that were outstanding during
the period. Unaudited pro forma basic and diluted loss per share has been
calculated for the three months ended March 31, 1998 by dividing unaudited
pro forma net loss available to common shareholders by the weighted average
number of shares outstanding during the period. Unaudited pro forma net loss
available to common shareholders is computed as unaudited pro forma net loss
less preferred stock dividends. The pro forma weighted average number of
common shares outstanding used to calculate pro forma basic and diluted loss
per share for the three month period ended is 2,304,802 shares.
(10) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concessions and theater operating expenses. Although
it is not a measure of performance calculated in accordance with generally
accepted accounting principles, theater level cash flow is presented
because the Company believes that certain investors find it useful in
analyzing companies in the motion pictures exhibition industry.
(11) Theater level cash flow margin represents theater level cash flow divided
by total revenues.
(12) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, EBITDA is presented as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities
(as determined in accordance with generally accepted accounting principles)
as a measure of the Company's liquidity.
(13) EBITDA margin represents EBITDA divided by total revenues.
(14) Ratio of EBITDA to cash interest expense represents EBITDA divided by
interest less non-cash amortization of debt issuance costs and discounts.
For the pro forma ratio of EBITDA to cash interest expense for the period
ended March 31, 1998, pro forma interest expense has been calculated using
a rate of interest on the Notes of 10.875% per annum.
25
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and the historical consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. The
consolidated financial data for the year ended December 31, 1997 presented below
are derived from the Company's consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, whose report covering the
Company's consolidated financial statements as of December 31, 1997 and for the
year then ended and the related financial statements is included elsewhere
herein. The consolidated financial data for the years ended December 31, 1996
and 1995 presented below are derived from the Company's consolidated financial
statements audited by Wiss & Company, LLP, independent accountants, whose report
covering the Company's consolidated financial statements as of December 31, 1996
and 1995 and for the years then ended and the related financial statements is
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------- ---------------------------
1995 1996(1) 1997(1) 1997 1998
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Theater revenues:
Box office.......................................... $ 1,759 $ 6,195 $12,926 $ 2,712 $ 7,077
Concession.......................................... 555 1,861 3,914 744 2,284
Other............................................... 31 142 422 49 320
------- ------- ------- ------- -------
2,345 8,198 17,262 3,505 9,681
------- ------- ------- ------- -------
Operating expenses:
Film rental and booking fees........................ 824 3,022 6,168 1,196 3,060
Cost of concession sales............................ 99 279 635 108 357
Theater operating expenses.......................... 1,078 3,298 6,591 1,227 3,455
General and administrative expenses................. 375 590 1,131 192 1,010
Depreciation and amortization....................... 100 635 2,051 413 1,263
------- ------- ------- ------- -------
2,476 7,824 16,576 3,136 9,145
------- ------- ------- ------- -------
Operating income...................................... (131) 374 686 369 536
Interest expense...................................... 85 592 2,015 358 1,161
------- ------- ------- ------- -------
Net income (loss)..................................... $ (216) $ (218) $(1,329) $ 11 $ (625)
======= ======= ======= ======= =======
Basic and diluted income (loss) per share(2).......... $ (.36) $ (.29) $ (1.03) $ .01 $ (.30)
======= ======= ======= ======= =======
OPERATING DATA:
Box office margin(3).................................. 53.2% 51.2% 52.3% 55.9% 56.8%
Concession margin(4).................................. 82.2% 85.0% 83.8% 85.5% 84.4%
Number of theaters.................................... 7 16 31 16 37
Number of screens..................................... 21 60 148 60 169
Attendance............................................ 315,406 1,167,409 2,322,063 480,529 1,278,273
Average ticket price(5)............................... $ 5.58 $ 5.31 $ 5.57 $ 5.64 $ 5.54
Average concession revenue per patron(6).............. $ 1.76 $ 1.59 $ 1.69 $ 1.55 $ 1.79
Ratio of earnings to fixed charges(7)................. -- -- -- --
OTHER DATA:
Theater level cash flow(8)............................ $ 344 $ 1,599 $ 3,868 $ 974 $ 2,809
Theater level cash flow margin(9)..................... 14.7% 19.5% 22.4% 27.8% 29.0%
EBITDA(10)............................................ $ (31) $ 1,009 $ 2,737 $ 782 $ 1,799
EBITDA margin(11)..................................... (1.3)% 12.3% 15.9% 22.3% 18.6%
Capital expenditures(12).............................. $ 631 $ 318 $ 3,486 $ 305 $ 765
CASH FLOWS FROM:
Operating activities.................................. $ 119 $ 1,147 $ 3,934 $ 780 $ 1,175
Investing activities.................................. (1,239) (7,295) (33,647) (399) (6,604)
Financing activities.................................. 853 6,723 30,608 299 5,252
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................. $ 176 $ 751 $ 1,647 $ 1,432 $ 1,470
Total assets.......................................... 2,029 15,761 57,352 16,630 63,408
Total long-term debt, including current maturities.... 948 10,252 41,112 10,663 46,903
Redeemable preferred stock............................ 2,132 2,781
Class B redeemable preferred stock.................... 1,350 1,350
Redeemable common stock............................... 113 357 357
Total stockholders' equity............................ 353 1,792 10,328 1,155 9,873
</TABLE>
26
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(1) See Note 2 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. with respect to its acquisitions in 1996 and 1997.
(2) Basic income (loss) per share is calculated by dividing net income (loss)
by the weighted average number of common shares outstanding during the
period. Diluted income (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares outstanding,
while also giving effect to all dilutive potential common shares that were
outstanding during the period.
(3) Box office margin represents total box office revenues less film rental and
booking fees divided by total box office revenues.
(4) Concession margin represents total concession revenues less cost of
concession sales divided by total concession revenues.
(5) Average ticket price represents total box office revenue divided by
attendance.
(6) Average concession revenue per patron represents total concession revenues
divided by attendance.
(7) The ratio of earnings to fixed charges is computed by dividing operating
income (loss) before fixed charges by fixed charges. Fixed charges is
calculated as interest expense, including capitalized interest, plus one
third of rental expense. Management believes one third of rental expense
represents an appropriate portion representative of the interest factor.
Earnings were insufficient to cover fixed charges for the years ended
December 31, 1995, 1996 and 1997 by $216,316, $218,328 and $1,369,868,
respectively, and for the three months ended March 31, 1998 by $625,283.
(8) Theater level cash flow represents total revenues less film rental and
booking fees, cost of concession sales and theater operating expenses.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, theater level cash flow is
presented because the Company believes that certain investors find it
useful in analyzing companies in the motion picture exhibition industry.
(9) Theater level cash flow margin represents theater level cash flow divided
by total revenues.
(10) EBITDA is a financial measure commonly used in the Company's industry.
Although it is not a measure of performance calculated in accordance with
generally accepted accounting principles, EBITDA is presented as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities
(as determined in accordance with generally accepted accounting principles)
as a measure of the Company's liquidity.
(11) EBITDA margin represents EBITDA divided by total revenues.
(12) Capital expenditures represent purchase of property, equipment and
leasehold improvements, excluding acquisitions. For the year ended December
31, 1997, capital expenditures included (a) construction of a new theater
in an existing building in Summit, NJ and the addition of four screens to
an existing theater in Chester, NJ; (b) upgrades to Clearview's existing
theaters and to theaters included in the 1997 Acquisitions; and (c)
replacement capital expenditures. For the quarter ended March 31, 1998,
capital expenditures included (a) upgrades to theaters included in the 1997
Acquisitions; (b) additional improvements to the Summit, NJ theater; (c)
furniture and equipment for the Company's expanded corporate offices; and
(d) replacement capital expenditures.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's results of
operations and financial condition should be read in conjunction with the
information set forth in the financial statements and the notes thereto included
elsewhere in this Prospectus.
OVERVIEW
Since the inception of its business in December 1994, when the Company
acquired the right to operate four theaters with eight screens, through March
31, 1998 the Company had acquired the right to operate an additional 32 theaters
with 150 screens, had added six screens to two existing theaters and had
constructed a new five-screen theater in an existing building, resulting in a
total of 37 theaters and 169 screens operated by the Company at March 31, 1998.
The Company operated 16 theaters with 60 screens as of March 31, 1997. The
Company expects that its future revenue growth will be derived primarily from
the acquisition of additional theaters, the addition of screens to existing
theaters and the development of new theaters. In order to fund its plans for
continued growth, the Company may need to seek additional debt or equity
financing. Failure to obtain any such financing could require the Company to
significantly curtail its acquisition activities. The Company has had no theater
closings since inception.
The Company's revenues are predominantly generated from box office
receipts, concession sales and on-screen advertising. Direct theater costs
include film rental and the cost of concessions. Other theater operating
expenses consist primarily of theater labor and related fringe benefit costs and
occupancy costs (including rent and/or real estate taxes, utilities, repairs and
maintenance, cleaning costs and supplies). Film rental costs are directly
related to the popularity of a film and the number of weeks the film has run.
Film rental costs generally decline as a percentage of box office receipts the
longer a film has been showing. Because certain concession items, such as
fountain drinks and popcorn are purchased in bulk and not prepackaged for
individual servings, the Company has significant gross profit margins on those
items.
General and administrative expenses consist primarily of corporate overhead
costs, such as management and office salaries and related fringe benefits costs,
professional fees, insurance costs and general office expenses. The Company
believes that its current internal controls and management information system
will allow the Company to expand its number of screens significantly without
incurring proportionate increases in general and administrative expenses. The
management information system has on-line capabilities to collect information
concerning box office receipts, ticketing, concession sales, inventory control
and booking. This system allows the Company to closely track and manage box
office and concession revenues.
During the three months ended March 31, 1998, the Company purchased the
Clairidge Cinemas in Montclair, New Jersey (6 screens) for $2.1 million in cash
and 14,782 shares of Common Stock; the Manhasset Cinemas in North Hempstead, NY
(3 screens) and the Babylon Cinemas in Babylon, NY (3 screens) for an aggregate
of $1.5 million in cash; and the Cobble Hill Cinemas in Brooklyn, NY (5 screens)
for $2.2 million in cash. In the first three months of 1998, the Company also
leased the Millburn Twin Cinemas in Millburn, New Jersey (2 screens) and The
Screening Zone in Montclair, New Jersey (2 screens). The acquisition and lease
of these additional theaters increased the Company's total number of theaters to
37 and its screen count to 169, as of March 31, 1998.
Upon repayment of the Old Credit Facility with a portion of the net
proceeds of the Notes Offering, the Company was required to pay a prepayment
premium of $412,000. The prepayment premium, taken together with a write-off of
unamortized debt discount and debt issuance costs of $242,000 and $1,439,000,
respectively, in connection with repayment of the Old Credit Facility, will
result in an extraordinary loss of $2,093,000 in the quarter ended June 30,
1998.
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 1998 AND 1997
Total Revenues. Total revenues for the three months ended March 31, 1998
increased 176.2% to $9,680,809 from $3,505,451 for the comparable 1997 period.
Box office receipts for the three months ended March 31, 1998 increased 160.9%
to $7,077,119 from $2,712,210 for the comparable 1997 period. The increase in
box office receipts resulted primarily from an increase in attendance for the
three months ended March 31, 1998 of 136.7% to approximately 1,278,000 from
540,000 attendees in the comparable 1997 period. This increase in attendance was
attributable primarily to the operation of theaters acquired in the third and
fourth
28
<PAGE>
quarters of 1997 and the first quarter of 1998. Total concession sales for the
three months ended March 31, 1998 increased 207.0% to $2,284,059 from $743,986
for the comparable 1997 period, primarily due to the increase in the number of
theaters operated. Other revenue (which consists primarily of advertising
revenue and rental income on fee-owned properties) for the three months ended
March 31, 1998 increased 548.9% to $319,631 from $49,255 for the comparable 1997
period. The increase in other revenue was the result of operating additional
theaters during the period.
Film Rental and Booking Fees. Film rental and booking fees for the three
months ended March 31, 1998 increased 155.8% to $3,060,197 from $1,196,126 for
the comparable 1997 period, principally due to the operation of additional
theaters as previously discussed. Film rental and booking fees as a percentage
of box office receipts decreased to 43.2% for the three months ended March 31,
1998 compared to 44.1% for the comparable 1997 period.
Cost of Concession Sales. Cost of concession sales for the three months
ended March 31, 1998 increased 229.1% to $357,465 from $108,605 for the
comparable 1997 period. This increase was attributable primarily to the
operation of the theaters acquired in the third and fourth quarters of 1997 and
in the first quarter of 1998. As a percentage of concession revenues, the cost
of concession sales increased to 15.7% for the three months ended March 31, 1998
compared to 14.6% for the comparable 1997 period. This increase was attributable
to the fact that the inventory mix at theaters acquired in the first quarter of
1998 did not match patrons' preferences, and that their cost of concession sales
did not reflect purchasing efficiencies available to the Company.
Theater Operating Expenses. Theater operating expenses for the three
months ended March 31, 1998 increased 181.7% to $3,455,314 from $1,226,799 for
the comparable 1997 period. This increase was attributable primarily to the
operation of the theaters acquired as previously discussed. Theater operating
expenses, as a percentage of total revenues, increased to 35.7% for the three
months ended March 31, 1998 from 35.0% for the comparable 1997 period. This
increase was attributable to the operation of the theaters acquired in the first
quarter of 1998 whose operating results did not reflect Clearview's operating
efficiencies for the entire period.
General and Administrative Expenses. General and administrative expenses
for the three months ended March 31, 1998 increased 426.4% to $1,009,744 from
$191,806 for the comparable 1997 period. The increase was due principally to the
hiring of personnel and related increases in salaries to support the Company's
transition from 16 theaters and 60 screens as of January 1, 1997 to 37 theaters
and 169 screens as of March 31, 1998. General and administrative expenses, as a
percentage of total revenues, increased to 10.4% for the three months ended
March 31, 1998 from 5.5% for the comparable 1997 period. The increase was
partially due to the incremental professional fees incurred during the period in
connection with increased external reporting requirements as a result of the
Common Stock Offering in August 1997. The increase was also attributable to the
hiring of in-house film booking and legal professionals to support the Company's
growth and future expansion plans. The Company expects general and
administrative expenses as a percentage of total revenues to decline over the
remainder of the fiscal year.
Depreciation and Amortization. Depreciation and amortization expense for
the three months ended March 31, 1998 increased 205.7% to $1,262,625 from
$413,011 for the comparable 1997 period. The increase was a direct result of the
substantial increase in the screen count and number of theaters operated since
the end of the first quarter of 1997, which significantly increased the
Company's depreciable and amortizable assets.
Operating Income. Operating income for the three months ended March 31,
1998 increased 45.1% to $535,464 from $369,104 for the comparable 1997 period.
Operating income as a percentage of total revenues, decreased to 5.5% for the
three months ended March 31, 1998 from 10.5% in the comparable 1997 period.
Operating income decreased as a percentage of total revenue due to the increase
in general and administrative and depreciation and amortization expenses.
Interest Expense. Interest expense for the three months ended March 31,
1998 increased 223.8% to $1,160,747 from $358,482 for the comparable 1997
period. The Company's borrowing rate on the Existing Credit Facility decreased
from Prime + 2% to Prime + 1.5% in September 1997. This decrease was offset by a
significant increase in total debt outstanding during the first quarter of 1998
due to the funding of the Company's acquisitions in 1997 and 1998.
Net Income (Loss). Net loss for the three months ended March 31, 1998 was
$625,283 compared to net income of $10,622 in the comparable 1997 period. The
net loss was attributable primarily to substantial increases in both
depreciation and amortization expense and interest expense, resulting from the
Company's growth through acquisitions and related borrowings.
29
<PAGE>
Other Financial Data. EBITDA for the three months ended March 31, 1998
increased 129.9% to $1,798,089 from $782,115 for the comparable 1997 period.
EBITDA as a percentage of total revenues for the three months ended March 31,
1998 decreased to 18.6% from 22.3% in the comparable 1997 period due primarily
to an increase in general and administrative expenses previously discussed.
Theater level cash flow increased 188.4% to $2,809,000 for the three months
ended March 31, 1998 from $974,000 for the comparable period in 1997. Theater
level cash flow margin increased to 29% in 1998 from 27.8% in 1997. These
improvements were attributable to increased revenues for new screens without a
commensurate increase in theater operating expenses and an improved box office
margin, respectively. EBITDA and theater level cash flow are financial measures
commonly used in the Company's industry. Although they are not measures of
performance calculated in accordance with generally accepted accounting
principles, they are presented as alternatives to operating income (as
determined in accordance with generally accepted accounting principles), as an
indicator of the Company's operating performance or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's liquidity.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Total Revenues. Total revenues for 1997 increased 110.6% to $17,261,977
from $8,197,974 in 1996. The increase in box office receipts resulted primarily
from an increase in attendance of 98.9% to approximately 2,322,000 attendees in
1997 from approximately 1,167,000 attendees in 1996. This increase in attendance
is attributable primarily to the Company's operation of the nine theaters
acquired during 1996 for a full year in 1997, as well as the operation of the 14
theaters acquired and the one theater developed during 1997. Additionally, the
average ticket price increased from $5.31 in 1996 to $5.57 in 1997. Total
concession sales increased 110.3% for 1997 to $3,914,416 from $1,861,155 in the
comparable 1996 period, primarily due to the increase in the number of theaters
operated.
Film Rental and Booking Fees. Film rental and booking fees for 1997
increased 104.1% to $6,168,380 in 1997 from $3,022,377 in 1996, principally due
to the operation of additional theaters as discussed above. Film rental and
booking fees, as a percentage of box office receipts, decreased to 47.7% for the
year ended December 31, 1997 compared to 48.8% for 1996.
Cost of Concession Sales. Cost of concession sales for 1997 increased
126.9% to $634,395 from $279,549 for 1996. This increase was attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of concession revenues, the cost of concession sales increased
to 16.2% in 1997 from 15.0% in 1996. This increase was attributable to the
number of theaters the Company added at the height of the 1997 holiday season
when the majority of the concession sales are lower margin candy sales.
Theater Operating Expenses. Theater operating expenses for 1997 increased
99.8% to $6,590,703 from $3,297,825 for 1996. This increase was attributable
primarily to the operation of the additional theaters acquired in 1997 and 1996.
As a percentage of total revenues, theater operating expenses decreased to 38.2%
in 1997 from 40.2% in 1996. The decrease, as a percentage of total revenues, was
primarily due to the Company's ability to control and manage its variable costs,
such as labor, and the lower average per-theater fixed costs, such as occupancy
costs, property taxes and utilities, of the theaters acquired in 1997 as
compared to the Company's other theaters.
General and Administrative Expenses. General and administrative expenses
for 1997 increased 91.7% to $1,130,855 from $589,822 in 1996. This increase was
due principally to the hiring of additional personnel and related increases in
salaries resulting from the transition from seven locations and 21 screens at
January 1, 1996 to 16 locations and 60 screens at January 1, 1997 and to 31
theaters and 148 screens at December 31, 1997. The increase was also due to the
increase in certain costs in 1997, such as professional fees, which are
typically associated with the transition from a private company to a public
company. As a percentage of total revenues, however, general and administrative
expenses for 1997 decreased to 6.6% from 7.2% for 1996. This decrease was
primarily due to the Company's internal controls and management information
system which allowed the Company to expand its number of screens without
incurring proportionate increases in general and administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense for
1997 increased 223.0% to $2,051,163 from $635,007 in 1996. This increase was a
direct result of the 14 additional theaters acquired in 1997, which
significantly increased the Company's depreciable and amortizable assets, as
well as the effect of a full year of depreciation and amortization on the assets
of the nine theaters acquired in 1996.
30
<PAGE>
Operating Income. Operating income for 1997 increased 83.8% to $686,481
from $373,394 for 1996. As a percentage of total revenues, operating income
decreased to 4.0% for the year ended December 31, 1997, compared to 4.6% for the
year ended December 31, 1996. Operating income decreased as a percentage of
total revenues primarily due to the substantial increase in depreciation and
amortization expense, which more than tripled in 1997 over 1996, compared to
total revenues, which approximately doubled over the same period. Excluding
depreciation and amortization, increases in the Company's other operating
expenses were less, on a percentage basis, than the growth in total revenues, as
summarized below:
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 funding of the Company's acquisitions.
Net Loss. Net loss for the year ended December 31, 1997 increased to
$1,328,938 from $218,328 in the comparable 1996 period. This increase in net
loss was attributable primarily to the substantial increases in both
depreciation and amortization ($1,416,156) and interest expense ($1,423,697),
together totaling over $2,800,000. These increases were due to the additional
screens operated by the Company in 1997 and their related acquisition financing
costs, which were offset by reduced film rental costs, theater operating
expenses and general and administrative expenses, which were less, on a
percentage basis, than the growth in total revenues.
Other Financial Data. EBITDA for the year ended December 31, 1997
increased 171% to $2,737,000 from $1,009,000 for the year ended December 31,
1996. EBITDA as a percentage of total revenue increased to 15.9% for the year
ended December 31, 1997 from 12.3% for the year ended December 31, 1996. This
increase was primarily attributable to the reduction of general and
administrative expenses from 7.2% of revenues for the year ended December 31,
1996 to 6.6% of revenues for the year ended December 31, 1997. This decrease in
general and administrative expenses as a percentage of revenues was a result of
Clearview management's cost controls which allowed the Company to expand its
revenue base without incurring a proportionate increase in corporate overhead.
Theater level cash flow for the year ended December 31, 1997 increased 142% to
$3,868,000 from $1,599,000 in 1996. Theater level cash flow margin for the year
ended December 31, 1997 increased to 22.4% of revenue from 19.5% of revenue in
1996. This increase was primarily due to the reduction of theater operating
expenses as a percentage of revenue from 40.2% for the year ended December 31,
1996 to 38.2% for the year ended 1997. EBITDA and theater level cash flow are
financial measures commonly used in the Company's industry. Although they are
not measures of performance calculated in accordance with generally accepted
accounting principles, they are presented as alternatives to operating income
(as determined in accordance with generally accepted accounting principles), as
an indicator of the Company's operating performance or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's liquidity.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total Revenues. Total revenues for 1996 increased 249.5% to $8,197,974
from $2,345,697 for 1995. This increase in total revenues was primarily a result
of an increase in attendance of 270% to approximately 1,167,000 attendees in
1996 from approximately 315,000 attendees in 1995. The increase in attendance
occurred principally because of the addition of 39 screens during 1996 and the
first full year of operation of the 11 screens added during 1995. Revenues from
those theaters operated by the Company throughout 1995 and 1996 increased 15.7%
from $1,541,843 to $1,783,260. This increase in same theater revenues was
attributable primarily to an overall increase in attendance at two theaters and
the conversion from a single-screen to a triplex at another theater location.
Average ticket prices for the Company's theaters remained relatively constant
during 1995 and 1996. Total concession sales increased 235.5% in 1996 to
$1,861,155 from $554,671 in 1995 principally for the same reasons.
31
<PAGE>
Film Rental and Booking Fees. Film rental and booking fees for 1996
increased 266.9% to $3,022,377 from $823,791 for 1995. As a percentage of box
office receipts, film rental and booking fees increased to 48.8% from 46.8% for
the years ended December 31, 1996 and 1995, respectively. This increase was
primarily attributable to the Company's acquisition of the six theaters acquired
in May and July of 1996 (film rental and booking fees as a percentage of box
office receipts are generally higher during the summer months than most of the
rest of the year).
Cost of Concession Sales. Cost of concession sales for 1996 increased
181.6% to $279,549 from $99,261 for 1995. As a percentage of concession
revenues, the cost of concession sales decreased to 15.0% from 17.9% for the
years ended December 31, 1996 and 1995, respectively. The Company's gross margin
on concession revenues improved in 1996 when compared to 1995 as a result of
obtaining volume discounts.
Theater Operating Expenses. Theater operating expenses increased for 1996
205.8% to $3,297,825 from $1,078,370 for 1995 primarily due to the Company's
acquisitions during 1996. As a percentage of total revenues, theater operating
expenses decreased to 40.2% from 46.0% for the years ended December 31, 1996 and
1995, respectively. This reduction was due to the Company's careful management
of its theater labor and fringe benefit costs and the lower average per-theater
fixed costs, such as occupancy costs, taxes and common area maintenance costs,
of the theaters acquired in 1996 as compared to the Company's other theaters. As
a percentage of box office receipts, theater labor and fringe benefit costs
decreased to 20.9% from 23.2% for the years ended December 31, 1996 and 1995,
respectively.
General and Administrative Expenses. General and administrative expenses
for 1996 increased 57.2% to $589,822 from $375,262 for 1995. This increase was
due principally to the hiring of additional personnel and increases in salaries
resulting from the transition from seven locations and 21 screens at the
beginning of 1996 to 16 locations and 60 screens by the end of 1996. As a
percentage of total revenues, however, general and administrative expenses
decreased to 7.2% from 16.0% for the years ended December 31, 1996 and 1995,
respectively. This decrease was primarily due to the Company's internal controls
and management information system which allowed the Company to expand its number
of screens without incurring proportionate increases in general and
administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense for
1996 increased 537.4% to $635,007 from $99,632 for 1995. This increase was
primarily a result of the acquisition of the nine theaters acquired in 1996,
which significantly increased the Company's depreciable and amortizable assets.
Operating Income. Operating income for 1996 increased to $373,394 from an
operating loss of $130,619 for 1995. This increase in the Company's operating
income was primarily due to certain improvements in operating efficiency, the
lower average occupancy costs per theater of the theaters acquired in 1996 as
compared to the Company's other theaters, and an increase in general and
administrative expenses which was less, on a percentage basis, than the growth
in total revenues, offset by higher depreciation and amortization expense.
Interest Expense. Interest expense for 1996 increased 590.5% to $591,722
from $85,697 for 1995. The increase was primarily attributable to the
significant increase in the Company's total debt during 1996, which was
primarily incurred to finance the Company's acquisitions during that year.
Net Loss. Net loss for 1996 increased 1.0% to $218,328 from a net loss of
$216,316 for 1995. The increase in net loss was primarily due to the Company's
acquisitions during 1996 that resulted in a significant increase in depreciation
and amortization expense, which is a non-cash expense, and a large increase in
interest expense, offset by better operating efficiencies indicated above.
Other Financial Data. EBITDA for the year ended December 31, 1996
increased to $1,009,000 from a loss of $31,000 for the year ended December 31,
1995. This increase was due to the screens added in 1996, and to the Company's
ability to increase its revenue base while maintaining low corporate overhead.
Theater level cash flow for the year ended December 31, 1996 increased 365% to
$1,599,000 from $344,000 in 1995. Theater level cash flow margin for the year
ended December 31, 1997 increased to 19.5% for the year ended December 31, 1996
from 14.7% for the year ended December 31, 1995. This increase was attributable
to the decreased concession costs obtained through volume purchasing and to the
implementation of Clearview management's cost controls at the theater level, in
particular, the reduction in labor and related fringe benefit costs. EBITDA and
theater level cash flow are financial measures commonly used in the Company's
industry. Although they are not measures of performance calculated in accordance
with generally accepted accounting
32
<PAGE>
principles, they are presented as alternatives to operating income (as
determined in accordance with generally accepted accounting principles), as an
indicator of the Company's operating performance or as an alternative to cash
flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's liquidity.
LIQUIDITY AND CAPITAL RESOURCES
The Company receives substantially all of its revenues in cash from box
office receipts and concession sales and, therefore, benefits from minimal
accounts receivable and inventory requirements. The Company's most significant
operating expense, film rental fees, continues to be paid to distributors 30 to
45 days following the receipt of the applicable cash ticket payments. In
addition, nearly all of the Company's other operating expenses such as
concession purchases, theater payroll and theater rents, are paid bi-weekly or
monthly, respectively. The period between the receipt of cash from operations
and the use of that cash to pay the related expenses provides certain operating
capital to the Company.
Since the Company is in an industry which is capital intensive,
substantially all of its assets are non-current. The Company's primary current
asset is cash, while inventories are relatively insignificant throughout the
fiscal year. The Company had negative working capital of $10,421,404 and
$1,484,683 at March 31, 1998 and March 31, 1997, respectively, and negative
working capital of $5,334,136 at December 31, 1997 and $1,710,825 at December
31, 1996, respectively. The increases in negative working capital were
attributable to the increase in the current portion of long-term debt used to
finance the Company's theater acquisitions during such periods, and the increase
in film rental fees payable due to the increase in the number of screens.
The Company has financed its day-to-day operations principally from the
cash flow generated by its operating activities. Such cash flow totaled
$1,174,819 for the three months ended March 31, 1998, as compared to $780,455
for the comparable 1997 period, and $3,934,204 in 1997 as compared to $1,147,062
in 1996. The difference between the Company's net losses and its cash flows from
operating activities for these periods was principally due to non-cash
depreciation and amortization expenses and increases in accounts payable and
accrued expenses.
The Company's primary capital requirements are to fund additional theater
acquisitions and for remodeling, expansion and maintenance of existing theaters.
While the Company has acquired fee-owned theaters from time to time, the Company
prefers to acquire theaters as leasehold properties in order to preserve
capital. Clearview also has historically developed, and plans to continue
developing, new theaters principally by entering into long-term leases, which
provide an opportunity to share construction and development costs with the
lessor. All of Clearview's landlords are unaffiliated third parties. As of March
31, 1998, the aggregate annual minimum lease payments for all the Company's
theaters over the next five years are as follows: 1998: $2,976,584; 1999:
$3,056,606; 2000: $2,991,443; 2001: $2,865,295; and 2002: $2,909,506. After
giving effect to the Pending Acquisitions, such aggregate annual minimum lease
payments would be: 1998: $3,991,672; 1999: $4,290,069; 2000: $4,239,306; 2001:
$4,049,198; and 2002: $4,109,480.
Capital expenditures, exclusive of theater acquisitions, totaled
approximately $765,000 in the first three months of 1998 and $305,000 in the
first three months of 1997. During the first quarter of 1998, the Company funded
its capital expenditures, other than theater acquisitions, through cash flow
from operations.
The Company's capital requirements in 1997 arose principally in connection
with theater acquisitions ($37.9 million), the renovation of acquired and
existing theaters ($2.4 million), the development of a new theater ($866,000)
and the addition of screens to an existing theater ($258,000). Capital
expenditures, exclusive of theater acquisitions, totaled approximately
$3,486,000 in 1997 and $318,000 in 1996. During 1997, the Company funded its
capital expenditures, including theater acquisitions, through the net proceeds
of its initial public offering of approximately $7.1 million approximately $24
million of bank borrowings, issuance of $6.0 million of subordinated debt, the
issuance of 750 shares of Class B Preferred Stock valued at $750,000 and the
issuance of 104,297 shares of common stock, valued at approximately $1.2
million.
In February 1998, the Company amended and restated its Old Credit Facility
by obtaining a third term note ('Term Note C') totaling $5.8 million which was
used to fund in part the 1998 Acquisitions. The aggregate availability under the
Old Credit Facility was $41.8 million at March 31, 1998. On June 12, 1998, the
Old Credit Facility was repaid, and the Company entered into the New Credit
Facility providing for a secured revolving line of credit in the aggregate
principal amount of $15.0 million. The New Credit Facility will mature on June
12,
33
<PAGE>
2003. The New Credit Facility is collateralized by substantially all of the
assets of the Company and contains various restrictive covenants. See
'Description of New Credit Facility.'
On April 23, 1998, the Company issued 3,000 shares of Class C Preferred
Stock to the Selling Stockholder for approximately $3.0 million.
On June 12, 1998, the Company received $80 million in aggregate gross
proceeds before fees and expenses from the Notes Offering.
The Company's future capital expenditures for planned maintenance will be
funded through cash flow from operations. In accordance with the Company's
growth strategy, Clearview intends to continue to acquire theaters and is
pursuing the acquisition of additional locations. Based on the Company's current
operations and anticipated revenue growth, management believes that cash flow
from operations and other available cash (including from the Notes Offering),
together with available borrowings under the New Credit Facility, will be
sufficient to fund the Company's growth strategy through at least the end of
1998. Thereafter, however, or in the event the Company exceeds its currently
anticipated expansion plans, the Company anticipates that it will need to seek
additional debt or equity financing to fund its growth strategy. Failure to
obtain any such financing could have a material adverse effect on the Company's
ability to achieve its growth strategy. In the absence of additional financing,
the Company believes that it is capable of funding its current operations
(including principal and interest payments as they come due) through
internally-generated cash flow from operations and existing debt financing.
QUARTERLY RESULTS AND SEASONALITY
Historically, the most successful films have been released during the
summer months (July and August) and Thanksgiving through the year-end holiday
season. Consequently, motion picture exhibitors generally have had
proportionally higher revenues during such periods, although seasonality of
motion picture exhibition revenues has become less pronounced in recent years as
studios have begun to release major motion pictures more evenly throughout the
year. The Company believes that its regular exhibition of first run independent
films has contributed to a moderation in the seasonality of its own revenues as
compared to the seasonality of the revenues of some of its competitors.
Nevertheless, the Company's revenues and income in any particular quarter will
be substantially the result of the commercial success of the particular films
being exhibited during such quarter.
EFFECTS OF INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
YEAR 2000
The Company is currently evaluating the potential impact of the year 2000
on the electronic data processing and other information systems relevant to the
Company's business and is developing a plan to resolve this issue. The year 2000
issue is the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's programs that
have time-sensitive software may recognize a date using '00' as the year 1900
rather than the year 2000, which could result in miscalculations or system
failures. This issue creates risk for the Company from unforeseen problems in
its own computer systems and from third parties with whom the Company deals on
various transactions. Based on preliminary information, costs of addressing
potential problems are not currently expected to have a material adverse impact
on the Company's results of operations, financial position or cash flows.
34
<PAGE>
BUSINESS
Clearview is a major regional first run motion picture exhibitor that
operates primarily community-based multiplex theaters in affluent suburban
communities in the New York/New Jersey metropolitan area. Clearview offers a
broad mix of first run films with a particular focus on films designed to appeal
to sophisticated moviegoers and families with younger children residing in these
communities. As of June 30, 1998, the Company operated 40 theaters with a total
of 193 screens. As of the same date, after giving effect to the Pending
Acquisitions, the Company would have had 42 theaters with a total of 200
screens. Through additions of screens to existing theaters and new theater
development, the Company also plans to add a total of 71 new screens by March
31, 1999. Based on the number of screens currently operated, the Company
believes that it is one of the largest motion picture exhibitors in the New
York/New Jersey metropolitan region and the second largest in New Jersey, thus
enabling it to compete effectively with the major national theater circuits in
its markets. As of June 30, 1998, approximately 70.0% of the Company's theaters
were the sole exhibitors in their film zones, and approximately 18.0% were the
leading exhibitors in their film zones. For the year ended December 31, 1997, on
a pro forma basis after giving effect to the 1997 Acquisitions, the 1998
Acquisitions and the Pending Acquisitions, the Company's revenues and EBITDA
would have been approximately $47.6 million and $9.2 million, respectively. For
the three months ended March 31, 1998, on a pro forma basis after giving effect
to the 1998 Acquisitions, other than the Cobble Hill Acquisition, and the
Pending Acquisitions, the Company's revenues and EBITDA would have been
approximately $11.9 million and $2.3 million, respectively.
Clearview operates clean, comfortable, visually appealing and
service-oriented theaters predominantly located in affluent towns and
communities rather than in shopping malls or near highways. The Company believes
that, in many suburban communities in the Middle Atlantic and New England
states, theaters located in town or in community-based retail centers serve
audiences that prefer the convenience and familiarity of such theaters to the
larger out-of-town megaplex theaters that appear to be the focus of the major
theater circuits. Many of the Company's target markets are in densely populated,
affluent areas consisting of numerous small municipalities with local business
districts that are well-suited to the Company's strategy of operating
community-based theaters. In many of these areas it can be difficult for theater
circuit operators to build or expand theaters into large multiplexes or
megaplexes due to a lack of affordable real estate, zoning laws and community
resistance.
Founded in 1994 with four theaters and eight screens, the Company has
remained relatively stable. Since May 1996, the Company has completed 13
acquisitions, representing 30 theaters with a total of 158 screens, and entered
into agreements to operate or lease an additional five theaters with a total of
15 screens. Management has successfully integrated these theaters into its
operations by reducing operating expenses and implementing new operating
standards, management controls and information systems. The Company has also
upgraded the seating, improved the sound and projection equipment, refurbished
the interior furnishings and broadened the concession offerings in most
locations. Additionally, since early 1995 the Company has added seven screens to
existing theaters and constructed a new five-screen theater in an existing
building, resulting in an aggregate of 40 theaters with a total of 193 screens
as of June 30, 1998. See '--Existing Theaters and Pending Acquisitions.'
During the past ten years, overall movie theater attendance in the United
States has remained relatively stable. Admission revenue increased from a total
of approximately $4.3 billion in 1987 to approximately $6.4 billion in 1997, or
a compound annual growth rate of 4.1%. The theatrical exhibition industry is
fragmented. Although the eleven largest theater circuits operated approximately
60% of the screens at May 1, 1997, 268 of the approximately 478 remaining
exhibitors operated four or fewer screens. There is also a strong trend toward
consolidation in the motion picture exhibition industry. Two recent major
transactions combined Cineplex (approximately 1,729 screens) with Sony/Loews
(approximately 1,020 screens), and combined Act III (approximately 832 screens)
with Regal (approximately 2,337 screens). The Company believes that it has an
opportunity to acquire additional theaters as the major circuits seek to divest
theaters which do not fit into their strategic plans and independent theater
operators find it increasingly difficult to compete with larger circuits.
35
<PAGE>
OPERATING STRATEGY
The Company's objective is to expand its position as a major regional first
run motion picture exhibitor operating multiplex theaters based on strict
operating controls, principally at in-town locations or in retail centers that
are the focus of community life. The following are the key elements of the
Company's operating strategy:
Maintain and Expand Strong Regional Focus. Based on the number of screens
currently operated, the Company believes that it is one of the largest motion
picture exhibitors in the New York/New Jersey metropolitan region and is the
second largest in New Jersey, thus enabling it to compete effectively with the
major national theater circuits in its markets. In addition, at June 30, 1998,
based on the number of screens currently operated, the Company is the leading
motion picture exhibitor in such upscale suburban areas as Morris County, New
Jersey; Essex County, New Jersey; and the North Shore of Long Island. The
Company seeks to continue to acquire or develop theaters that are close to the
Company's existing theaters and to acquire or develop similar clusters of
theaters in other target markets in the Middle Atlantic and New England states.
Approximately 80% of the Company's theaters are within a 30 mile radius and all
of the Company's theaters are within a 50 mile radius. By developing clusters of
theaters, the Company generally reduces its operating expenses through the
sharing of skilled personnel and management oversight. Also, with a large number
of screens in one area, the Company can operate separate theaters as if they
were a single larger multiplex, thereby enabling the Company to offer a wide
selection of films, play successful films longer and play films with very strong
demand on a number of screens at one time.
Dominate Film Zones. The Company seeks to operate theaters that will be
the sole or leading exhibitors in their geographic film licensing zones. A
geographic film licensing zone or 'film zone' is a geographic area (typically
having a three to five mile radius in suburban markets) customarily recognized
by film distributors, in which a film is licensed for exhibition at only one
theater. As of June 30, 1998, approximately 70.0% of the Company's theaters were
the sole exhibitors in their film zones and approximately 18.0% were the leading
exhibitors in their film zones. Being the sole or leading exhibitor in a film
zone allows the Company to choose which films to exhibit from among the various
films licensed by the production companies. Management believes that this
flexibility in film selection, combined with management's experience and
expertise in selecting films for its target markets, is an important factor in
the Company's success.
Pursue Community-Based Niche Strategy. Clearview operates clean,
comfortable, visually appealing and service-oriented theaters in predominantly
affluent towns and communities rather than in shopping malls or near highways.
The Company believes that, in many suburban communities in the Middle Atlantic
and New England states, theaters located in town or in community-based retail
centers serve audiences that prefer the convenience and familiarity of such
theaters to the larger out-of-town megaplex theaters that appear to be the focus
of the major theater circuits. By concurrently showing first run commercial, art
and family-oriented films, the Company seeks to appeal to three main groups in
affluent suburban communities: baby boomers, older moviegoers and families with
younger children (10 years of age and younger). Because of its community-based
focus, Clearview can adjust its mix of films based on its sensitivity to the
tastes of the audiences in each community. Examples of successful releases at
Clearview theaters during the past twelve months include Titanic, As Good As It
Gets, L.A. Confidential, Good Will Hunting, The Apostle, Sliding Doors, The
Horse Whisperer, Mousehunt and Paulie. Also as part of its community-based
strategy, Clearview encourages community interaction and involvement through
regular participation in local fund-raising and charity functions and through
the hiring of local employees. Clearview believes that its community-based,
niche strategy is exemplified by the Company's motto, 'We Bring Neighbors to the
Movies.'
Maintain Cost Controls and Pursue Margin Enhancement. The Company seeks to
improve the profitability of its theaters by: (i) controlling theater-level
costs through centralized management; (ii) increasing efficiencies in concession
purchasing; (iii) reducing general and administrative expenses as a percentage
of revenues; and (iv) selecting films that appeal to Clearview's target
audiences but result in relatively low aggregate film rental costs as a
percentage of box office receipts. For the year ended December 31, 1997,
Clearview's box office margin (total box office revenues less film rental and
booking fees divided by total box office revenues) was 52.3%, its concession
margin (total concession revenues less cost of concession sales divided by total
concession revenues) was 83.8%, and its theater level cash flow margin (total
revenues less film rental and booking fees, cost of concession sales and theater
operating expenses divided by total sales) was
36
<PAGE>
22.4%. For the three months ended March 31, 1998, Clearview's box office margin
was 56.8%, its concession margin was 84.4% and its theater level cash flow
margin was 29.0%. The Company believes that such percentages compared favorably
with those of the five largest motion picture exhibitors for the year ended
December 31, 1997. The Company believes that its regional focus, centralized
management and emphasis on sophisticated management information systems also
create efficiencies and reduce operating and general and administrative expenses
as a percentage of revenues for most of the theaters it acquires.
Operate Clean, Modern Theaters which Appeal to Customer Base. Clearview's
theaters generally are multiplexes located in towns and communities rather than
in shopping malls or near highways. Each of the Company's theaters has at least
one auditorium equipped with digital sound. Most locations are surrounded by
stores and restaurants, with available parking nearby. An important aspect of
Clearview's operating strategy is to provide a clean, comfortable and visually
appealing environment, which usually includes chandeliers, a decorative
fireplace and silk flower arrangements. When Clearview acquires a theater, it
typically refurbishes the existing seats and equips them with cup holders. In
addition, Clearview will generally redecorate the lobby, upgrade the concession
stand, provide a courtesy phone so that patrons can make free local telephone
calls and selectively add digital sound. The concession stand at each theater
offers high-margin snack and food items, such as fruit, bottled water, ice
cream, cappuccino and Swiss chocolates (items designed to appeal to the
Company's generally upscale customer base), as well as more traditional theater
concession items such as soft drinks, popcorn and an assortment of candy items.
The Company has adopted a set of procedures designed to keep its theaters clean
and to ensure proper film presentation.
GROWTH STRATEGY
The Company intends to increase revenues and cash flow by: (i) selectively
acquiring theaters in its target markets; (ii) adding screens to its existing
theaters; (iii) developing new theaters; and (iv) increasing other sources of
high margin revenues.
Selectively Acquire Theater Operations. The Company believes that one of
its strengths is its ability to identify available theaters at attractive prices
in appropriate locations. Clearview identifies many of its potential
acquisitions from the following two sources: (i) major circuits seeking to
divest theaters which do not fit into their strategic plans and (ii) independent
theater operators finding it increasingly difficult to compete with larger
circuits. In addition, Clearview believes it is able to acquire these theaters
at favorable prices as compared with prices for acquisitions of theaters that
fit more closely into the strategic plans of many of the larger theater
circuits. Potential acquisition candidates typically exhibit the following
characteristics: (i) location that strengthens Clearview's position in an
existing market or, when combined with other available acquisitions or new
theater development, provides a sufficient entree into a new market; (ii)
position as the sole or a leading exhibitor in a film zone; (iii) demographics
consistent with the Company's other locations; and (iv) availability at
favorable prices. The Company believes that it has improved the profitability of
its acquired theaters by aggressively implementing cost controls and other
measures to enhance EBITDA margins.
Add Screens to Existing Theaters. The Company adds screens to existing
theaters when the Company believes that such additions will increase revenues
and cash flow and provide sufficient return on capital. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Depending on the configuration of an existing theater, the Company may
add screens without necessarily increasing the overall dimensions of the theater
by dividing an individual auditorium into two or more smaller auditoriums.
Dividing an auditorium in this fashion can create additional revenue with only a
marginal increase in expense. In certain instances, the Company may also add
screens by expanding into adjacent space for the buildout of additional screens.
The Company currently plans to add 26 screens to existing theaters by March 31,
1999. See '--Theater Expansion and Development.'
Develop New Theaters. The Company believes that it can successfully
identify locations in suitable communities that can be developed into theaters.
The Company currently plans to develop four theaters with a total of 45 screens
in the New York/New Jersey metropolitan area and the Philadelphia main line by
March 31, 1999. See '--Theater Expansion and Development.' From time to time,
opportunities are presented to Clearview by real estate developers who wish to
enhance the value of their properties with the presence of a movie theater.
These opportunities often require limited direct investment by the Company. In
addition, due to its
37
<PAGE>
reputation for operating community-based theaters, Clearview has been approached
by local governments or community development agencies of towns in the New
York/New Jersey metropolitan area and the Philadelphia main line that are
interested in revitalizing parts of their communities and believe that a movie
theater could provide an impetus to such redevelopment.
Increase Other Sources of Revenues. Clearview seeks to increase revenues
and cash flow from sources other than admissions and concessions, including
party, theater rental and on-screen advertising revenues. For the year ended
December 31, 1997, Clearview had other revenues of approximately $420,000, or
2.4% of total revenues, and for the three months ended March 31, 1998, had other
revenues of approximately $320,000, or 3.3% of total revenues. Clearview intends
to increase these high margin revenue sources in the future. For example, in May
1998 the Company initiated a children's party program designed to maximize use
of its theaters at times when they otherwise would not be operating. In
addition, the Company has recently renegotiated its advertising contracts to
increase the rates for on-screen advertising. See '--Other Sources of Revenue.'
EXISTING THEATERS AND PENDING ACQUISITIONS
Founded in 1994 with four theaters and eight screens, the Company has since
acquired 30 theaters, entered into agreements to operate or lease five theaters
and developed one theater, resulting in an increase in the number of Clearview
theaters to 40 and the number of Clearview screens to 193. A list of the
theaters currently operated by Clearview and the Company's pending theater
acquisitions is set forth in the following table:
<TABLE>
<CAPTION>
DATE OF NO. OF NATURE OF
ACQUISITION OR LEASE COMMUNITY/THEATER NAME COUNTY/STATE SCREENS OCCUPANCY EXPIRATION
- --------------------- -------------------------------- ---------------- ------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Dec. 21, 1994 Bernardsville Somerset, NJ 3 Lease Dec. 31, 1999(1)
(Bernardsville Cinema 3)
Dec. 21, 1994 Chester Morris, NJ 6 Lease Jan. 31, 2008(1)
(Chester Cinema 6)
Dec. 21, 1994 Madison Morris, NJ 4 Lease Dec. 31, 2000(1)
(Madison Cinema 4)
Dec. 21, 1994 Manasquan Monmouth, NJ 1 Lease Jan. 14, 2002
(Algonquin Arts Theater)
Sept. 8, 1995 Baldwin Nassau, NY 2 Operating Aug. 31, 2015(2)
(Grand Avenue Cinema) Contract
Sept. 8, 1995 New Hyde Park Nassau, NY 2 Operating Aug. 31, 2022(2)
(Herricks Cinemas) Contract
Sept. 8, 1995 Port Washington Nassau, NY 7 Operating Jan. 31, 2010(2)
(Port Washington Cinemas) Contract
May 29, 1996 Clifton Passaic, NJ 6 Lease Jan. 14, 2007
(Allwood Cinemas)
May 29, 1996 Emerson Bergen, NJ 4 Lease Dec. 31, 2006
(Emerson Quad)
May 29, 1996 New City Rockland, NY 6 Lease Dec. 31, 2017
(New City Cinemas)
May 29, 1996 Washington Twp. Bergen, NJ 3 Lease Oct. 31, 2006
(Washington Twp. Cinemas)
July 18, 1996 Bedford Westchester, NY 2 Lease Dec. 31, 2011
(Bedford Cinemas)
July 18, 1996 Mount Kisco Westchester, NY 5 Lease Dec. 31, 2003
(Mt. Kisco Cinemas)
Dec. 13, 1996 Bergenfield Bergen, NJ 5 Own (3)
(Bergenfield Cinema 5)
Dec. 13, 1996 Closter Bergen, NJ 4 Lease Aug. 31, 1999(1)
(Closter Cinema 4)
Dec. 13, 1996 Tenafly Bergen, NJ 4 Own (3)
(Tenafly Cinema 4)
July 2, 1997 Summit Union, NJ 5 Lease Dec. 31, 2007(1)
(Beacon Hill 5)
Sept. 12, 1997 Bronxville Westchester, NY 3 Own (3)
(Bronxville Cinemas)
Sept. 12, 1997 Larchmont Westchester, NY 1 Lease Sep. 30, 2016(1)
(Larchmont Cinemas)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
DATE OF NO. OF NATURE OF
ACQUISITION OR LEASE COMMUNITY/THEATER NAME COUNTY/STATE SCREENS OCCUPANCY EXPIRATION
- --------------------- -------------------------------- ---------------- ------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Sept. 12, 1997 Mamaroneck Westchester, NY 4 Own (3)
(Mamaroneck Playhouse)
Sept. 12, 1997 New City Rockland, NY 2 Own (3)
(Cinema 304 New City)
Sept. 12, 1997 Wayne Passaic, NJ 4 Lease Nov. 2006(1)
(Wayne Preakness Cinemas)
Nov. 7, 1997 Roslyn Nassau, NY 4 Own (3)(5)
(Roslyn Cinemas)
Nov. 21, 1997 Parsippany Morris, NJ 12 Lease Dec. 2015(1)
(Parsippany Cinema 12)
Nov. 21, 1997 Succasunna Morris, NJ 10 Lease Dec. 31, 2019(1)
(Succasunna Cinema 10)
Dec. 9, 1997 Edison Middlesex, NJ 8 Lease Dec. 31, 2004(1)
(Edison Cinemas)
Dec. 9, 1997 Woodbridge Middlesex, NJ 5 Lease Dec. 30, 2003
(Woodbridge Cinemas)
Dec. 12, 1997 Upper Montclair Essex, NJ 4 Lease Nov. 30, 2017(1)
(Bellevue Theaters)
Dec. 12, 1997 Cedar Grove Essex, NJ 5 Lease May 31, 2010
(Cinema 23)
Dec. 12, 1997 Kinnelon Morris, NJ 8 Lease Apr. 30, 2002(1)
(Kin Mall Cinemas)
Dec. 12, 1997 Middlebrook Monmouth, NJ 10 Lease Oct. 31, 1999(1)
(Middlebrook Galleria Cinemas)
Jan. 29, 1998 Millburn Essex, NJ 2 Operating July 31, 1998(4)
(Millburn Twin Cinemas) Contract
Feb. 13, 1998 Montclair Essex, NJ 6 Lease Dec. 31, 2016(1)
(Clairidge Cinemas)
Feb. 15, 1998 Montclair Essex, NJ 2 Lease Feb. 15, 2008
(The Screening Zone)
Mar. 6, 1998 Manhasset Nassau, NY 3 Own (3)
(Manhasset Cinemas)
Mar. 6, 1998 Babylon Suffolk, NY 3 Own (3)
(Babylon Cinemas)
Mar. 23, 1998 Cobble Hill Kings, NY 5 Lease Mar. 23, 2003(1)
(Cobble Hill Cinemas)
Jun. 17, 1998 Great Neck Nassau, NY 7 Lease May 31, 2021(1)
(Great Neck Squire Cinemas)
Jun. 17, 1998 Franklin Square Suffolk, NY 6 Lease Dec. 31, 2014(1)
(Franklin Square Cinemas)
Jun. 24, 1998 Morristown Morris, NJ 10 Lease July 31, 2007(1)
(Headquarters 10)
Pending Livingston Essex, NJ 3 Own (3)
(Colony Cinemas)
Pending West Milford Passaic, NJ 4 Lease Mar. 31, 2000(1)
(West Milford Cinemas)
</TABLE>
- ------------------
(1) Under these leases, the Company has one or more renewal options.
(2) The Company has an option expiring in September 2000 to acquire the
operations and leaseholds of these theaters. The Company's right to operate
these theaters will terminate if the option is not exercised.
(3) Not applicable because the theater is owned by the Company.
(4) The Company currently operates this theater under an agreement with the
owner and has an option to purchase the theater operation and leasehold,
which it intends to exercise with a portion of the net proceeds of the Notes
Offering.
(5) During the second quarter of 1998, the Company added a screen to increase
the number of screens from three to four.
39
<PAGE>
THEATER EXPANSION AND DEVELOPMENT
Part of Clearview's growth strategy is theater expansion and development.
When considering theater expansion and development opportunities, the Company
typically analyzes the demographics, including population density and household
income data, admissions revenue data for existing theaters within a 10 to 15
mile radius of the proposed site, and projected return on investment, to assess
a location's desirability for a new theater or additional screens. The Company
also researches existing and proposed development plans of its competitors for
this purpose.
Screen Additions. Since inception, the Company has added a total of seven
screens to three existing theaters. The following table sets forth the screens
which the Company currently plans to add to existing theaters. There can be no
assurance that all or any of such additions will be made.
PROJECTED SCREEN ADDITIONS
<TABLE>
<CAPTION>
PROJECTED NUMBER OF TOTAL
OPENING DATE COMMUNITY SCREENS TO BE ADDED RESULTING SCREENS
- ------------- -------------------- ------------------- -----------------
<S> <C> <C> <C>
Oct. 1998 Mamaroneck, NY 1 5
Nov. 1998 Cedar Grove, NJ 2 7
Nov. 1998 Millburn, NJ 2 4
Nov. 1998 Kinnelon, NJ 3 11
Aug. 1998 Larchmont, NY 2 3
Nov. 1998 Manhasset, NY 1 4
Dec. 1998 Succasunna, NJ 8 18
Oct. 1998 Bronxville, NY 1 4
Nov. 1998 New Hyde Park, NY 2 4
Jan. 1999 Baldwin, NY 2 4
Mar. 1999 Port Washington, NY 2 9
-- --
26 73
</TABLE>
New Theater Development. The Company has constructed one five-screen
theater in an existing building (the Beacon Hill 5 in Summit, New Jersey), and
currently plans to develop four theaters with a total of 45 screens in the New
York/New Jersey metropolitan area and the Philadelphia main line by March 31,
1999. The following table sets forth the Company's planned new theater
development. There can be no assurance that any or all of such projects will be
completed or, if completed, that the development ultimately will prove
profitable.
PLANNED NEW THEATER DEVELOPMENT
<TABLE>
<CAPTION>
PROJECTED
OPENING DATE COMMUNITY NUMBER OF THEATERS PROJECTED NUMBER OF SCREENS
- ------------- ------------------ ------------------ ---------------------------
<S> <C> <C> <C>
Nov. 1998 Anthony Wayne, PA 1 5
Nov. 1998 Mansfield, NJ 1 15
Dec. 1998 Carmel, NY 1 15
Mar. 1999 Bayonne, NJ 1 10
- --
4 45
</TABLE>
In April 1998, the Company issued approximately $1.5 million in Common
Stock to acquire the leasehold interest and related construction permit for the
Mansfield Theater. Construction began in May 1998 and is expected to be
completed by the end of October 1998. The estimated cost of development is $3.1
million. The Mansfield Theater will be located in Warren County, New Jersey and
currently is planned to be a 15-screen multiplex. The Company began paying 50%
of the monthly rental payments of $29,167 as of May 1, 1998 and will become
liable for the full monthly rent on the earlier of the opening of the theater
and January 1, 1999. Currently there is no multiplex in Warren County, New
Jersey, and the Company is not aware of any other proposed development in that
county.
40
<PAGE>
In March 1998, Clearview entered into an agreement with a public real
estate investment trust, subject to obtaining certain approvals, to develop a
new 15-screen multiplex theater in the Carmel ShopRite Center in Putnam County,
New York. The agreement provides that after the theater is constructed Clearview
will add the seats, projection equipment and a concession stand at a cost of
approximately $1.1 million. Monthly rental payments of $22,500 are payable
beginning on the earlier of 120 days after the landlord completes construction
and the date that Clearview begins operating the theater. Construction is
expected to be completed by the end of 1998.
In February 1997, the Company entered into an agreement with a private
developer to lease a new multiplex theater to be constructed by the landlord on
a 'turn key' basis. This theater project is currently planned to include at
least 10 screens in Bayonne, New Jersey. The landlord has agreed to install all
theater seats, projection and sound equipment, concession stands and final
finishes according to the Company's specifications. The Company does not expect
to incur any capital costs for this project. Currently there is no multiplex in
Bayonne, New Jersey, and the Company is not aware of any other proposed
development in that county. Construction is expected to be completed in early
1999, at which time a subsidiary of the Company would be obligated to make
monthly rental payments of $41,667. The construction contract for this theater
has not yet been signed.
In June 1998, the Company entered into an agreement with a private
developer to develop a new multiplex theater, subject to obtaining certain
approvals, in Anthony Wayne, PA, along the Philadelphia main line. The theater
is expected to have five screens, and construction is expected to be completed
by November 1998. A subsidiary of Clearview will be obligated to make monthly
rental payments of $4,500 on the earlier of 120 days after all permits have been
obtained or the date that Clearview begins operating the theater. The
construction contract has not yet been signed.
FILM LICENSING
The Company's success depends to a significant extent on its knowledge of
movie-viewing trends. To augment its resources in this aspect of its business,
the Company has recently hired Mr. Craig Zeltner to serve as its Vice
President-Film. Mr. Zeltner has more than 20 years of experience as a film
buyer, particularly in film buying for the Company's target market. Clearview
also employs two film 'bookers' to assist Mr. Zeltner. The Company licenses
films from distributors on a film-by-film and theater-by-theater basis. Prior to
negotiating for film licenses, senior management of Clearview evaluates the
prospects for upcoming films using many factors, including cast, director, plot,
performance of similar films, estimated film rental costs and expected Motion
Picture Association of America rating. Clearview's success when licensing
particular films depends in large part upon its knowledge of trends and the
historical film preferences of the residents in the markets served by its
theaters, as well as on the availability of motion pictures that the Company
believes will be successful in those markets.
Films are licensed either from film distributors owned by major film
production companies or from one of the independent film distributors that
generally distribute films for smaller production companies for exhibition at
only one theater in a particular film licensing zone. Film distributors
typically recognize geographic film licensing zones with radii of three to five
miles in suburban markets, depending primarily on population density. Of
Clearview's current theaters, approximately 70.0% are the sole exhibitors in
their film zones, permitting the Company to choose which films it wishes to
exhibit at these theaters, and approximately 18.0% are the leading exhibitors in
their film zones.
In film zones where Clearview is the sole exhibitor, a film license is
generally obtained by Clearview after selecting a film from among those offered
and negotiating directly with its distributor. In film zones where there are
multiple exhibitors, a distributor will either require the exhibitors in the
film zone to bid for a film or will allocate films among the exhibitors in the
film zone. When films are licensed under the allocation process, a distributor
will choose which exhibitor is to be offered a movie and then that exhibitor
will negotiate film rental terms directly with that distributor. Over the past
several years, distributors have almost exclusively used the allocation process
rather than the bidding process to license their films in the New York/New
Jersey metropolitan area. When films are licensed through a bidding process,
exhibitors compete for licenses based upon the film rental fees to be paid. The
Company currently does not bid for films in any of its film zones, although it
may be required to do so in the future.
41
<PAGE>
Clearview predominantly licenses 'first run' films. If the Company believes
that a film has substantial remaining potential following its first run, it may
license that film for a 'second run.' Second runs enable Clearview to exhibit a
variety of films during periods in which there are few new releases and to offer
its target audience an opportunity to see a film that did not fit into
Clearview's first run schedule. Film distributors establish second run
availability on a national or market-by-market basis after a film's release from
first run theaters and generally permit each theater within a market to exhibit
that film. Each film license typically specifies that the rental fee is based on
either a gross box office receipts formula or a theater admissions revenue
formula, depending upon which one results in the larger film rental fee. In
addition, if a distributor deems a film to be extremely promising, exhibitors
may be required to pay non-refundable guarantees of film rental fees or to make
refundable advance payments of film rental fees or both in order to obtain a
license for that film. Under a gross box office receipts formula, the
distributor receives a specified percentage of box office receipts from the
licensed film, with the percentage declining over the term of the film run.
First run commercial and family-oriented film rental fees typically begin at
approximately 70% to 50% of box office receipts for the licensed film (depending
on the type of film and its distributor) and gradually decline, over a period of
four to seven weeks, to as low as 30% of box office receipts. First run art film
rental fees and second run commercial and family-oriented film rental fees
typically begin at 35% to 40% of box office receipts for the licensed film and
often decline to 30% to 35% of box office receipts after the first week. Under a
theater admissions revenue formula (commonly known as a '90/10' clause), the
distributor receives a specified percentage (i.e., 90%) of the excess of box
office receipts for a given film over a negotiated allowance for theater
overhead expenses. Although generally not specifically contemplated by the
provisions of film licenses, the terms of a film license often are adjusted or
renegotiated subsequent to the initial release of the film.
The Company's business is dependent upon the availability of marketable
first run commercial, family-oriented and art motion pictures and its
relationships with distributors. Although many distributors provide first run
movies to the motion picture exhibition industry, distribution has been
dominated historically by a limited number of distributors (Warner Brothers,
Paramount, 20th Century Fox, Universal, Disney/Touchstone, MGM/UA and
Columbia/Tri-Star) which, since 1989, have typically accounted for well over 75%
of domestic admission revenues and virtually every one of the top 25 grossing
films in a given year. No single major distributor dominates the market.
Disruption in the production of motion pictures by the major studios and/or
independent producers, poor commercial success of motion pictures or poor
relationships with distributors could have a material adverse effect upon the
Company's business and results of operations.
The Company licenses films from each of the major distributors and believes
that it has good relationships with these distributors. The Company also
licenses films from independent film distributors on a consistent basis. Because
these distributors often have difficulty licensing films at theaters that are
well-maintained and technologically up-to-date, these distributors have
generally cooperated with the Company when it seeks to move prints, modify the
length of a film's run or change a film's rental fee. From year to year, the box
office revenues of the Company attributable to individual distributors will vary
depending upon the films they distribute. Set forth below are the top 15
distributors to the Company for 1996 and 1997, ranked by the number of films
shown.
42
<PAGE>
DISTRIBUTORS RANKED BY NUMBER OF FILMS EXHIBITED
<TABLE>
<CAPTION>
1996 1997
- ------------------------------- -------------------------------
NAME # OF FILMS NAME # OF FILMS
- ----------------- ---------- ----------------- ----------
<S> <C> <C> <C>
Buena Vista 31 Buena Vista 29
Sony 22 Sony 27
Warner Brothers 21 Warner Brothers 25
Miramax 20 Paramount 22
Paramount 17 20th Century Fox 21
20th Century Fox 16 Miramax 18
MCA/Universal 15 New Line 14
MGM/UA 13 MCA/Universal 11
New Line 9 MGM/UA 7
Gramercy 6 Gramercy 6
Fine Line 4 Sony Classic 5
Orion 4 October 5
Samuel Goldwyn 4 Fox Search Light 4
Sony Classic 4 Orion 3
October 3 Fine Line 3
Dream Works 3
</TABLE>
CONCESSIONS
Concession sales are generally the second largest source of revenue for the
Company after box office receipts, representing approximately 22.7% of the
revenue for the year ended December 31, 1997 and 23.6% of revenue for the three
months ended March 31, 1998. The Company has devoted considerable management
effort to increasing concession sales and improving concession margins. The
Company's concession margin was 83.8% for the year ended December 31, 1997 and
84.4% for the three months ended March 31, 1998. The Company's efforts include
implementing the following strategies:
Tailoring product mix to customer base. The Company's mix of concession
items reflects the preferences of its customer base. While Clearview's theaters
provide the traditional concession items such as popcorn, soda and candy, the
Company also offers items which appeal to more upscale moviegoers. Examples of
these products include cappuccino, Swiss chocolates, fruit and bottled water.
The Company varies its concessions by theater based on preferences of the
particular community. The Company believes its product mix further enhances the
appeal of its theaters to its patrons by differentiating its theaters from those
of larger circuits.
Cost control. The Company negotiates its concession supplies on a bulk
rate basis for all of its theaters. The Company often realizes improvements in
the concession margins of acquired theaters by integrating their concession
purchasing with the Company's existing theaters. The Company believes that
acquisitions of additional theaters would further increase the Company's ability
to obtain more favorable pricing from concession distributors.
43
<PAGE>
OTHER SOURCES OF REVENUE
Clearview also seeks to increase revenues and cash flow from sources other
than admissions and concessions, including party, theater rental and on-screen
advertising revenues. For the year ended December 31, 1997, Clearview had other
revenues of approximately $420,000, or 2.4% of total revenues, and for the three
months ended March 31, 1998 had other revenues of approximately $320,000, or
3.3% of total revenues. Clearview intends to increase these high margin revenue
sources in the future. For example, in May 1998 the Company initiated a
children's party program which is designed to maximize use of its theaters at
times when they otherwise would not be operating. The Company also rents certain
of its theaters to special interest groups, receiving a fixed payment for the
screen rental and incremental concession income. In addition, the special
interest groups supply the films and pay the film rental costs. With respect to
on-screen advertising, the Company sells advertising space on its screens prior
to the exhibition of films in both slide form, which typically promote local
area businesses, and rolling stock form, which focus more on national
promotions. The slide and rolling stock promotions are sold through third
parties. The Company has recently renegotiated its contracts to increase the
rates for slide and rolling stock promotions.
The following table shows the Company's other revenues for each of the last
three years and for the quarter ended March 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- QUARTER ENDED
1995 1996 1997 MARCH 31, 1998
------- -------- -------- --------------
<S> <C> <C> <C> <C>
Other Revenues $31,895 $141,420 $421,427 $319,631
Other Revenues as a
% of Total Revenues 1.4% 1.7% 2.4% 3.3%
</TABLE>
INDUSTRY OVERVIEW
Theatrical exhibition is the primary initial distribution channel for new
motion picture releases. The Company believes that the successful theatrical
release of a movie abroad and in 'downstream' distribution channels, such as
home video and pay-per-view, network, syndicated and satellite television, is
largely dependent upon its successful theatrical release in the United States.
The Company further believes that the emergence of new motion picture
distribution channels has not adversely affected attendance at theaters and that
these distribution channels do not provide an experience comparable to the
out-of-home experience of viewing a movie in a theater. The Company also
believes that the public will continue to recognize the advantages of viewing a
movie on a large screen with superior audio and visual quality, while enjoying a
variety of concessions and sharing the experience with a large audience. In
addition, when compared with other forms of entertainment, such as many sporting
events and cultural events, movies remain one of the best entertainment values
for families.
The theatrical exhibition industry is fragmented. Although the 10 largest
theater circuits operated approximately 60% of the screens at May 1, 1997, 268
of the remaining approximately 478 exhibitors operated four or fewer screens.
From 1987 through 1997, the net number of indoor screens increased from
approximately 21,048 to approximately 30,825. There is a strong trend toward
consolidation in the motion picture exhibition industry. Two recent major
transactions combined Cineplex (approximately 1,729 screens) with Sony/Loews
(approximately 1,020 screens), and combined Act III (approximately 832 screens)
with Regal (approximately 2,337 screens).
The multiplex theater was introduced to the moviegoing public in the 1960's
and multiplexes are now considered the industry standard. The advantages of a
multiplex format include the following: (i) the ability to play a range of
movies to fit the various tastes of the movie-going public; (ii) the ability to
accommodate the expected size of the audience for a particular movie; (iii) the
ability to run a popular movie for a longer period of time and to exhibit newer
films immediately upon their release; and (iv) the ability to show a single film
in two or more auditoriums simultaneously, thereby effectively increasing the
viewing capacity for a popular film.
Revenues for the theatrical exhibition industry are a function of theater
attendance, ticket prices, trends in movie releases and concession sales.
According to data released by the Motion Picture Association of America, overall
movie theater attendance in the United States has grown from 1,089 million in
1987 to 1,388 million in 1997. The Company believes that the primary reason for
year-to-year variances in attendance is the overall
44
<PAGE>
audience appeal of the films released and, to a lesser extent, general economic
conditions. Admissions revenues increased from a total of approximately $4.3
billion in 1987 to approximately $6.4 billion in 1997, or a compound annual
growth rate of 4.1%. Over the same period, the average ticket price increased at
a compound annual growth rate of approximately 1.6%, whereas the U. S. Consumer
Price Index increased at a compound annual growth rate of approximately 3.4%.
The following table represents the results of a survey by the Motion Picture
Association of America outlining the historical trends in U. S. theater
attendance, average ticket prices and box office sales for the last eleven
years.
<TABLE>
<CAPTION>
AVERAGE TICKET PRICE U.S. BOX OFFICE SALES
YEAR ATTENDANCE (MILLIONS) -------------------- ---------------------
- ----- --------------------- (IN DOLLARS) (DOLLARS IN BILLIONS)
<S> <C> <C> <C>
1987 1,089 3.91 4.25
1988 1,085 4.11 4.46
1989 1,263 3.99 5.03
1990 1,189 4.23 5.02
1991 1,141 4.21 4.80
1992 1,173 4.15 4.87
1993 1,244 4.14 5.15
1994 1,292 4.18 5.40
1995 1,263 4.35 5.49
1996 1,339 4.42 5.91
1997 1,388 4.59 6.37
</TABLE>
- ------------------
Sources: MPAA; 1989-1997 figures for attendance and average ticket prices based
on Ernst & Young survey; previous years based on CPI-W index.
From 1987 to 1997, the number of movies released remained relatively
constant, and the Company expects that trend to continue, with some annual
variability. The Company also believes that movies generally are being released
to a wider number of screens as studios seek to recover higher costs.
Historically, the motion picture industry was somewhat seasonal, as major film
distributors generally released the films expected to have the greatest
commercial appeal during the summer and during the Thanksgiving through year-end
holiday season. The seasonality of motion picture exhibition has become less
pronounced in recent years as studios have begun to release major motion
pictures somewhat more evenly throughout the year.
The Company believes that certain demographic trends favor the theater
exhibition industry. Information obtained from the U.S. Bureau of Census
indicates that the number of 10 to 20 year olds in the United States, the
largest moviegoing segment of the population, was projected to grow an aggregate
of 5.8% from 1996 through the year 2000. Furthermore, of particular significance
for Clearview's target audiences, according to the Motion Picture Association of
America, the number of patrons over 40 years old as a percentage of the total
movie audience has increased from approximately 20% in 1987 to approximately 33%
in 1997. According to American Demographics, film attendance by the age groups
45-54 and 55-64 is expected to grow 14.5% and 12.2%, respectively, in years
1996-2000 and 14.1% and 28.5% in years 2000-2006. Also according to American
Demographics, based on 1996 data, the percentage of adults who attend movies at
least once a month rises with household income.
COMPETITION
The motion picture exhibition industry is highly competitive, particularly
with respect to licensing films, attracting patrons and acquiring or developing
theaters to operate. The Company's theaters compete with theaters operated by
national and regional circuits and by smaller independent exhibitors. The
Company believes that the principal competitive factors with respect to film
licensing include licensing terms, seating capacity, location and reputation of
an exhibitor's theaters, quality of projection and sound equipment at an
exhibitor's theaters and an exhibitor's ability and willingness to promote
films. Competition for patrons is dependent upon factors such as the
availability of popular films, the location of theaters, the comfort and quality
of theaters and ticket prices. The Company believes that it competes favorably
with respect to each of these factors.
There were approximately 489 domestic motion picture exhibitors as of May
1, 1997. Motion picture exhibitors vary substantially in size, from small
independent operators of single-screen theaters to large national
45
<PAGE>
chains of multi-screen theaters. Many of the Company's larger competitors have
been in existence significantly longer than the Company and may be better
established in the markets where the Company's theaters are, or may in the
future be, located. Certain of the Company's larger competitors have sought to
increase the number of theaters and screens in operation in particular markets.
Such increases may cause those markets or portions of those markets to become
overscreened, which could negatively impact the earnings of the Company's
theaters, if any, in those markets.
The Company analyzes the level of competition in a geographic area prior
to, and in the early stages of, the negotiation of any development or
acquisition of a theater. This analysis is critical, as many of the Company's
potential theater locations are in well-established communities that have
previously experienced the building of large out-of-town multiplexes and the
addition of screens to in-town theaters.
The Company's theaters also face competition from a number of other motion
picture delivery systems, such as cable television, direct satellite delivery,
video cassettes and pay-per-view television. The impact of such delivery systems
on the motion picture exhibition industry is difficult to determine precisely,
and there can be no assurance that existing or future delivery systems will not
have an adverse impact on attendance at movie theaters. The Company, however,
believes that the public will continue to recognize the advantages of viewing a
movie on a large screen with superior audio-visual quality as a shared
experience in a public forum and that alternative delivery systems do not
provide an experience comparable to the out-of-home entertainment experience of
attending a movie in a theater. The Company believes that movie theaters also
face competition from other forms of outside-the-home entertainment that compete
for the public's leisure time and disposable income. Clearview believes that
movie exhibition is priced competitively relative to other out-of-home
entertainment options, such as music concerts, sporting events and live theater.
EMPLOYEES
As of March 31, 1998, the Company had 810 employees, of whom 18 were
employed at the corporate headquarters, 6 were district managers, 17 were
salaried theater managers and 769 were hourly employees, including 216 theater
managers and/or projectionists. Clearview employs one primary manager and one or
more relief managers at each of its theaters. In most of its theaters, each
shift (which is five to six hours) has a manager and a projectionist or a single
manager/projectionist. Generally, the theater manager serves as the
projectionist if the applicable theater has four or fewer screens. In the larger
theaters there are separate managers and projectionists. In addition, the
Company's six district managers, each of whom also manages a theater within his
district, have certain supervisory obligations. The Company has entered into an
agreement with the International Alliance of Theatrical Stage Employees union
that provides for a skilled projectionist for every shift at a substantial
number of its theaters. The Company believes that it has a positive working
relationship with the union.
REGULATORY ENVIRONMENT
The distribution of motion pictures is in large part regulated by U.S.
federal and state antitrust laws and has been the subject of numerous antitrust
cases. The Company has never been a party to any of such cases or the resulting
decrees, but its licensing operations are subject to those decrees. The consent
decrees resulting from such cases bind certain major motion picture distributors
and require the films of those distributors to be offered and licensed to
exhibitors, including the Company, on a film-by-film and theater-by-theater
basis. Consequently, exhibitors such as the Company cannot assure themselves of
a supply of films by entering into long-term arrangements with major
distributors, but must negotiate for licenses on a film-by-film and
theater-by-theater basis.
The U.S. Americans With Disabilities Act (the 'Disabilities Act') prohibits
discrimination on the basis of disability in public accommodations and
employment. The Disabilities Act became effective as to public accommodations in
January 1992 and as to employment in July 1992. The Company will have new
theaters constructed to be accessible to the disabled and believes that it is
otherwise in substantial compliance with all current applicable regulations
relating to accommodations for the disabled. The Company intends to comply with
any future regulations relating to accommodating the needs of the disabled, and
the Company currently does not anticipate that such compliance will require the
Company to expend substantial funds.
46
<PAGE>
The Company's theater operations are also subject to U.S. federal, state
and local laws governing such matters as wages and working conditions, health
and sanitation requirements and licensing. A significant portion of the
Company's employees are paid just above the federal minimum wage and,
accordingly, further increases in that minimum wage could increase the Company's
labor costs.
In connection with the construction, renovation and operation of its
theaters, the Company and its contractors and landlords are required to obtain
proper building and operating permits and to comply with the other requirements
of local zoning and other laws and regulations. The Company does not anticipate
that compliance with such laws and regulations will have a material adverse
effect on its business.
PROPERTIES
The Company leases or otherwise operates under contract all of its theaters
other than eight theaters located in Tenafly and Bergenfield, New Jersey, and
Bronxville, Mamaroneck, New City, Manhasset, Babylon, and Roslyn, New York.
Those eight theaters are owned by the Company. The theaters located in Baldwin,
New Hyde Park and Port Washington, New York are being operated under agreements
pursuant to which the Company pays rent to the landlords and has the right to
acquire the underlying leaseholds and theater operations upon payment of an
amount to be calculated based on the operating cash flow of the theaters. This
option will expire in September 2000 if not exercised, and the Company's right
to lease the theaters would terminate in such event. The Company also leases a
theater located in Millburn, New Jersey, that it intends to purchase pursuant to
an option for approximately $1.1 million with a portion of the net proceeds of
the Notes Offering.
When Clearview develops a theater or negotiates directly with a landlord,
the term of the relevant lease, including all renewal options, is usually more
than 25 years. If a lease is acquired from an exhibitor, typically the lease is
assigned to Clearview and still has a substantial term. Most of Clearview's
current leases have terms, including all renewal options, of at least ten years
and provide for periodic rent increases. Only one theater that is leased by the
Company has a lease that expires in the next five years under which the Company
does not have one or more renewal options or an option to purchase the theater,
and that theater is not material to the Company's business and future
operations. All of Clearview's landlords are unaffiliated third parties. As of
March 31, 1998, the aggregate annual minimum lease payments for all of the
Company's theaters over the next five years are as follows: 1998: $2,976,584;
1999: $3,056,606; 2000: $2,991,443; 2001: $2,865,295; and 2002: $2,909,506.
After giving effect to the Pending Acquisitions, such aggregate annual minimum
lease payments would be: 1998: $3,991,672; 1999: $4,290,069; 2,000: $4,239,306;
2001: $4,049,198; and 2002: $4,109,480.
The Company's corporate office is located in approximately 4,000 square
feet of space in Chatham, New Jersey, and is subject to a lease agreement, the
term of which expires on December 31, 2002.
LEGAL PROCEEDINGS
From time to time the Company is involved in litigation in the ordinary
course of its business. Currently, the Company does not have pending any
litigation that management believes would have a material adverse effect upon
the Company.
47
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Under the Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws, the members of the Board of Directors are divided
into two groups; one group (the 'Common Directors') is elected by the holders of
the Common Stock and the other group (the 'Preferred Directors') is elected by
the holders of the Class A Preferred Stock. Further, the Common Directors are
divided into three classes, with the classes as equal in number as possible. At
each annual meeting of stockholders, Common Directors are elected for three-year
terms to succeed the Common Directors of the class whose terms are expiring. The
Preferred Directors are elected for one-year terms.
Set forth below is certain information concerning the Company's directors
and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ------------------------------------------------------
<S> <C> <C>
A. Dale Mayo 56 Chairman of the Board, President, Chief Executive
Officer and Director
Paul Kay 57 Senior Vice President--Operations
Craig L. Zeltner 47 Vice President--Film, and President--Cinema Services
Division
Sueanne Hall Mayo 51 Vice President--Management Information Systems,
Assistant Secretary and Director
Joan M. Romine 46 Treasurer and Chief Financial Officer
Robert D. Lister 29 General Counsel and Secretary
Wayne L. Clevenger 54 Director
Robert G. Davidoff 70 Director
Philip M. Getter 61 Director
Brett E. Marks 36 Director
Denis Newman 67 Director
</TABLE>
A. DALE MAYO has been the Chairman of the Board, President and Chief
Executive Officer and a director of the Company since its incorporation in 1994.
He was the President of Clearview Cinema Corp. from 1987 to 1993. Mr. Mayo
founded and was President of Clearview Leasing Corporation, a lessor of computer
peripherals for larger scale computer systems, from 1981 to 1987. Mr. Mayo is a
member of the Foundation of Motion Picture Pioneers and the Motion Picture Club.
He is the spouse of Sueanne Hall Mayo. Mr. Mayo is a Class III Common Director,
with a term expiring in 2000.
Clearview Cinema Corp. was formed in 1987 by Mr. Mayo and two other persons
to operate one theater and it acquired an additional three theaters over the
next several years. It was sold in 1993, after Mr. Mayo and his then-partners
were unable to agree on its future, with Mr. Mayo retaining the rights to the
Clearview name and trademark and one of those theaters through 1994.
PAUL KAY was appointed Senior Vice President--Operations on February 23,
1998 and had been the Vice President--Operations of the Company since its
incorporation. He was the vice president and general manager of Clearview Cinema
Corp. from 1987 to 1993. Prior to joining Clearview, Mr. Kay was an independent
theater owner and had held various management positions with Universal Pictures
and Paramount Pictures. Mr. Kay has over 30 years of experience in the film
industry.
CRAIG ZELTNER was appointed Vice President--Film and President of the
Company's Cinema Services Division on February 23, 1998. Prior to joining
Clearview, Mr. Zeltner was the President of Cinema Services, Inc., an
independent film buying service, for more than 20 years. Prior to that, Mr.
Zeltner held various positions as a film buyer and in the advertising and
publicity divisions of Loew's Theater, Esquire Theaters and Mid-States Theaters.
SUEANNE HALL MAYO has been the Vice President--Management Information
Systems and Assistant Secretary of the Company since 1997, and a director of the
Company since its incorporation. She joined the Company in 1994 as its Vice
President--Finance and Treasurer. Ms. Mayo was the Treasurer of Clearview Cinema
Corp. from 1987 to 1993. Ms. Mayo has more than 25 years of experience in
computerized accounting
48
<PAGE>
systems. She is married to A. Dale Mayo. Ms. Mayo is a Class II Common Director,
with a term expiring in 1999.
JOAN M. ROMINE has been the Treasurer and Chief Financial Officer of the
Company since 1997. Prior to joining the Company in 1996 as its Controller, she
was the Controller of Magic Cinemas, L.L.C. from 1995 through 1996 and
Controller and Treasurer of Hanita Cutting Tools, Inc., a U.S. subsidiary of an
international metalworking company, from 1988 through 1994.
ROBERT D. LISTER has been the General Counsel and Secretary of the Company
since March 1998. From September 1993 through March 1996, Mr. Lister was an
attorney with Kelley Drye & Warren, a New York law firm, and served as associate
general counsel of Merit Behavioral Care Corporation, a behavioral healthcare
company, from March 1996 until his employment by the Company.
WAYNE L. CLEVENGER has been a director of the Company since 1996. He has
been a managing director of MidMark Advisors, Inc., the general partner of
MidMark Equity Partners, L.P., since 1994 and a managing director of MidMark
Associates, Inc. ('MidMark Associates'), the general partner of MidMark Capital,
L.P. ('MidMark'), a small business investment company registered with the Small
Business Administration, since 1994. Mr. Clevenger has been a managing director
of MidMark Management, Inc., ('MidMark Management') a private investment
management company, since 1989. Mr. Clevenger is a Preferred Director.
ROBERT G. DAVIDOFF has been a director of the Company since 1994. He has
been a managing director of Carl Marks & Co., Inc., a general partner of CMNY
Capital II, L.P. ('CMNY'), a small business investment company registered with
the Small Business Administration and a managing director of CMCO, Inc.
('CMCO'), a New York corporation, since 1982. Mr. Davidoff also serves on the
Boards of Directors of Marisa Christina, Inc., Rex Stores, Inc., Hubco
Exploration, Inc., SIDARI Corp., Consco Enterprises, Inc., Paging Partners Corp.
and Audio Network Communications, Inc. Mr. Davidoff is a Class II Common
Director, with a term expiring in 1999.
PHILIP M. GETTER has been a director of the Company since October 1997. He
has been a Managing Director of Prime Charter Ltd. ('Prime Charter') since April
1996, and was Senior Vice President of Prime Charter for more than five years
prior thereto. Mr. Getter is a member of the League of American Theater Owners
and Producers. Mr. Getter is a Class III Common Director, with a term expiring
in 2000.
BRETT E. MARKS has been a director of the Company since its incorporation
and was its Vice President-- Department of Development from such date to 1997.
He has been an executive vice president of First New York, a realty brokerage
firm specializing in commercial leasing and investment sales, since 1987, and
the president of Marks Capital Management, a real estate management company,
since 1989. Mr. Marks is a Class I Common Director, with a term expiring in
1998.
DENIS NEWMAN has been a director of the Company since 1996. He has been a
managing director of MidMark Advisors, Inc., the general partner of MidMark
Equity Partners, L.P., since 1994; a managing director of MidMark Associates,
the general partner of MidMark, since 1994; and a managing director of MidMark
Management since 1989. Mr. Newman also serves on the Board of Directors of First
Brands Corporation. Mr. Newman is a Preferred Director.
DIRECTOR COMPENSATION
The Company does not currently compensate its directors or reimburse them,
as such, for their expenses incurred in connection with attendance at Board of
Directors' meetings and has no current plans to change this policy. See 'Certain
Transactions.'
THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1997 ('Fiscal 1997'), the Board
of Directors met on one occasion and acted by unanimous written consent fourteen
times. The Board has an Audit Committee, but does not have standing compensation
or nominating committees.
The members of the Audit Committee are Messrs. A. Dale Mayo, Robert G.
Davidoff and Philip M. Getter. The Audit Committee reviews matters relating to
the quality of financial reporting and internal accounting
49
<PAGE>
controls and the nature, extent and results of the audits by the Company's
independent auditors, and maintains communications between the Company's
auditors and the Board of Directors. The Audit Committee held no meetings in
Fiscal 1997, and last met April 15, 1998.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chairman of the Board, President and Chief Executive Officer, the
only executive officer of the Company whose annual salary and bonus exceeded
$100,000 during Fiscal 1997.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for each of the two
fiscal years ended December 31, 1997 for the Company's Chief Executive Officer.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------------------------------- UNDERLYING ALL OTHER
NAME AND OTHER ANNUAL OPTIONS COMPENSATION
PRINCIPAL POSITION (1) YEAR SALARY ($) BONUS ($) COMPENSATION($) (3) ($)
- ---------------------------------- ---- ---------- --------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A. Dale Mayo(2)
Chairman of the Board, Chief
Executive Officer and President 1997 120,000 104,500 -- 50,000 --
1996 99,167 37,371 -- -- --
</TABLE>
- ------------------
(1) No other officer earned more than $100,000 in total annual salary and bonus
for either of the two fiscal years ended December 31, 1997.
(2) Since May 29, 1996, Mr. Mayo's compensation has been determined in
accordance with his employment agreement (as described below). Prior to that
date, Mr. Mayo's annual compensation was equal to 2% of the first $5,000,000
in gross revenues of the Company, plus 1% of gross revenues in excess of
$5,000,000.
(3) Represents options granted pursuant to the Company's 1997 Stock Incentive
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information with respect to stock options
granted to Mr. Mayo during Fiscal 1997 under the Company's 1997 Stock Incentive
Plan. The options listed below are included in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN FISCAL PRICE EXPIRATION
NAME GRANTED(1) YEAR ($/SH) DATE
- ----------------------------- -------------------- ------------------- -------- ----------
<S> <C> <C> <C> <C>
A. Dale Mayo 50,000 40.8% 8.00 8/18/2007
</TABLE>
- ------------------
(1) The options were granted under the Company's 1997 Stock Incentive Plan. The
exercise price of the options was set at 100% of the fair market value of
the shares on the date of grant. The options have a ten-year term and become
exercisable over four years from the date of grant in installments of 5,000,
12,500, 15,000 and 17,500 shares, respectively, subject to earlier vesting
or termination in certain circumstances. In the event of a change in control
(as defined in the 1997 Stock Incentive Plan), options become fully
exercisable. The options will remain exercisable for one year following a
termination of employment by reason of death, disability or retirement but
will expire on the date of termination for any other reason. The exercise
price may be paid by delivery of cash or shares owned for more than six
months, and any income tax obligations related to exercise may be satisfied
by surrender of shares received upon exercise, subject to certain
conditions.
50
<PAGE>
The table below sets forth information with respect to the number of
unexercised options held by Mr. Mayo on December 31, 1997 on a pre-tax basis.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------- ------------------------------- -------------------------
<S> <C> <C>
A. Dale Mayo -0-/50,000 -0-/162,500
</TABLE>
- ------------------
(1) Computed as the difference between the aggregate fair market value of the
shares subject to the options on December 31, 1997, based on the closing
price of the Common Stock on the AMEX on that date, and the aggregate
exercise price of the options.
EMPLOYMENT AGREEMENT
Pursuant to an Employment Agreement by and between the Company and Mr. Mayo
dated May 29, 1996 (the 'Mayo Employment Agreement'), Mr. Mayo has agreed to
serve as Chairman of the Board, President and Chief Executive Officer of the
Company. As compensation, Mr. Mayo is to receive an annual base salary of not
less than $120,000, plus an annual bonus equal to one percent of the Company's
annual gross revenues in excess of $7,000,000; provided, however, that such
total compensation may not exceed $750,000 in any one year. The initial term of
the Mayo Employment Agreement expires on May 29, 2003. Thereafter, the term of
the Mayo Employment Agreement will be automatically extended for successive
one-year periods ending on May 29 of each year, unless terminated by either
party upon at least six months' advance notice. The Mayo Employment Agreement
also provides that, for a period of three years after its termination, Mr. Mayo
may not, directly or indirectly, engage, have a financial interest in or become
interested in any other businesses similar to or in competition with the Company
within a 50 mile radius of any theater owned or operated by the Company as of
the date of that termination.
51
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to a Contribution and Exchange Agreement dated December 21, 1994,
the Company issued to Mr. Mayo and Mr. Marks 330,000 and 120,000 shares of
Common Stock, respectively, in exchange for (i) all of the outstanding shares of
capital stock of Clearview Theater Group, Inc., CCC Madison Triple Cinema Corp.,
CCC Chester Twin Cinema Corporation and CCC Manasquan Cinema Corporation
(collectively, the 'Subsidiaries') and (ii) promissory notes of certain of the
Subsidiaries with an aggregate principal amount of $250,000. The principal
assets of the Subsidiaries were the leases for the Company's existing movie
theaters in Bernardsville, Chester, Madison and Manasquan, New Jersey and the
related leasehold improvements and equipment. Concurrent with that contribution
and pursuant to an Investment and Stockholders Agreement dated December 21, 1994
(the 'Investment Agreement'), the Company sold 150,000 shares of Common Stock of
the Company to CMNY for an aggregate purchase price of $500,000 in cash. Mr.
Davidoff, a Common Director, is a general partner of CMNY and a managing partner
of CMCO.
Mr. Mayo had formed CCC Chester Twin Cinema Corporation in August 1993 to
be the lessee of the Chester Twin Theater. In September 1993, as part of the
consideration for the sale of Clearview Cinema Corp., Mayo acquired the capital
stock of Clearview Theater Group, Inc. The terms of that sale were negotiated at
arm's length between the owners of Clearview Cinema Corp. and the purchaser. In
February 1994, Mr. Mayo had sold to Mr. Marks 49% of the capital stock of CCC
Madison Triple Cinema Corp. and of CCC Chester Twin Cinema Corporation for
$10,000 and $5,000, respectively. Simultaneously, Mr. Marks had loaned CCC
Madison Triple Cinema Corp. $125,000 and received a promissory note in exchange.
In May 1994, Mr. Mayo had formed CCC Manasquan Cinema Corporation to be the
lessee of the Algonquin Theater in Manasquan, New Jersey.
No third party was retained by the Company, CMNY, Messrs. Mayo or Marks to
value the interests being exchanged by Messrs. Mayo and Marks for shares of
Common Stock or to determine the relationship between those values and the
purchase price paid by CMNY for its shares of Common Stock. The valuation to be
placed on those interests and that relationship was determined by arm's length
negotiations between Messrs. Mayo and Marks and a representative of CMNY. Under
the Investment Agreement, CMNY had the right to sell its shares of Common Stock
to the Company during a 30-day period commencing in 2002 at a price based upon a
formula set forth therein and, if CMNY did not exercise that right, the Company
had the right to purchase those shares of Common Stock from CMNY during the
90-day period commencing after the expiration of such 30-day period at a price
based upon the same formula. CMNY and the Company terminated such repurchase and
sale rights in connection with the Common Stock Offering.
As of June 1, 1997, Mr. Marks and the Company entered into a consulting and
confidentiality agreement pursuant to which Mr. Marks agreed to assist the
Company as a consultant in the identification of possible locations for the
development of theaters and of potential acquisition candidates and provide
other services as requested by the Company. Mr. Marks is also an executive vice
president of First New York. To the extent, if any, that Mr. Marks identifies
any person who is interested in leasing a site to the Company in his capacity as
an employee of First New York and Clearview determines to lease that site, First
New York could be entitled to a commission from that person and Mr. Marks could
then be entitled to a commission from First New York.
In connection with the acquisition of the UA I Theaters, First New York and
Mr. Marks received commissions of $259,500 and $77,850, respectively, paid by
United Artists. In connection with the Company's acquisition of a three-screen
theater in Roslyn, New York, the Nelson-Ferman Theaters, the CJM Theaters, a
six-screen theater in Montclair, New Jersey, two three-screen theaters in
Manhasset and Babylon, New York, the Cobble Hill Acquisition and the Great
Neck/Franklin Square Acquisition, NY, Mr. Marks received commissions of
approximately $10,000, $3,500, $5,000, $2,500, $34,200, $20,000, and $25,000,
respectively. In addition, in connection with the Company's lease of office
space in Chatham, New Jersey, Mr. Marks received a commission of approximately
$5,000. In order to formalize the relationships among the parties, First New
York, Mr. Marks and Clearview entered into an agreement on September 1, 1997. In
that agreement, First New York acknowledged that Mr. Marks, as a consultant to
Clearview, may from time to time engage in activities that may, under other
circumstances, result in commissions being earned by First New York and Mr.
Marks, but that Clearview has sole discretion to determine whether any such
activity will result in commissions being payable to First New York or Mr.
Marks.
52
<PAGE>
On August 31, 1995, CMNY, CMCO and Mr. Davidoff each purchased an 8% Note
in the principal amounts of $300,000, $50,000 and $50,000, respectively. In
connection with the sale of these 8% Notes, the Company issued to each purchaser
warrants ('A/B Warrants') to purchase 75 shares, 12.5 shares and 12.5 shares of
Common Stock, respectively. On October 11, 1995, Mr. Davidoff and CMCO each
purchased an additional 8% Note in the principal amount of $50,000. In
connection with the sale of these 8% Notes, the Company issued to each purchaser
A/B Warrants to purchase 12.5 shares of Common Stock. On December 13, 1996, Mr.
Davidoff and CMCO each purchased an additional 8% Note due December 13, 1998 in
the principal amount of $300,000. In connection with the sale of these 8% Notes,
the Company issued to each purchaser A/B Warrants to purchase 37.5 shares of
Common Stock. In connection with the Common Stock Offering, the holders of the
A/B Warrants exchanged 162.5 of the A/B Warrants for an aggregate of 66,000
shares of Common Stock.
In October 1997, the Company repaid the 8% Notes issued during 1995 from
borrowings under the Old Credit Facility. Pursuant to an agreement among the
Company, CMCO and Mr. Davidoff dated December 12, 1997, CMCO and Mr. Davidoff
each exchanged their 8% Notes issued in 1996 for 300 shares of Class B Preferred
Stock. In connection with this exchange, CMCO and Mr. Davidoff terminated the
remaining A/B Warrants.
The terms of the 8% Notes, the A/B Warrants and the agreements related to
the termination and exchange transactions described above were negotiated at
arm's length by Mr. Davidoff, for himself and as a representative of CMNY and
CMCO, and the Company.
Messrs. Clevenger and Newman, each a Preferred Director, are managing
directors of MidMark Associates, which is the general partner of MidMark.
MidMark acquired from the Company a total of 779 shares of Class A Preferred
Stock and two warrants (the 'Preferred Warrants') to purchase a total of 471
shares of Class A Preferred Stock in two transactions in 1996. Pursuant to the
Purchase Agreements under which MidMark acquired its shares of Class A Preferred
Stock and the Preferred Warrants, MidMark acquired the right to sell to the
Company, under certain circumstances, those shares of Class A Preferred Stock or
those shares of Common Stock into which those shares were converted (the 'Put
Right'). In connection with the Common Stock Offering, MidMark terminated the
Put Right in exchange for 60,000 shares of Common Stock of the Company and
exchanged its Preferred Warrants for a new Warrant ('Class A Warrant')
exercisable for 282,600 shares of Common Stock of the Company.
In accordance with a Consulting Agreement between MidMark Associates and
the Company dated May 23, 1997 (the 'Consulting Agreement'), MidMark Associates
will provide the Company with business and organizational strategy and financial
and investment management services for a fee equal to $60,000 per year. The
Consulting Agreement terminates on August 22, 2003, unless sooner terminated
because no officer of MidMark Associates is on the Board of Directors and the
holders of the Class A Preferred Stock are no longer entitled to vote separately
for directors.
Mr. Getter, a Common Director, is a Managing Director of Prime Charter.
Prime Charter acted as the representative of the several underwriters
(collectively, the 'IPO Underwriters') who purchased an aggregate of 1,150,000
shares (including 150,000 shares purchased solely to cover over-allotments) of
the Common Stock in the Common Stock Offering.
Pursuant to the terms of the Underwriting Agreement between the Company and
Prime Charter dated August 18, 1997 (the 'IPO Underwriting Agreement'), the
Company paid Prime Charter on behalf of the IPO Underwriters $736,000 for
discounts and commissions and $276,940 for additional expenses incurred by Prime
Charter in connection with the Common Stock Offering. In addition, the Company
sold to Prime Charter for nominal consideration warrants to purchase an
aggregate of 100,000 shares of Common Stock (the 'IPO Underwriter Warrants').
The IPO Underwriter Warrants are exercisable for a four-year period commencing
on August 12, 1998. Also commencing on August 12, 1998, the Company will (i) be
obligated for five years to register, pursuant to the Securities Act, the shares
of Common Stock issued or issuable upon exercise of the IPO Underwriter Warrants
and (ii) be obliged for seven years to include shares of Common Stock in any
appropriate registration statement which may be filed by the Company.
Prime Charter has the right to send a representative to observe each
meeting of the Board of Directors until August 2002. At Prime Charter's
election, in lieu of such representative, Prime Charter may require the Company
53
<PAGE>
to use its reasonable best efforts to elect one designee of Prime Charter to the
Board of Directors for the longer of (i) two years following the consummation of
the Common Stock Offering or (ii) up to five years following consummation of the
Common Stock Offering. Mr. Getter is Prime Charter's designee on the Board of
Directors. Prime Charter and its affiliates are the beneficial owners of at
least 50% of the IPO Underwriter Warrants and/or the underlying shares of Common
Stock.
Prior to the Common Stock Offering, there was no public market for the
Common Stock. Accordingly, the Common Stock Offering price was determined by
negotiation between the Company and Prime Charter.
All of the transactions described above were negotiated at arm's length
among the various parties thereto and the Company believes that each of these
transactions has terms that would be appropriate in a transaction between
unaffiliated parties and that are fair to the Company as a whole. It is the
policy of the Company to have any transaction with an affiliated party reviewed
and approved by the directors of the Company who have no relationship with that
party or that transaction.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the Common Stock
as of June 30, 1998 by each beneficial owner of more than 5% of the outstanding
Common Stock, each director, and all of the Company's directors and executive
officers as a group. All of the Class A Preferred Stock is owned by MidMark. All
of the Class C Preferred Stock is owned by the Selling Stockholder, an affiliate
of Credit Suisse First Boston Corporation. Unless otherwise indicated, the
holders of all shares shown in the table have sole voting and investment power
with respect to such shares.
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------
NAME AND ADDRESS(1) NUMBER PERCENT
- ------------------ --------- -------
A. Dale Mayo(2) 878,802 38.1%
MidMark Capital, L.P.(3) 527,400 19.0%
Emerson Cinema, Inc.(2)(4) 208,200 9.0%
CMNY Capital II, L.P.(5) 184,080 8.0%
Marshall Capital Management, Inc.(6) 163,916 6.6%
Wayne L. Clevenger(3)(7) 527,400 19.0%
Robert G. Davidoff(5)(8) 216,000 9.4%
Philip M. Getter(9) -- --
Brett E. Marks(2)(10) 117,600 5.1%
Denis Newman(3)(7) 527,400 19.0%
Sueanne Hall Mayo(11) -- --
All directors and executive officers as a group(2) 1,622,202 58.5%
- ------------------
(1) The address of each person set forth above is 97 Main Street, Chatham, New
Jersey 07928, except as otherwise noted.
(2) Mr. Mayo owns directly 318,000 shares of Common Stock. The other 560,802
shares are owned by other stockholders of the Company, including Emerson
Cinema, Inc. and Mr. Marks, subject to voting trust agreements for which Mr.
Mayo is the trustee. Under those agreements, Mr. Mayo has the right to
exercise all voting rights with respect to those shares for a period of 20
years or until they are sold in a public offering under the Securities Act
or in accordance with Rule 144 under the Securities Act.
(3) The address for MidMark and Messrs. Clevenger and Newman is c/o MidMark
Associates, Inc., 466 Southern Boulevard, Chatham, New Jersey 07928. MidMark
beneficially owns 527,400 shares of Common Stock by means of its ownership
of (i) 60,000 shares of Common Stock and (ii) 779 shares of Class A
Preferred Stock, which represent all of the outstanding shares of Class A
Preferred Stock, and which are convertible into 467,400 shares of Common
Stock.
(4) The address for Emerson Cinema, Inc. is c/o Roxbury Cinemas, Inc., Route 10,
Succasunna, New Jersey 07054.
(5) The address for CMNY and Mr. Davidoff is c/o Carl Marks & Co., Inc., 135
East 57th Street, New York, New York 10022.
(6) Represents the shares of Common Stock into which the Class C Preferred Stock
was convertible at June 30, 1998. See 'Description of Capital Stock--Class C
Preferred Stock.' The address for Marshall Capital Management, Inc. is 11
Madison Avenue, New York, New York 10010.
(7) Comprises the shares owned by MidMark. Both Mr. Clevenger and Mr. Newman
disclaim beneficial ownership of the shares of Common Stock beneficially
owned by MidMark.
(8) Includes 184,080 shares owned by CMNY and 15,960 shares owned by CMCO. Mr.
Davidoff disclaims beneficial ownership of the shares of Common Stock owned
by either CMNY or CMCO.
(9) The address for Philip M. Getter is 810 Seventh Avenue, 9th Floor, New York,
New York 10019.
(10) The address for Mr. Marks is c/o First New York, 310 Madison Avenue, New
York, New York 10017.
(11) Ms. Mayo disclaims beneficial ownership of all of the shares beneficially
owned by Mr. Mayo.
55
<PAGE>
SELLING STOCKHOLDER
The Selling Stockholder acquired 3,000 shares of Class C Preferred Stock on
April 23, 1998. The Class C Preferred Stock is convertible at the option of the
Selling Stockholder into a number of shares of Common Stock based upon a
conversion price equal to the lesser of (i) $21.95 per share and (ii) 87.5% of
the fourth, fifth and sixth lowest closing prices of the Common Stock during the
20 trading-day period immediately prior to such conversion, subject to certain
limitations and adjustments. As of June 30, 1998, the Class C Preferred Stock
was convertible into an aggregate of 163,916 shares of Common Stock, or 6.6% of
the shares outstanding on such date. The Selling Stockholder does not
beneficially own any other shares of Common Stock. The Selling Stockholder does
not, and during the past three years did not have, any position, office or other
material relationship with the Company or any of its predecessors or affilates.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by or for the
account of the Selling Stockholder on one or more exchanges or otherwise;
directly to purchasers in negotiated transactions; by or through brokers or
dealers in ordinary brokerage transactions or transactions in which a broker or
dealer solicits purchasers; in block trades in which brokers or dealers will
attempt to sell Shares as agent but may position and resell a portion of the
block as principal; in transactions in which a broker or dealer purchases as
principal for resale for its own account; or in any combination of the foregoing
methods. Shares may be sold at a fixed offering price, which may be changed, at
the prevailing market price at the time of sale, at prices related to such
prevailing market price or at negotiated prices. Brokers or dealers may arrange
for others to participate in any such transaction and may receive compensation
in the form of discounts, commissions or concessions payable by the Company
and/or the purchasers of Shares. If required at the time that a particular offer
of Shares is made, a supplement to this Prospectus will be delivered that
describes any material arrangements for the distribution of Shares and the terms
of the offering, including, without limitation, any discounts, commissions or
concessions and other items constituting compensation from the Selling
Stockholder or otherwise. The Company may agree to indemnify participating
brokers or dealers against certain civil liabilities, including liabilities
under the Securities Act. The Company and the Selling Stockholder are obligated
to indemnify each other against certain civil liabilities arising under the
Securities Act.
The Selling Stockholder and any such brokers or dealers may be deemed to be
'underwriters' within the meaning of the Securities Act, in which event any
discounts, commissions or concessions received by such brokers or dealers and
any profit on the resale of the Shares purchased by such brokers or dealers may
be deemed to be underwriting commissions or discounts under the Securities Act.
The Company has informed the Selling Stockholder that the provisions of
Regulation M under the Exchange Act may apply to their sales of Shares and has
furnished the Selling Stockholder with a copy of that regulation. The Company
also has advised the Selling Stockholder of the requirement for delivery of a
prospectus in connection with any sale of the Shares.
Any Shares covered by this Prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. There is no assurance that the Selling Stockholder
will sell any or all of the Shares. The Selling Stockholder may transfer, devise
or gift such Shares by other means not described herein.
The Company will pay all of the expenses incurred in connection with
registration of the Shares, including, without limitation, all registration,
printing, qualification and filing fees and fees and disbursements of counsel
for the Company, other than underwriting discounts, selling commissions, stock
transfer taxes applicable to registration and sale of the Shares, and expenses
of counsel to the Selling Stockholder.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock and 2,500,000 shares of Preferred Stock. The following is a
summary description of the Common Stock, Preferred Stock and Class A Warrants.
This summary description does not purport to be complete and is qualified in its
56
<PAGE>
entirety by reference to the Certificate and the Warrant Agreement dated as of
May 23, 1997 by and between the Company and MidMark.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote for each
share held on all matters submitted to a vote of the holders of the Common Stock
and the Class A Preferred Stock and do not have cumulative voting rights.
Holders of shares of Common Stock are entitled to receive dividends, if any, as
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to share ratably in the net assets of the Company
available after the payment of all debts and other liabilities of the Company,
subject to the prior rights of outstanding shares of Preferred Stock. Holders of
shares of Common Stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of holders of shares
of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of the Class A Preferred Stock, Class B Preferred Stock
and Class C Preferred Stock or any other series of Preferred Stock the Company
may designate and issue in the future.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares, designations, voting powers, preferences, optional and
other special rights and the restrictions or qualifications thereof, subject to
the rights of the holders of the Class A Preferred Stock discussed below. The
rights, preferences, privileges and powers of each series of Preferred Stock may
differ with respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund provisions and
other matters. The following is a description of the two Classes of Preferred
Stock that are currently outstanding.
Class A Preferred Stock
In May 1996, the Company authorized 1,303 shares and issued 779 shares of
Class A Preferred Stock. Each share of Class A Preferred Stock is convertible at
any time at the option of the holders into 600 shares of the Common Stock. Upon
the occurrence of certain events, the shares of Class A Preferred Stock will
automatically convert into shares of Common Stock of the Company. The holders of
the Class A Preferred Stock are entitled to receive preferential dividends, when
and as declared by the Board of Directors, in a per share amount equal to the
product of the dividend payable per share of Common Stock and the number of
shares of Common Stock into which a share of Class A Preferred Stock is then
convertible. So long as any shares of Class A Preferred Stock are outstanding,
unless all dividends on the Class A Preferred Stock have been paid, no dividend
or other distribution may be paid or made on the Common Stock or any other
capital stock of the Company ranking junior as to dividends to the Class A
Preferred Stock and no such capital stock may be acquired by the Company, other
than by means of a distribution or exchange of capital stock of the Company
ranking junior to the Class A Preferred Stock. In the event of any sale of all
or substantially all of the assets of the Company or any liquidation,
dissolution or winding up of the Company, the holders of the Class A Preferred
Stock will be entitled to receive an amount per share equal to $2,558.85,
subject to certain adjustments, plus all declared but unpaid dividends per share
on the Class A Preferred Stock, prior to any distribution to holders of the
Common Stock or any other capital stock of the Company ranking junior upon
liquidation or dissolution to the Class A Preferred Stock.
Generally, the holders of the Class A Preferred Stock vote with the holders
of the Common Stock on all matters submitted to a vote of the stockholders of
the Company other than the election of members of the Board of Directors for so
long as those holders vote separately for Preferred Directors. The holders of
the Class A Preferred Stock will vote separately as a class for two Preferred
Directors so long as the outstanding shares of Class A Preferred Stock represent
more than 15% of the combined voting power of the outstanding capital stock of
the Company or for one Preferred Director so long as the outstanding shares of
Class A Preferred Stock represent at least 5% and no more than 15% of the
combined voting power of the outstanding capital stock of the Company.
57
<PAGE>
Class B Preferred Stock
In December 1997, the Company authorized 20,000 shares and issued 600
shares of its Class B Preferred Stock to Mr. Robert Davidoff and CMCO, Inc. in
exchange for 8% subordinated promissory notes in the aggregate principal amount
of $600,000. The Company repurchased such shares in June 1998 with the proceeds
of the Notes Offering. In March 1998, the Company issued 750 shares of Class B
Preferred Stock as a portion of the purchase price in connection with the
acquisition of the CJM Theaters.
The shares of Class B Preferred Stock do not have voting rights, and pay a
cumulative quarterly dividend equal to 10 1/2% of the stated value of such
shares, subject to certain restrictions. The Class B Preferred Stock is
redeemable at any time at the option of the Company or the holder upon giving
written notice. Upon certain liquidation events, holders of shares of Class B
Preferred Stock are entitled to receive a liquidation value equal to $1,000 per
share, subject to adjustment in certain circumstances.
Class C Preferred Stock
The Company has authorized and issued 3,000 shares of Class C Preferred
Stock to the Selling Stockholder. Each share of Class C Preferred Stock is
convertible at any time at the option of the holder after the earlier of (i)
July 21, 1998 and (ii) the date on which a registration statement covering the
shares of Common Stock into which the Class C Preferred Stock is convertible has
been declared effective, into a number of shares of the Common Stock based on a
conversion price equal to the lesser (i) $21.95 per share or (ii) 87.5% of the
average of the fourth, fifth and sixth lowest closing prices of the Common Stock
during the 20-day period immediately prior to such conversion, subject to
certain limitations and adjustments. On April 23, 2000, the shares of Class C
Preferred Stock will automatically convert into shares of Common Stock on the
basis of the conversion price then in effect, subject to certain conditions. The
holders of the Class C Preferred Stock are entitled to receive cumulative
preferential dividends, when and as declared by the Board of Directors, in a per
share amount equal to, on an annualized basis, 5% of the stated value of the
Class C Preferred Stock ($1,000 per share), payable in cash or in shares of
Common Stock, at the Company's option. In the event of any sale of all or
substantially all of the assets of the Company or any liquidation, dissolution
or winding up of the Company, the holder of the Class C Preferred Stock will be
entitled to receive a liquidation preference of $1,000 per share (subject to
adjustment in the event of any stock split, combination or reclassification of
the Class C Preferred Stock or other similar event) plus any accrued and unpaid
dividends thereon. Upon the occurrence of certain events, as described below,
the Class C Preferred Stock will be mandatorily redeemable at the option of the
holder of the Class C Preferred Stock, at a redemption price equal to the
greater of (i) 125% of the liquidation preference of the shares being redeemed
and (ii) an amount determined by dividing the liquidation preference of the
shares being redeemed by the conversion price in effect on the date of such
redemption multiplied by the closing trading price for the Common Stock on the
five trading days immediately preceding the date of such redemption. Events
giving rise to mandatory redemption include, among other things, (i) the
Company's failure to issue and deliver the shares of Common Stock upon
conversion due to voluntary action by the Company or a failure by the Company to
take action, (ii) the material breach by the Company, due to voluntary action
taken by the Company or a failure by the Company to take action, of any covenant
or other material term or condition of any agreement entered into in connection
with such issuance, (iii) materially inaccurate or misleading representations or
warranties by the Company in connection with the issuance and sale of the Class
C Preferred Stock, due to voluntary action taken by the Company or a failure by
the Company to take action, (iv) the required registration statement not being
declared effective within the required period of time or if the registration
statement lapses for any reason or is unavailable to the holder for the sale of
the conversion shares, provided that the cause of such lapse or unavailability
is not due to factors solely within the control of the holder, and provided
further that the failure or lapse or unavailability is due to a voluntary action
by the Company or a failure by the Company to take action, (v) the Common Stock
not being listed on the AMEX, New York Stock Exchange or the National
Association of Securities Dealers, Inc. National Market System due to voluntary
action by the Company or a failure by the Company to take action, or (vi) a
change in control of the Company, which results in prior stockholders of the
Company failing to own at least 50% of the surviving entity, other than a
transaction which is not approved by the Board of Directors of the Company.
58
<PAGE>
CLASS A WARRANT
The Class A Warrant is initially exercisable for 282,600 shares of Common
Stock, at an initial exercise price of $.01 per share, subject to adjustment in
certain events. The Class A Warrant is not exercisable until June 1, 2001
unless, prior to that date, the Company sells all or substantially all of its
assets, liquidates, dissolves or winds up or merges or consolidates with another
corporation in a transaction immediately after which persons who held voting
securities of the Company having more than 50% of the combined voting power of
the outstanding voting securities of the Company do not hold voting securities
of the surviving corporation having more than 50% of the combined voting power
of the outstanding voting securities of the surviving corporation or a majority
of the outstanding shares of Common Stock are acquired by a single person or
group of affiliated persons (other than the Company's current stockholders). The
number of shares of Common Stock for which the Class A Warrant is exercisable
will be subject to reduction if any of the events described in the preceding
sentence occur or if there is an underwritten public offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act or if the Common Stock is listed on a national securities
exchange or registered as a class under the Exchange Act, and the Fair Market
Value (as defined below) of the Common Stock is greater than the Floor Price
(currently equal to $11.37 per share). Fair Market Value for purposes of any of
such transactions is equal to the consideration paid or payable or deemed paid
to the holders of the Common Stock assuming the exercise of all warrants to
purchase shares of Common Stock and the conversion of all securities convertible
into shares of Common Stock (other than the Class A Warrant). Fair Market Value
for purposes of a public offering or any such listing or registration of the
Common Stock is based on the average closing sale price or last bid price for
the Common Stock for any 120-day trading period following the closing of such
offering or listing or registration, so long as the closing sale price or last
bid price on each day in that period exceeds the Floor Price; provided, that the
last day of any such period may not occur during any 'lock up' period agreed to
by the holder of the Class A Warrant with respect to any public offering. The
reduction in the number of shares of Common Stock purchasable upon exercise of
the Class A Warrants is based upon a formula and, if the Fair Market Value is
high enough (currently $17.25), could result in the Class A Warrant not being
exercisable for any shares. The Floor Price and the number of shares of Common
Stock that the Class A Warrant are exercisable for are subject to adjustment for
subdivisions or combinations of the Common Stock, the issuance of shares of
Common Stock as a dividend and certain reorganizations and reclassifications,
mergers and consolidations.
CERTAIN PROVISIONS OF THE CERTIFICATE AND THE BY-LAWS
The Certificate and the By-laws contain a number of provisions relating to
corporate governance and the rights of stockholders. Certain of these provisions
may be deemed to have a potential 'anti-takeover' effect insofar as such
provisions may delay, defer or prevent a change of control of the Company,
including, but not limited, to the following provisions:
The Certificate provides that the holders of the Common Stock may only take
action at a duly called meeting of the stockholders of the Company and may not
act by written consent.
The By-laws contain certain notification requirements relating to
nominations to the Board of Directors and to the raising of business matters at
stockholder meetings. Such requirements provide that a notice of proposed
stockholder business must be timely given in writing to the Secretary of the
Company prior to the appropriate meeting. To be timely, notice relating to an
annual meeting must be given not less than 60, nor more than 90, days in advance
of such meeting; provided, that if the date of the annual meeting is changed by
more than 30 days from the anniversary date of the prior annual meeting, written
notice must be given no later than the fifth day after the first public
disclosure of the date of the meeting. The By-laws provide that special meetings
of stockholders may be called only by certain officers of the Company or the
Board of Directors.
The Certificate contains certain provisions permitted under the Delaware
General Corporation Law (the 'DCL') regarding the liability of directors. These
provisions eliminate the personal liability of a director to the Company and its
stockholders for monetary damages for breach of fiduciary duty as a director
other than for any breach of that director's duty of loyalty, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, for any transaction from which the director derived an
improper personal benefit or for an unlawful payment of dividends or redemption
of stock. Those provisions do not affect
59
<PAGE>
the availability of equitable remedies such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty. The By-laws provide that the
Company will indemnify its directors and officers, and may indemnify any
authorized representative of the Company, to the fullest extent permitted by the
DCL. The Company believes that such provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors and
officers.
The By-laws provide that the number of directors constituting the entire
Board of Directors will be established by the Board of Directors except as
otherwise provided in the Certificate, but will consist of not less than three
Common Directors. Common Directors may be removed by the holders of the Common
Stock only for cause and new Common Directors may be elected simultaneously with
such removal. The By-laws further provide that any amendment of the By-laws to
permit the removal of Common Directors without cause by the holders of the
Common Stock will not apply to any incumbent director for the balance of his or
her term.
The Certificate provides that the Common Directors will be divided into
three classes serving staggered three-year terms. Each class will consist, as
nearly as possible, of one-third of the whole number of Common Directors. The
classification of the Common Directors and the separate voting for the Preferred
Directors has the effect of making it more difficult for stockholders to change
the composition of the Board of Directors in a relatively short period of time.
At least three annual meetings of stockholders will generally be required to
effect a change in a majority of the Board of Directors.
The By-laws may be amended by a majority of the Board of Directors, subject
to the right of the stockholders to amend the By-laws by the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Common Stock and
Class A Preferred Stock voting as a single class. The Certificate may be amended
by the affirmative vote of the holders of a majority of the outstanding shares
of Common Stock and Class A Preferred Stock voting as a single class, except
that the affirmative vote of the holders of at least two-thirds of such shares
is required to amend certain provisions, including the provisions establishing a
classified board and prohibiting action by written consent.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
60
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
Clearview Cinema Group, Inc. (the 'Borrower') has entered into a Senior
Bank Credit Facility with The Provident Bank (the 'New Credit Facility'). The
following is a summary of certain provisions of the New Credit Facility and does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the definitive terms of the New Credit Facility.
The New Credit Facility provides for revolving credit loans in an aggregate
principal amount not to exceed $15.0 million, with all outstanding indebtedness
thereunder repayable on the fifth anniversary of the closing of the New Credit
Facility. Revolving credit loans will be available for general corporate
purposes, including working capital and theater acquisitions. Amounts borrowed
under the New Credit Facility may be repaid and reborrowed, provided that the
Borrower is in compliance with all covenants under the New Credit Facility, and
if, following consummation of such borrowing, the ratios of senior indebtedness
under the New Credit Facility to consolidated EBITDA, determined on a pro forma
basis with adjustments acceptable to The Provident Bank, does not exceed 3.5 to
1. Availability under the New Credit Facility is $15.0 million.
In addition, the New Credit Facility provides for mandatory prepayments
equal to (i) the net proceeds of certain extraordinary dispositions (unless the
Borrower reasonably intends to reinvest the proceeds in specified assets within
six months or other exceptions are applicable) and (ii) certain unused
condemnation and insurance proceeds.
The Borrower's obligations under the New Credit Facility are guaranteed by
all of the Borrower's present direct and indirect subsidiaries, and secured by
the pledge of the stock of all direct and indirect subsidiaries of the Borrower.
The subsidiary guarantees are secured by substantially all of the assets of each
such subsidiary.
Loans under the New Credit Facility will bear interest at a rate equal to
The Provident Bank's prime rate. Following the occurrence and during the
continuation of an event of default under the New Credit Facility, the loans
will bear interest at the applicable rate plus 2%.
The New Credit Facility ranks pari passu in right of payment with the
Notes, except that the Notes are unsecured. The New Credit Facility contains
covenants that, among other things, restrict the ability of the Borrower and its
subsidiaries to materially change the nature of their business, consolidate with
or merge with or into other entities, make payments of principal or interest on
contractually subordinated debt (in each case subject to certain exceptions),
incur lease obligations, pay management compensation in excess of specified
amounts, dispose of assets or businesses, make investments, grant liens,
mortgages or other encumbrances, agree to restrictions on payments of dividends
or intercompany indebtedness, incur indebtedness, enter into sale-leaseback
transactions, enter into transactions with affiliates except on an arm's length
basis, incur capital expenditures in excess of specified amounts and otherwise
restrict corporate activities. In addition, the New Credit Facility requires
compliance with certain financial covenants, including requiring the Borrower
and its subsidiaries to maintain a minimum interest coverage ratio, a minimum
debt service coverage ratio, and a minimum senior secured indebtedness under the
New Credit Facility to consolidated EBITDA ratio. The Borrower does not expect
that such covenants will materially impact the ability of the Borrower and its
subsidiaries to operate their respective businesses.
The terms of the New Credit Facility permit the Borrower to make payments
on pari passu debt (including the Notes). There are no limitations in the New
Credit Facility on the ability of the subsidiaries of the Borrower to make
distributions to the Borrower.
The New Credit Facility contains customary events of default, including the
failure to pay principal when due or any interest or other amount that becomes
due within three days after the due date thereof, any representation or warranty
being made by the Borrower that is incorrect in any material respect on or as of
the date made, a default in the performance of any negative covenants or a
default in the performance of certain other covenants or agreements for a period
of thirty days, default in certain other indebtedness, certain insolvency
events, rendering of judgments against the Borrower in specified amounts and
failure to satisfy such judgments within specified periods, occurrence of a
material adverse effect (i.e. an event which will, or is reasonably likely to,
have a material adverse effect on the collateral under the New Credit Facility
or upon the financial condition, operations, assets or prospects in the
aggregate of the Borrower) and certain change of control events (including a
Change of Control as defined in the Indenture). In addition, the New Credit
Facility provides that a default under the Indenture will result in a default
under the New Credit Facility.
61
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The Notes were issued pursuant to the Indenture between the Company, the
Subsidiary Guarantors and The Bank of New York, as trustee (the 'Trustee'), in a
private transaction that is not subject to the registration requirements of the
Securities Act. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the 'Trust Indenture Act'). The following summary of the
material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under '--Certain
Definitions.' For purposes of this summary, the term 'Company' refers only to
Clearview Cinema Group, Inc. and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Company and rank pari
passu in right of payment with all future senior indebtedness of the Company. As
of March 31, 1998, on a pro forma basis giving effect to the Transactions, the
Company would have had $80.0 million of indebtedness outstanding, all of which
is represented by the Notes, and has up to $15.0 million of secured revolving
credit borrowings available under the New Credit Facility. The Indenture permits
the incurrence of additional senior indebtedness in the future.
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company is
able to designate future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries are subject to many of the restrictive covenants set forth in the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $80.0 million and
mature on June 1, 2008. Interest on the Notes accrues at the rate of 10 7/8% per
annum and is payable semi-annually in arrears on June 1 and December 1,
commencing on December 1, 1998, to Holders of record on the immediately
preceding May 15 and November 15. Interest on the Notes accrues from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months. Principal, premium, if any, and
interest and liquidated damages as set forth in the Indenture (the 'Liquidated
Damages') on the Notes are payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Notes at their respective addresses set forth
in the register of Holders of Notes; provided that all payments of principal,
premium, interest and Liquidated Damages with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes were issued in denominations of $1,000
and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are fully and
unconditionally guaranteed, on a joint and several basis (the 'Subsidiary
Guarantees'), by the Subsidiary Guarantors. The Subsidiary Guarantors include
all of the Company's Subsidiaries in existence on the date of the Indenture,
each of which is currently wholly-owned by the Company. The Subsidiary Guarantee
of each Subsidiary Guarantor ranks pari passu with all senior indebtedness of
such Subsidiary Guarantor.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes, the Indenture and the
Registration Rights Agreement; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
62
<PAGE>
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described above under the caption '--Incurrence of
Indebtedness and Issuance of Preferred Stock.' Notwithstanding the foregoing
clause (iii), each Subsidiary Guarantor may consolidate with or merge into the
Company or another Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See 'Repurchase at the Option of Holders--Asset Sales.'
As of March 31, 1998, on a pro forma basis after giving effect to the
Transactions, the Subsidiary Guarantors would have had no indebtedness
outstanding other than the Subsidiary Guarantees of the Notes.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to June 1, 2003.
Thereafter, the Notes are subject to redemption at any time at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 1 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2003.......................................................... 105.4375%
2004.......................................................... 103.6250
2005.......................................................... 101.8125
2006 and thereafter........................................... 100.0000
Notwithstanding the foregoing, at any time prior to June 1, 2001, the
Company may on any one or more occasions redeem up to 33% of the aggregate
principal amount of Notes originally issued under the Indenture at a redemption
price of 110.875% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of a public offering of common stock of the Company or the
net cash proceeds from a Strategic Equity Investment in the Company; provided
that at least $53.3 million in aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption (excluding Notes
held by the Company and its Subsidiaries); and provided, further, that such
redemption shall occur within 45 days of the date of the closing of such public
offering or Strategic Equity Investment.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes has the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the 'Change of Control Offer') at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
'Change of Control Payment'). Within ten days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
'Change of Control Payment Date'), pursuant to the procedures required by the
Indenture and described in such notice.
63
<PAGE>
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility limits the ability of the Company to purchase any
Notes and provides that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to senior indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute as default under the New Credit
Facility.
The Company is not required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
'Change of Control' means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any 'person' (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal (as defined below) or a Related Party
(as defined below) of the Principal, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that (A) any 'person' (as defined above), other than the
Principal and its Related Parties, becomes the 'beneficial owner' (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have 'beneficial ownership' of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 40% of the Voting Stock of the
Company (measured by voting power rather than number of shares) and (B) the
Principal and its Related Parties 'beneficially own' (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the Voting Stock
of the Company (measured by voting power rather than number of shares) than any
such 'person' (as defined above), (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors
(as defined below) or (v) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of 'all or substantially all'
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
'substantially all,' there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
'Continuing Directors' means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) is a designee of the Principal or was nominated
by the Principal.
'Principal' means A. Dale Mayo.
64
<PAGE>
'Related Party' with respect to the Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefore received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet), of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the New Credit Facility, or (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, an entity that
is engaged in another Permitted Business and that becomes a Restricted
Subsidiary, the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Permitted Business ('Replacement
Assets'); provided, however, that in connection with any repayment of
Indebtedness under the New Credit Facility pursuant to clause (a), the Company
will retire such Indebtedness and will cause the related commitment to be
reduced in an amount equal to the principal amount so repaid. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute 'Excess Proceeds.' When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all Holders of Notes (an 'Asset Sale Offer') to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes tendered into such Asset Sale Offer surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Notwithstanding the immediately preceding paragraphs, the Company and its
Restricted Subsidiaries are permitted to consummate an Asset Sale without
complying with such paragraphs to the extent (i) 100% of the consideration for
such Asset Sale constitutes either Replacement Assets or cash or Cash
Equivalents or any combination thereof and (ii) such Asset Sale is for fair
market value as determined in good faith by the Company's Board of Directors;
provided, that if the total consideration with respect to any such Asset Sale is
greater than $10.0 million (as determined in good faith by the Company's Board
of Directors), the Company shall obtain a fairness opinion from an independent
accounting, appraisal or investment banking firm of national standing; provided
further, that any consideration not constituting Replacement Assets received by
the Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph shall constitute Net
Proceeds subject to the provisions of the immediately preceding paragraph.
65
<PAGE>
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or to
the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or other Affiliate of the Company (other than any such
Equity Interests owned by the Company or any Restricted Subsidiary); (iii) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes,
except a payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as 'Restricted Payments'),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption '--Incurrence of Indebtedness
and Issuance of Preferred Stock;' and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi) and (vii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company since
the date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) 50% of any
dividends received by the Company or a Restricted Subsidiary that is a
Subsidiary Guarantor after the date of the Indenture from an Unrestricted
Subsidiary of the Company, to the extent that such dividends were not
otherwise included in Consolidated Net Income of the Company for such
period, plus (v) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the Indenture,
the lesser of (A) the fair market value of the Company's Investment in such
Subsidiary as of the date of such redesignation or (B) such fair market
value as of the date on which such Subsidiary was originally designated as
an Unrestricted Subsidiary.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are
66
<PAGE>
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (ii) of the preceding paragraph; (iii)
the defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of
the Company to the holders of such Subsidiary's common Equity Interests on a pro
rata basis; (v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of the Indenture; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $250,000 in any twelve-month period; (vi) the
redemption or repayment on the date of the Indenture of (A) $1,350,000 aggregate
liquidation preference of outstanding Series B Preferred Stock and (B)
$6,000,000 aggregate principal amount of outstanding subordinated promissory
notes issued in connection with the acquisition of the Nelson Ferman Theaters,
in each case with the net proceeds from the offering of the Notes; (vii) the
payment of dividends to holders of any class or series of Disqualified Stock of
the Company issued or incurred after the date of the Indenture in accordance
with the covenant 'Incurrence of Indebtedness and Issuance of Preferred Stock,'
provided that after giving effect to any such dividend as a Fixed Charge on a
pro forma basis, the Company and its Restricted Subsidiaries would have had a
Fixed Charge Coverage Ratio of at least 2.0 to 1; and (viii) other Restricted
Payments in an aggregate amount not to exceed $500,000; provided, however, that
at the time of, and after giving effect to, any Restricted Payment permitted by
clauses (ii), (iii), (iv), (v), (vii) and (viii) of this paragraph, no Default
or Event of Default shall have occurred and be continuing.
The Board of Directors may designate any Restricted Subsidiary acquired or
created after the date of the Indenture (other than any Restricted Subsidiary
created to effect the Pending Acquisitions) to be an Unrestricted Subsidiary if
such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Upon such designation, the Subsidiary Guarantee, if any, of such
designated Unrestricted Subsidiary shall be automatically released.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $1.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant 'Restricted
Payments' were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, 'incur') any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of such incurrence or issuance, (i) the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
(ii) any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt),
in each case if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified
67
<PAGE>
Stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
'Permitted Debt'):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) under Credit Facilities; provided that the
aggregate principal amount of all Indebtedness outstanding under all Credit
Facilities under this clause (i) after giving effect to such incurrence
does not exceed an amount equal to $15 million, less the aggregate amount
of all Net Proceeds of Asset Sales applied to repay Indebtedness under a
Credit Facility pursuant to the covenant described above under the caption
'--Asset Sales;'
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and by the Subsidiary Guarantors of Indebtedness represented by the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of the Subsidiary Guarantors
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary Guarantor, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to be incurred under the first paragraph hereof or clauses (ii) and (iv) of
this paragraph;
(vi) the incurrence by the Company or any Subsidiary Guarantor of
intercompany Indebtedness between or among the Company and any Subsidiary
Guarantor; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Subsidiary Guarantor thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Subsidiary Guarantor thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary Guarantor, as the case may be, that was not permitted by this
clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant;
(ix) the incurrence by the Company or any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $10.0
million; and
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x).
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion,
68
<PAGE>
classify such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest or accretion or amortization of original issue
discount will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant; provided, in each such case, that the amount thereof is included
in Fixed Charges of the Company as accrued.
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
LIENS
The Indenture provides that the Company will not and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing Indebtedness
or trade payables (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under the
Indenture, the Notes and the Subsidiary Guarantees are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole (as determined in good faith by the Company), than those contained in
the agreements governing the Indebtedness being refinanced, (i) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption '--Liens' that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (j)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements and other similar agreements entered into in the
ordinary course of business and (k) restrictions on cash or other deposits or
net worth imposed by customers under contracts entered into in the ordinary
course of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease,
69
<PAGE>
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the
Registration Rights Agreement, the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption '--Incurrence of Indebtedness and Issuance of Preferred
Stock.'
The entity or the Person formed by or surviving any consolidation or merger
(if other than the Company) will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an 'Affiliate Transaction'),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an independent accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) any employment agreement approved by
the Board of Directors and entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees to Persons who are not otherwise Affiliates of the
Company and (iv) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption '--Restricted Payments.'
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption '--Incurrence of
Indebtedness and Issuance of Preferred Stock' and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
'--Liens,' (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and
70
<PAGE>
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
the covenant described above under the caption '--Asset Sales.'
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests owned by the Company in such Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant described
above under the caption '--Repurchase at the Option of Holders--Asset Sales,'
and (ii) will not permit any Restricted Subsidiary of the Company to issue any
of its Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Restricted Subsidiary of the Company, except that any Restricted
Subsidiary acquired or created after the date of the Indenture in connection
with an acquisition of a theater (other than any Restricted Subsidiary created
to effect the Pending Acquisitions) may issue Equity Interests representing not
more than 20% of the aggregate Voting Stock of such Restricted Subsidiary to the
seller of such theater as part of the consideration for the acquisition thereof.
BUSINESS ACTIVITIES
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Company and
its Restricted Subsidiaries taken as a whole.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Restricted Subsidiary after the date of the Indenture,
then such newly acquired or created Restricted Subsidiary shall become a
Subsidiary Guarantor and execute a Supplemental Indenture and deliver an Opinion
of Counsel, in accordance with the terms of the Indenture.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the 'Commission'), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K (or
10-QSB or 10-KSB, as applicable) if the Company were required to file such
Forms, including a 'Management's Discussion and Analysis of Financial Condition
and Results of Operations,' that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto the financial condition and results of operations of the
Company and its Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of the Company) and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports, in each case within the time periods specified in
the Commission's rules and regulations. In addition, following the consummation
of the exchange offer contemplated by the Registration Rights Agreement, whether
or not required by the rules and regulations of the Commission, the
71
<PAGE>
Company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, the Company and the Subsidiary Guarantors have agreed
that, for so long as any Notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes ; (ii) default in payment when due
of the principal of or premium, if any, on the Notes (including, without
limitation, pursuant to the provisions described under the captions
'--Repurchase at the Option of Holders--Change of Control' and '--Repurchase at
the Option of Holders--Asset Sales'); (iii) failure by the Company or any of its
Subsidiaries to comply with the provisions described under the caption
'--Merger, Consolidation or Sale of Assets'; (iv) failure by the Company or any
of its Subsidiaries for 30 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a 'Payment Default') or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Significant Subsidiaries; and (viii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Subsidiary Guarantor, or any Person acting
on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture and if the maturity of the Notes
is accelerated, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the Notes.
If an Event of Default occurs prior to June 1, 2003 and if the maturity of the
Notes is accelerated, by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to June 1, 2003, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its
72
<PAGE>
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser are parties to a Registration Rights
Agreement dated June 12, 1998 (the 'Notes Registration Rights Agreement').
Pursuant to the Notes Registration Rights Agreement, the Company agreed to file
with the Commission an Exchange Offer Registration Statement (the 'Exchange
Offer Registration Statement') on the appropriate form under the Securities Act
with respect to the new notes exchanged for the Notes (the 'New Notes'). Upon
the effectiveness of the Exchange Offer Registration Statement, the Company will
offer to the Holders of Transfer Restricted Securities pursuant to the Exchange
Offer who are able to make certain representations the opportunity to exchange
their Transfer Restricted Securities for New Notes. If (i) the Company is not
required to file the Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Company after consummation of the Exchange Offer and on
or prior to the 20th day following consummation of the Exchange Offer that (A)
it is prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the New Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales or (C) that it is a broker-dealer and owns Notes acquired directly
from the Company or an affiliate of the Company, the Company will use its best
efforts to file with the Commission a Shelf Registration Statement to cover
resales of the Notes by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement and to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission. For purposes of
the foregoing, 'Transfer Restricted Securities' means each Note until the
earliest to occur of (i) the date on which such Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Note for a
New Note, the date on which such New Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144 under
the Act.
The Notes Registration Rights Agreement provides that (i) the Company will
file an Exchange Offer Registration Statement with the Commission on or prior to
60 days after the Closing Date, (ii) the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, New Notes in
exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 60 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 150 days
thereafter. If (a) the Company fails to file any of the Registration Statements
required by the Notes Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the 'Effectiveness Target Date'), or (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Notes Registration Rights Agreement (other than during a specified
suspension period) (each such event referred to in clauses (a) through (d) above
a 'Registration Default'), then the Company will pay Liquidated Damages to each
Holder of Transfer Restricted Securities, with respect to the first 90-day
period immediately following the occurrence of
73
<PAGE>
such Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Notes held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 in principal
amount of Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all Registration Defaults of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued Liquidated Damages will be
paid by the Company on each Interest Payment Date by depositing with the Trustee
for the benefit of the Holders entitled thereto immediately available funds in
sums sufficient to pay such Liquidated Damages. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
'Acquired Debt' means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, 'control'
(including, with correlative meanings, the terms 'controlling,' 'controlled by'
and 'under common control with'), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
'Asset Sale' means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption '--Change of Control' and/or the
provisions described above under the caption '--Merger, Consolidation or Sale of
Assets' and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $500,000 or (b) for net proceeds in
excess of $500,000. Notwithstanding the foregoing, the following items shall not
be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary that is a Subsidiary Guarantor or by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary that is a
Subsidiary Guarantor, (ii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary, (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption '--Restricted Payments' and (iv) dispositions of Cash Equivalents.
'Attributable Debt' in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
'Capital Lease Obligation' means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
'Capital Stock' means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests
74
<PAGE>
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses, of,
or distributions of assets of, the issuing Person.
'Cash Equivalents' means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of 'B' or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) - (v) of this definition.
'Consolidated Cash Flow' means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than any item that was accrued in
the ordinary course of business), in each case, on a consolidated basis and
determined in accordance with GAAP.
'Consolidated Net Income' means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
'Consolidated Net Tangible Assets' means, with respect to the Company and
its Restricted Subsidiaries, the total amount of consolidated assets of the
Company and its Restricted Subsidiaries (less applicable reserves and other
properly deductible items), determined on a consolidated basis and in accordance
with GAAP, after
75
<PAGE>
deducting therefrom (i) all current liability items and (ii) all goodwill, trade
names, trademarks, service marks, patents, unamortized debt discount and
expense, and all other intangibles.
'Consolidated Net Worth' means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
'Credit Facilities' means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) of the definition of Permitted Debt.
'Default' means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
'Disqualified Stock' means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
'--Certain Covenants--Restricted Payments.'
'Equity Interests' means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
'Existing Indebtedness' means up to $1.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
'Fixed Charge Coverage Ratio' means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the 'Calculation Date'), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-
76
<PAGE>
quarter reference period or subsequent to such reference period and on or prior
to the Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income (and Consolidated Cash
Flow related to any such acquisition shall be calculated on a pro forma basis
giving effect to any pro forma expense and cost reductions as determined by the
Company in accordance with Article 11 of Regulation S-X under the Securities
Act), and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded and (iii) the Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the obligations giving rise
to such Fixed Charges will not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
'Fixed Charges' means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs (other than debt
issuance costs in respect of the Notes and the execution of the New Credit
Facility on the date of the Indenture) and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
'Guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
'Hedging Obligations' means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
'Indebtedness' means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any
77
<PAGE>
Indebtedness issued with original issue discount, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
'Investments' means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption '--Restricted Payments.'
'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
'Net Income' means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain or loss, together
with any related provision for taxes on such extraordinary gain or loss.
'Net Proceeds' means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
'New Credit Facility' means that certain Credit Agreement, dated as of June
12, 1998, by and among the Company and The Provident Bank, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time (including, without limitation,
involving any increase in amount or replacement lender).
'Non-Recourse Debt' means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
'Obligations' means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
'Pending Acquisitions' means the proposed acquisitions of the Colony
Cinemas in Livingston, N.J. and the West Milford Cinemas in West Milford, N.J.
movie theaters.
78
<PAGE>
'Permitted Business' means the business being operated by the Company and
its Restricted Subsidiaries on the date of the Indenture and any other business
related, ancillary or complementary to any such business as determined in good
faith by the Board of Directors from time to time.
'Permitted Investments' means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Subsidiary Guarantor, (ii) any
Investment in Cash Equivalents; (iii) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary of the Company and a
Subsidiary Guarantor or (B) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is a
Subsidiary Guarantor; (iv) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption '--Repurchase at
the Option of Holders--Asset Sales;' (v) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; (vi) loans or advances to employees made in the ordinary course of
business not to exceed $250,000 at any one time outstanding; and (vii) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (vii) that are at the time outstanding, not to exceed the greater
of $2.5 million or 5% of the Company's Consolidated Net Tangible Assets
determined at the time of each such Investment without giving effect to
subsequent changes in value.
'Permitted Liens' means (i) Liens securing Indebtedness under the New
Credit Facility that was permitted by the terms of the Indenture to be incurred;
(ii) Liens in favor of the Company; (iii) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of the covenant
entitled 'Incurrence of Indebtedness and Issuance of Preferred Stock' covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) Liens of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary and (x) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries.
'Permitted Refinancing Indebtedness' means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable (as determined in good faith by the
Company) to the
79
<PAGE>
Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Restricted Subsidiary' of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
'Significant Subsidiary' means any Restricted Subsidiary that would be a
'significant subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
'Stated Maturity' means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
'Strategic Equity Investment' means an Investment in the Company by a
Strategic Equity Investor.
'Strategic Equity Investor' means, as of any date, any Person (other than
an Affiliate of the Company) engaged in a Permitted Business which has a Total
Equity Market Capitialization of at least $1 billion.
'Subsidiary' means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
'Subsidiary Guarantors' means (i) each Subsidiary in existence on the date
of the Indenture and (ii) any other Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture, and their
respective successors and assigns.
'Total Equity Market Capitalization' means the product of (i) the average
of the reported closing share prices of the referent Person as of the five
trading days immediately preceding the date of any Strategic Equity Investment
and (ii) the total number of shares outstanding of the referent Person as
reported in the last document publicly filed with the Commission by such Person.
'Unrestricted Subsidiary' means (i) any Subsidiary acquired or created
after the date of the Indenture that is designated by the Board of Directors as
an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the terms of
any such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Company; (c) is a Person
with respect to which neither the Company nor any of its Restricted Subsidiaries
has any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption 'Certain Covenants--Restricted
Payments.' If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption 'Incurrence of Indebtedness and Issuance of Preferred
80
<PAGE>
Stock,' the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption 'Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock,' calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
'Voting Stock' of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
'Wholly Owned Restricted Subsidiary' of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
EXPERTS
The consolidated financial statements of Clearview Cinema Group, Inc. and
its subsidiaries as of December 31, 1997 and for the year then ended included in
this Prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their report appearing herein.
The consolidated financial statements of Clearview Cinema Group, Inc. and
its subsidiaries as of December 31, 1996 and for each of the two years in the
period then ended, the the combined financial statements of the UA I Theaters as
of December 31, 1996 and for each of the two years in the period then ended, the
combined financial statements of the Nelson Ferman Theaters as of September 30,
1997 and for the nine months then ended and the year ended December 31, 1996,
and the combined financial statements of the CJM Theaters as of September 30,
1997 and for the nine months then ended and for the year ended December 31, 1996
have been audited by Wiss & Company, LLP, independent auditors, as set forth in
their respective reports appearing herein.
81
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLEARVIEW CINEMA GROUP, INC.
Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998................................... F-2
Consolidated Statements of Operations for the Three Months Ended March 31, 1997 and 1998................. F-3
Consolidated Statement of Changes in Stockholders' Equity for the Three Months Ended
March 31, 1998........................................................................................ F-4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1998................. F-5
Notes to Consolidated Financial Information.............................................................. F-6
CLEARVIEW CINEMA GROUP, INC.
Report of Independent Accountants (Price Waterhouse LLP)................................................. F-9
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-10
Consolidated Balance Sheet as of December 31, 1996 and 1997.............................................. F-11
Consolidated Statement of Operations for the Years Ended December 31, 1995, 1996 and 1997................ F-12
Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1995, 1996 and
1997.................................................................................................. F-13
Consolidated Statement of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997................ F-14
Notes to Consolidated Financial Statements............................................................... F-15
THEATERS ACQUIRED FROM UNITED ARTISTS
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-28
Combined Balance Sheets at December 31, 1996 and March 31, 1997 (unaudited).............................. F-29
Combined Statements of Income and Divisional Equity for the Years Ended December 31, 1995 and 1996 and
the Three Months Ended March 31, 1996 and 1997 (unaudited)............................................ F-30
Combined Statements of Cash Flows for the Years Ended December 31, 1995 and 1996 and the Three Months
Ended March 31, 1996 and 1997 (unaudited)............................................................. F-31
Notes to Combined Financial Statements................................................................... F-32
THEATERS ACQUIRED FROM NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-35
Combined Balance Sheet at September 30, 1997............................................................. F-36
Combined Statements of Income and Changes in Retained Earnings for the Year Ended December 31, 1996 and
the Nine Months Ended September 30, 1997.............................................................. F-37
Combined Statements of Cash Flows for the Year Ended December 31, 1996 and Nine Months Ended September
30, 1997.............................................................................................. F-38
Notes to Combined Financial Statements................................................................... F-39
THEATERS ACQUIRED FROM CJM THEATERS AT KIN-MALL, MIDDLEBROOK, CEDAR GROVE AND BELLEVUE
Independent Auditors' Report (Wiss & Company, LLP)....................................................... F-42
Combined Balance Sheet, September 30, 1997............................................................... F-43
Combined Statements of Income and Changes in Retained Earnings for the Year Ended December 31, 1996 and
the Nine Months Ended September 30, 1997.............................................................. F-44
Combined Statements of Cash Flow for the Year Ended December 31, 1996 and the Nine Months Ended September
30, 1997.............................................................................................. F-45
Notes to Combined Financial Statements................................................................... F-46
</TABLE>
F-1
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 1,647,176 $ 1,470,083
Inventories..................................................................... 116,655 163,163
Other current assets............................................................ 341,273 433,257
------------ ------------
Total current assets......................................................... 2,105,104 2,066,503
Property, equipment and leaseholds, net........................................... 34,488,714 36,549,295
Intangible assets, net............................................................ 19,931,555 23,877,269
Other non-current assets.......................................................... 827,019 915,198
------------ ------------
$ 57,352,392 $ 63,408,265
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................ $ 2,876,607 $ 5,205,205
Subordinated notes payable--short term.......................................... 2,000,000
Accounts payable and accrued expenses........................................... 4,562,633 5,282,702
------------ ------------
Total current liabilities.................................................... 7,439,240 12,487,907
Long-term debt, less current maturities........................................... 32,234,955 35,697,369
Subordinated notes payable--long term............................................. 6,000,000 4,000,000
Commitments and contingencies (Notes 5 and 6)
Class B Redeemable Preferred Stock................................................ 1,350,000 1,350,000
Stockholders' equity:
Undesignated preferred stock:
2,478,697 shares authorized..................................................
Class A Preferred Stock, par value $.01, 1,303 shares authorized; 779 shares
issued and outstanding....................................................... 8 8
Common Stock, par value $.01, 10,000,000 shares authorized; 2,213,097 and
2,227,879 shares issued and outstanding...................................... 22,131 22,279
Additional paid-in capital...................................................... 12,214,515 12,414,367
Accumulated deficit............................................................. (1,908,457) (2,563,665)
------------ ------------
Total stockholders' equity................................................... 10,328,197 9,872,989
------------ ------------
$ 57,352,392 $ 63,408,265
============ ============
</TABLE>
See accompanying notes to consolidated financial information.
F-2
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31,
-------------------------
1997 1998
---------- ----------
<S> <C> <C>
Theater Revenues:
Box office....................................................................... $2,712,210 $7,077,119
Concession....................................................................... 743,986 2,284,059
Other............................................................................ 49,255 319,631
---------- ----------
3,505,451 9,680,809
---------- ----------
Operating Expenses:
Film rental and booking fees..................................................... 1,196,126 3,060,197
Cost of concession sales......................................................... 108,605 357,465
Theater operating expenses....................................................... 1,226,799 3,455,314
General and administrative expenses.............................................. 191,806 1,009,744
Depreciation and amortization.................................................... 413,011 1,262,625
---------- ----------
3,136,347 9,145,345
---------- ----------
Operating Income................................................................... 369,104 535,464
Interest expense, net.............................................................. 358,482 1,160,747
---------- ----------
Net Income (Loss).................................................................. $ 10,622 $ (625,283)
========== ==========
Basic Income (Loss) Per Share...................................................... $ 0.01 $ (0.30)
========== ==========
Diluted Income (Loss) Per Share.................................................... $ 0.01 $ (0.30)
========== ==========
</TABLE>
See accompanying notes to consolidated financial information.
F-3
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ --------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997.......... 779 $8 2,213,097 $22,131 $12,214,515 $(1,908,457) $10,328,197
Issuance of common stock for
assets acquired................ 14,782 148 199,852 200,000
Preferred stock dividend.......... (29,925) (29,925)
Net loss.......................... (625,283) (625,283)
--
------ -- --------- ------- ----------- ----------- -----------
Balance, March 31, 1998............. 779 $8 2,227,879 $22,279 $12,414,367 $(2,563,665) $ 9,872,989
=== == ========= ======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial information.
F-4
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................................... $ 10,622 $ (625,283)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization of property, equipment & leaseholds................ 339,415 842,486
Amortization of intangible assets................................................ 73,596 420,139
Amortization of debt discount and issuance costs................................. 47,493 74,004
Changes in operating assets and liabilities:
Inventories.................................................................... (2,522) (46,508)
Other current assets........................................................... (126,141) (91,984)
Other non-current assets....................................................... (10,075) (88,179)
Accounts payable and accrued expenses.......................................... 448,067 690,144
---------- ----------
Net cash provided by operating activities................................... 780,455 1,174,819
---------- ----------
Cash Flows From Investing Activities:
Purchase of property, equipment and leaseholds...................................... (305,347) (765,067)
Acquisitions of theaters............................................................ (5,750,000)
Acquisition costs................................................................... (93,181) (88,548)
---------- ----------
Net cash used in investing activities....................................... (398,528) (6,603,615)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of long term debt............................................ 625,000 5,800,000
Payments on long term debt.......................................................... (261,311) (8,988)
Debt issuance costs................................................................. (539,309)
Deferred offering costs............................................................. (65,179)
---------- ----------
Net cash provided by financing activities................................... 298,510 5,251,703
---------- ----------
Net Change in Cash and Cash Equivalents............................................... 680,437 (177,093)
Cash and Cash Equivalents, Beginning of Period........................................ 751,345 1,647,176
---------- ----------
Cash and Cash Equivalents, End of Period.............................................. $1,431,782 $1,470,083
========== ==========
Supplemental Cash Flow Information:
Interest paid....................................................................... $ 235,371 $1,108,979
========== ==========
Non-cash investing and financing activities:
Issuance of common stock as consideration for theater acquired................... $ -- $ 200,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial information.
F-5
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 1--BASIS OF PRESENTATION
The balance sheet as of December 31, 1997 has been derived from the audited
balance sheet contained in the Form 10-KSB of Clearview Cinema Group, Inc. (the
'Company'), and is presented for comparative purposes. All other financial
information is unaudited. In the opinion of management, all adjustments, which
include only normal recurring adjustments necessary to present fairly the
financial position, results of operations and cash flows for all periods
presented, have been made. Results of operations for interim periods are not
necessarily indicative of the operating results for a full year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. The financial information presented in this report should
be read in conjunction with the annual financial statements included in the
Annual Report on Form 10-KSB.
Income (Loss) Per Share--In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards 128, Earnings Per Share
('SFAS 128') which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Prior period amounts have been
restated to conform to the requirements of SFAS 128.
For the three months ended March 31, 1998, the net loss available to common
stockholders was $655,208, after giving effect to the preferred stock dividend.
For the three months ended March 31, 1997, the net income available to common
stockholders was $10,622. For the three months ended March 31, 1998 the weighted
average number of shares outstanding used in the computation of basic and
diluted loss per share was 2,220,816. For the three months ended March 31, 1997,
the weighted average number of shares outstanding used in the computation of
basic income per share was 832,800 and for diluted income per share was
1,728,000 including all potentially dilutive common stock.
Reclassification--Certain amounts previously reported have been reclassified to
conform to current year presentation.
NOTE 2--STOCK BASED COMPENSATION
During the three months ended March 31, 1998 the Company granted 61,000
incentive stock options, under the 1997 Stock Incentive Plan with exercise
prices equal to the quoted market price of the Company's Common Stock on the
date of grant.
NOTE 3--LONG-TERM DEBT
In February 1998, the Company amended and restated its Credit Facility by
obtaining a third term note ('Term Note C') totaling $5.8 million which was used
to acquire four additional theaters. The aggregate availability under the Credit
Facility was $41.8 million at March 31, 1998, of which $40.8 million is
outstanding at the date hereof. The Credit Facility expires in September 2002.
The Credit Facility includes a revolving credit line of $1 million which can be
used for refinancing existing debt, financing working capital, financing
acquisitions and for general corporate purposes. As of March 31, 1998, principal
payments under the term loans are due in April 1998, July 1998, October 1998 and
January 1999 and totalled $5.28 million. There were no amounts outstanding under
the revolving credit line at March 31, 1998.
The Credit Facility is collateralized by substantially all of the assets of the
Company and contains various restrictive covenants, including maintenance of
specified levels of net worth and debt coverage ratios. In February 1998, the
senior debt coverage ratio under the Credit Facility was amended from 3.7:1 to
4.5:1.
F-6
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 3--LONG-TERM DEBT--(CONTINUED)
As a result of the February 1998 amendment, all loans under the Credit Facility
bear interest at a rate based on the prime rate plus (x) a margin based upon the
ratio of the Company's borrowings under the Credit Facility plus capital leases
to the Company's EBITDA, and (y) a 'Margin Adjustment Rate'. The Margin
Adjustment Rate is defined initially as 0%, increases to 2% on November 10,
1998, and increases by 0.5% every 180 days thereafter. The interest rate at
March 31, 1998 was 10%.
NOTE 4--THEATER ACQUISITIONS
During the first three months of 1998, the Company acquired a total of four
theaters and twenty one screens located in New Jersey and New York. The
acquisitions have been accounted for under the purchase method of accounting.
Under the purchase method of accounting, the purchase price for each transaction
has been allocated based on the estimated fair value of identifiable tangible
and intangible assets (principally property, equipment and leasehold interest)
of the respective theaters with the excess purchase price, together with
acquisition costs being allocated to goodwill. The results of operations of the
acquired theaters are included in the accompanying consolidated financial
statements from the respective acquisition dates.
Clairidge Acquisition--In February 1998 the Company acquired substantially all
the assets, including leasehold interest, equipment and various operating
contracts of one theater from Clairidge Cinemas, Inc. (the 'Clairidge
Acquisition') for a total purchase price of $2.3 million. The Company paid $2.1
million in cash from borrowings under the Credit Facility and issued 14,782
shares of common stock with an aggregate market value of $200,000 based on the
closing price of the Company's stock on the ten trading days preceding the
acquisition. Leasehold interests acquired are to be amortized over the theater
lease which has a remaining lease term through December 31, 2016. The purchase
price has been allocated as follows:
<TABLE>
<S> <C>
Leasehold interest.......................................... $ 104,500
Equipment................................................... 345,000
Goodwill.................................................... 1,850,500
----------
$2,300,000
==========
</TABLE>
UA II Acquisition--In March 1998 the Company acquired substantially all the
assets, including land, building, equipment and various operating contracts of
two theaters from United Artists Theater Circuit, Inc. (the 'UA II Acquisition')
for a total purchase price of $1.5 million paid in cash from borrowings under
the Credit Facility. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Land........................................................ $ 252,000
Building.................................................... 1,008,000
Equipment................................................... 240,000
----------
$1,500,000
==========
</TABLE>
Cobble Hill Acquisition--In March 1998 the Company acquired substantially all
the assets, including equipment and various operating contracts of one theater
from Cobble Hill Cinemas, Inc. (the 'Cobble Hill Acquisition') for a total
purchase price of $2.15 million, paid in cash from borrowings under the Credit
Facility. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Equipment................................................... $ 188,500
Non-compete................................................. 14,000
Goodwill.................................................... 1,947,500
----------
$2,150,000
==========
</TABLE>
F-7
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
NOTE 5--COMMITMENTS AND CONTINGENCIES
In February 1998, the Company entered into a lease agreement to operate a
theater facility in Montclair, N.J. for ten years with four 5-year renewal
options. The lease provides for base rent of $37,500 and is adjusted upward each
year based on a formula.
In January 1998, the Company entered into an agreement providing for the lease
of a theater in Millburn, N.J. with the option to purchase certain assets of the
theater for $1.15 million in cash. The lease period is three months with an
option to extend for an additional three months, at $9,000 per month, during
which time the Company can exercise its option to purchase the theater. It is
the Company's intention to exercise this option within the lease period.
In connection with the CJM Acquisition consummated in 1997, the Company agreed
to provide to the seller additional consideration of 750 shares of Class B
redeemable preferred stock valued at $750,000 if another competing theater is
not opened in the operating vicinity of the purchased theaters within two years
of the date of the agreement or December 12, 1999. However, such consideration
is deemed to be contingent and, as such, will only be recorded on December 12,
1999 if no competing theater has opened.
During September 1995, the Company entered into an agreement providing for the
lease of three New York theater locations with annual rent of approximately
$300,000 and the option to purchase certain assets of the three theaters through
September 2000. Until exercise of the option, the Company is required to make
annual payments which are recorded as interest expense. It is the Company's
intention to exercise this option.
NOTE 6--SUBSEQUENT EVENTS
Class C Preferred Stock--In April 1998 the Company designated a new series,
consisting of 3,000 shares of its preferred stock, $.01 par value, as Class C
Convertible Preferred Stock (the 'Class C Preferred Stock'). Concurrently, the
Company entered into a Securities Purchase Agreement and issued the 3,000 shares
of its Class C Preferred Stock for $3.0 million in cash. The conversion feature
grants the holder of the Class C Preferred Stock the right to convert to common
stock based on a formula any time after the earlier to occur of (1) the 90th day
following the issue date or (2) the date on which the underlying security is
registered. The Class C Preferred Stock will be automatically converted two
years following the issue date. The Securities Purchase Agreement included a
registration rights agreement, which requires the Company to prepare and file
with the Securities and Exchange Commission a registration statement covering
the resale of at least 150% of the number of shares of common stock then
issuable upon conversion of the Class C Preferred Stock no later than July 15,
1998.
Theater Transaction--In November 1997, the Company entered into an agreement to
merge with Warren County Cinemas contingent upon Warren County Cinemas obtaining
a certain construction permit. During 1998, the construction permit was approved
and on April 30, 1998, the Company completed the merger, through the issuance of
76,923 shares of common stock having a fair market value of approximately $1.5
million in exchange for all the outstanding stock of Warren County Cinemas. In
addition, the shareholders of Warren County Cinemas have the right to receive
additional consideration, dependent upon future earnings of the theater for the
next two years, of up to $500,000. The shares of common stock issued are
unregistered shares and are subject to a Voting Trust Agreement whereby the
President and Chief Executive Officer of the Company has the right to exercise
all rights as an owner of the shares, including the right to vote, until the
shares are sold or registered. In May 1998, the Company entered into an
agreement and began to construct a 15-screen multiplex theater in Mansfield, NJ
with a total estimated cost of $3.15 million with a planned opening in November
1998.
F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Clearview Cinema Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity, and
of cash flows present fairly, in all material respects, the financial position
of Clearview Cinema Group, Inc. and its subsidiaries (the 'Company') at December
31, 1997, and the results of their operations and their cash flows for the year
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
New York, New York
March 19, 1998
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the consolidated balance sheet of Clearview Cinema Group, Inc.
and subsidiaries as of December 31, 1996 and the related consolidated statements
of operations, changes in stockholders' equity and cash flows for each of the
two years in the period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Clearview Cinema
Group, Inc. and subsidiaries at December 31, 1996 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
February 10, 1997 (except as to
the stock split described in Note 7
and as to Note 12, for which the dates
are August 7, 1997 and February 3, 1998)
F-10
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..................................................... $ 751,345 $ 1,647,176
Inventories................................................................... 45,102 116,655
Other current assets.......................................................... 34,866 341,273
----------- -----------
Total current assets....................................................... 831,313 2,105,104
Property, equipment and leaseholds, net......................................... 11,412,217 34,488,714
Intangible assets, net.......................................................... 2,711,518 19,931,555
Other non-current assets........................................................ 805,496 827,019
----------- -----------
$15,760,544 $57,352,392
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt.......................................... $ 835,650 $ 2,876,607
Current maturities of subordinated notes payable.............................. 479,986
Accounts payable and accrued expenses......................................... 1,226,502 4,562,633
----------- -----------
Total current liabilities.................................................. 2,542,138 7,439,240
Long-term debt, less current maturities......................................... 7,742,611 32,234,955
Subordinated notes payable, less current maturities............................. 1,193,882 6,000,000
Commitments and contingencies (Note 10)
Class A redeemable preferred stock at redemption price.......................... 2,132,294
Class B redeemable preferred stock.............................................. 1,350,000
Redeemable common stock at redemption price..................................... 357,305
Stockholders' equity
Undesignated preferred stock 2,498,697 and 2,478,697 shares authorized,
respectively
Class A preferred stock, par value $.01, 1,303 shares authorized; 779 shares
issued and outstanding..................................................... 8 8
Common stock, par value $.01, 10,000,000 shares authorized; 832,800 and
2,213,097 shares issued and outstanding, respectively...................... 8,328 22,131
Additional paid-in-capital.................................................... 4,827,096 12,214,515
Accumulated deficit........................................................... (553,519) (1,908,457)
Less: Redemption price of redeemable stock.................................... (2,489,599)
----------- -----------
Total stockholders' equity................................................. 1,792,314 10,328,197
----------- -----------
$15,760,544 $57,352,392
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Theater revenues
Box office........................................................... $1,759,131 $6,195,399 $12,926,134
Concession........................................................... 554,671 1,861,155 3,914,416
Other................................................................ 31,895 141,420 421,427
---------- ---------- -----------
2,345,697 8,197,974 17,261,977
---------- ---------- -----------
Operating expenses
Film rental and booking fees......................................... 823,791 3,022,377 6,168,380
Cost of concession sales............................................. 99,261 279,549 634,395
Theater operating expenses........................................... 1,078,370 3,297,825 6,590,703
General and administrative expenses.................................. 375,262 589,822 1,130,855
Depreciation and amortization........................................ 99,632 635,007 2,051,163
---------- ---------- -----------
2,476,316 7,824,580 16,575,496
---------- ---------- -----------
Operating income (loss).............................................. (130,619) 373,394 686,481
Interest expense, net.................................................. 85,697 591,722 2,015,419
---------- ---------- -----------
Net loss............................................................. $ (216,316) $ (218,328) $(1,328,938)
========== ========== ===========
Basic and diluted loss per share....................................... $ (.36) $ (.29) $ (1.03)
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------- --------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994.......... 600,000 $ 6,000 $ 765,200 $ (78,875) $ 692,325
Dividends paid.................... (30,000) (30,000)
Issuance of warrants in connection
with subordinated debt.......... 19,610 19,610
Net loss.......................... (216,316) (216,316)
----- ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1995.......... 600,000 6,000 784,810 (325,191) 465,619
Proceeds from sale of preferred
stock, net of related costs of
$154,911........................ 779 $ 8 2,345,081 2,345,089
Dividends paid.................... (10,000) (10,000)
Issuance of common stock
For cash........................ 12,600 126 69,874 70,000
Upon conversion of debt......... 12,000 120 79,880 80,000
For assets acquired............. 208,200 2,082 1,107,918 1,110,000
Issuance of warrants in connection
with
Subordinated debt............... 23,532 23,532
Bank financing.................. 416,001 416,001
Net loss.......................... (218,328) (218,328)
------ ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1996.......... 779 8 832,800 8,328 4,827,096 (553,519) 4,281,913
Repurchase of warrants held by
lender.......................... (1,000,000) (1,000,000)
Sale of underwriter warrants...... 1,000 1,000
Issuance of common stock
At initial public offering, net
of costs...................... 1,150,000 11,500 7,055,597 7,067,097
Upon termination of preferred
stock redemption right........ 60,000 600 25,400 (26,000)
In exchange for warrants
surrendered................... 66,000 660 103,340 104,000
In exchange for assets
acquired...................... 104,297 1,043 1,202,082 1,203,125
Net loss.......................... (1,328,938) (1,328,938)
------ ------- --------- ------- ----------- ----------- -----------
Balance, December 31, 1997.......... 779 $ 8 2,213,097 $22,131 $12,214,515 $(1,908,457) $10,328,197
===== ======= ========= ======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss............................................................... $ (216,316) $ (218,328) $(1,328,938)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization of property, equipment and
leaseholds......................................................... 95,445 526,182 1,675,856
Amortization of intangible assets.................................... 4,187 108,825 375,307
Amortization of debt discount and debt issuance costs................ 5,320 42,715 281,190
Interest expense recognized upon surrender of warrants............... 104,000
Changes in operating assets and liabilities
Inventories........................................................ (4,938) (28,455) (71,553)
Other current assets............................................... (62,014) 32,954 (306,407)
Other non-current assets........................................... (9,600) (48,063) (131,382)
Accounts payable and accrued expenses.............................. 306,736 731,232 3,336,131
----------- ----------- -----------
Net cash provided by operating activities....................... 118,820 1,147,062 3,934,204
----------- ----------- -----------
Cash flows from investing activities
Purchase of property, equipment and leaseholds......................... (630,675) (317,946) (3,486,123)
Acquisitions of theaters............................................... (6,499,000) (29,875,000)
Acquisition costs and other............................................ (608,315) (477,906) (285,499)
----------- ----------- -----------
Net cash used in investing activities........................... (1,238,990) (7,294,852) (33,646,622)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of long-term debt............................... 400,000 4,317,228 30,386,108
Payments on long-term debt............................................. (17,448) (136,543) (4,995,054)
Proceeds from issuance of subordinated notes payable................... 580,000 600,000
Payments on subordinated notes payable................................. (1,100,000)
Debt issuance costs.................................................... (342,842) (750,902)
Proceeds from issuance of common stock upon initial public offering.... 9,200,000
Initial public offering costs.......................................... (2,132,903)
Proceeds from issuance of common stock................................. 70,000
Proceeds from issuance of preferred stock.............................. 2,500,000
Preferred stock issuance costs......................................... (154,911)
Dividends paid......................................................... (30,000) (10,000)
Proceeds from issuance of underwriter warrants......................... 1,000
Payments on option..................................................... (80,000) (120,000)
----------- ----------- -----------
Net cash provided by financing activities....................... 852,552 6,722,932 30,608,249
----------- ----------- -----------
Net change in cash and cash equivalents.................................. (267,618) 575,142 895,831
Cash and cash equivalents, beginning of year............................. 443,821 176,203 751,345
----------- ----------- -----------
Cash and cash equivalents, end of year................................... $ 176,203 $ 751,345 $ 1,647,176
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include the
accounts of Clearview Cinema Group, Inc. ('Clearview') and its wholly-owned
subsidiaries (collectively referred to as the 'Company'). All significant
intercompany balances and transactions have been eliminated in consolidation.
Nature of the Business--The Company was incorporated November 23, 1994 and is a
regional motion picture exhibitor that acquires and operates in-town multiplex
theaters primarily located in affluent suburban communities in the New York/New
Jersey metropolitan area. As of December 31, 1997, the Company's 31 theaters
with 148 screens show a mix of first-run commercial, art and family-oriented
films. The Company licenses films from distributors on a film-by-film and
theater-by-theater basis. The Company's business is seasonal with a substantial
portion of its revenue and operating income being derived during the summer
months (June through August) and the holiday season (November and December).
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results, as determined at a later date, could differ
from those estimates.
Film rental costs owed to distributors are estimated as a percentage of the
film's box office receipts and the length of a film's run and are ultimately
settled with distributors within a period approximating three months.
Revenue Recognition--The Company recognizes revenues from box office admissions
and concession sales at the time of sale.
Cash Equivalents--Cash equivalents include commercial paper investments
purchased with original maturities of three months or less.
Inventories--Inventories consist of concession products and are stated at the
lower of cost (first-in, first-out method) or market.
Property, Equipment and Leaseholds--Property, equipment and leaseholds are
stated at cost less accumulated depreciation and amortization. Buildings and
improvements, furniture and equipment are depreciated using the straight line
method over the estimated useful lives of the assets as follows: buildings and
improvements-- 40 years; furniture and equipment--5 to 7 years. Leasehold
interests represent acquired rights to operate theatres under previously
existing operating leases. The fair value assigned to these leasehold interests
and lease improvements are capitalized and amortized using the straight-line
method over the shorter of the term of the lease or the estimated useful life of
the assets.
In 1996, the Company adopted Statement of Financial Accounting Standards 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of ('SFAS 121'). SFAS 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be reviewed
for impairment whenever there is an indication that the carrying amount of the
asset may not be recoverable. Recoverability of these assets is determined by
comparing the forecasted undiscounted net cash flows of the operation to which
the assets relate, to the carrying amount, including associated intangible
assets, of such operation. The adoption of SFAS 121 did not have a significant
effect on the consolidated financial position or results of operations.
Intangible Assets--Intangible assets consist of cost in excess of the tangible
and identifiable intangible assets of the theaters acquired (goodwill), debt
issuance costs, covenants not to compete, and organization costs. Costs are
amortized on a straight line basis over the following lives: goodwill--15 years,
covenants not to compete--3 to 5 years, organization costs--5 years. The Company
evaluates the recoverability of goodwill on an ongoing basis in light of changes
in any business conditions, events or circumstances that may indicate the
potential impairment of intangibles. Debt issuance costs are amortized as
interest expense over the term of the related debt.
F-15
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
Stock-Based Compensation--The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ('APB
25') and related interpretations in accounting for stock-based compensation. The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ('SFAS
123').
Income Taxes--Deferred tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Net Loss Per Share--In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards 128, Earnings Per Share
('SFAS 128') which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. The Company adopted SFAS 128 in
the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period. Prior period amounts have been
restated to conform to the requirements of SFAS 128.
Disclosure of Fair Value of Financial Instruments--The carrying amounts reported
for cash and cash equivalents and accounts payable and accrued expenses
approximate fair value due to the short maturities of these assets and
liabilities. The fair value of the long term debt, subordinated notes payable
and Class B redeemable preferred stock are estimated based on discounted future
cash flows using rates currently available for debt and equity instruments with
similar terms. At December 31, 1997, the fair values approximate carrying
values.
NOTE 2--THEATER ACQUISITIONS
During 1997, the Company acquired a total of fourteen theaters and 79 screens
located in New Jersey and New York. The acquisitions have been accounted for
under the purchase method of accounting. Under the purchase method of
accounting, the purchase price for each transaction has been allocated based on
the estimated fair value of identifiable tangible and intangible assets
(principally property, equipment and leasehold interest) of the respective
theaters with the excess purchase price, together with acquisition costs
approximating $285,000 being allocated to goodwill. The results of operations of
the acquired theaters are included in the accompanying consolidated financial
statements from the respective acquisition dates.
UA Acquisition--In September 1997 the Company acquired substantially all the
assets, including land, building, leasehold interests, equipment and various
operating contracts of five theaters from United Artists Theater Circuit, Inc.
(the 'UA Acquisition') for a total purchase price of $8.65 million in cash from
proceeds of the initial public offering (Note 7) and borrowings under the Credit
Facility (Note 6). Leasehold interests acquired
F-16
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
are to be amortized over the related theater leases which have remaining lease
terms through December 31, 2019. The purchase price has been allocated as
follows:
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 preferred stock
(Note 7) by March 31, 1998 or pay $750,000 in cash in lieu of stock if the
Company consummated a private placement offering by such date. As the private
placement offering is not likely to occur by March 31, 1998, the 750 shares of
Class B redeemable preferred stock will be issued and have been reflected as
such in the accompanying financial statements. The agreements also provide for
additional consideration of 750 additional shares of Class B redeemable
preferred stock valued at $750,000 to be paid to the seller if another competing
theater is not opened in the operating vicinity of the purchased theaters within
two years. However, such consideration is deemed to be contingent and, as such,
will only be recorded on December 12, 1999 if no competing theater has opened.
Leasehold interests acquired in the CJM Acquisition are to be amortized over the
related theater leases which have remaining lease terms through November 30,
2017. The purchase price has been allocated as follows:
<TABLE>
<S> <C>
Leasehold interests................................... $ 1,503,000
Equipment............................................. 1,510,400
Non-compete........................................... 60,000
Goodwill.............................................. 5,629,725
-----------
$ 8,703,125
===========
</TABLE>
F-17
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
The shares of common stock issued in the Nelson Ferman Acquisition and the CJM
Acquisition are unregistered shares and are subject to Voting Trust Agreements
whereby the President and Chief Executive Officer has the right to vote the
shares until the shares are sold or registered.
The Company acquired three additional theaters during 1997 in two separate
transactions for $1,975,000 in cash from borrowings under the Credit Facility
and working capital.
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1996 and 1997 assumes the UA Acquisition, the Nelson
Ferman Acquisition and the CJM Acquisition, along with the Company's 1996
acquisitions, had occurred on January 1, 1996 giving effect to purchase
accounting adjustments and financing. The pro forma results have been prepared
for informational purposes only and do not reflect any benefit from economies
which might be achieved from combined operations. The pro forma results do not
represent results which would have occurred if the acquisition had taken place
on the basis assumed above, nor are they indicative of the results of future
combined operations.
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)
During 1996, the Company acquired the leaseholds of seven theaters and two
theaters with the underlying real estate, all located in New Jersey and New York
(the '1996 Acquisitions'). The 1996 Acquisitions have also been accounted for
under the purchase method of accounting. The results of operations of the
acquired theaters are included in the accompanying consolidated financial
statements from their respective acquisition dates. The 1996 Acquisitions are
described as follows:
May 1996--The Company purchased the leaseholds of three New Jersey theaters and
one New York theater in May 1996 for $5,000,000 in cash and the issuance of
208,200 shares of the Company's Common Stock. The total cost was allocated as
follows: $835,000--theater equipment, $5,075,000--leasehold interests and
$200,000-- covenant not to compete.
July 1996--The Company purchased the leaseholds of two New York theaters in July
1996. The total cost of $1,499,000 was paid in cash and was allocated as
follows: $1,489,000--leasehold interests and $10,000--covenant not to compete.
December 1996--The Company purchased two theaters and the underlying real estate
and the leasehold of another theater in New Jersey in December 1996. The total
cost of $5,000,000 was paid with a $4,400,000 secured note and $600,000
subordinated note. The purchase price was allocated as follows: $400,000--land,
$1,300,000--buildings and leasehold improvements, $832,000--theater equipment,
$848,000--leasehold interests and $1,620,000--goodwill.
The following unaudited pro forma results of operations for the years ended
December 31, 1995 and 1996 assume the 1996 Acquisitions occurred as of January
1, 1995 after giving effect to certain adjustments, including depreciation and
increased interest expense on acquisition debt. The pro forma results have been
prepared for
F-18
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 2--THEATER ACQUISITIONS--(CONTINUED)
comparative purposes only and do not purport to indicate the results of
operations which would actually have occurred had the combinations been in
effect on the dates indicated, or which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues........................................................................... $10,754,531 $13,182,481
Net loss........................................................................... $(1,658,987) $(1,268,766)
Basic and diluted loss per common share............................................ $ (2.05) $ (1.55)
</TABLE>
NOTE 3--PROPERTY, EQUIPMENT AND LEASEHOLDS
Property, equipment and leaseholds are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Land............................................................................... $ 400,000 $ 1,927,848
Buildings and improvements......................................................... 1,302,098 5,491,183
Leasehold interest and improvements................................................ 8,095,097 21,704,639
Furniture and equipment............................................................ 2,347,117 7,772,995
----------- -----------
12,144,312 36,896,665
Less: Accumulated depreciation and amortization.................................... 732,095 2,407,951
----------- -----------
$11,412,217 $34,488,714
=========== ===========
</TABLE>
NOTE 4--INTANGIBLE ASSETS
Intangible assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Goodwill........................................................................... $ 2,151,437 $19,004,450
Debt issuance costs................................................................ 378,264 1,129,166
Covenants not to compete........................................................... 210,000 305,000
Organization costs................................................................. 36,362 42,234
----------- -----------
2,776,063 20,480,850
Less: Accumulated amortization..................................................... 64,545 549,295
----------- -----------
$ 2,711,518 $19,931,555
=========== ===========
</TABLE>
F-19
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Film rental and booking fees payable.............................. $ 699,444 $1,613,834
Accounts payable.................................................. 243,278 1,936,552
Accrued interest.................................................. 55,351 369,874
Accrued payroll................................................... 68,632 254,538
Sales taxes payable............................................... 49,228 100,688
Other accrued expenses............................................ 110,569 287,147
---------- ----------
$1,226,502 $4,562,633
========== ==========
</TABLE>
NOTE 6--LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
DESCRIPTION INTEREST RATE 1996 1997
- ---------------------------------------------------- ------------------------- ----------- -----------
<S> <C> <C> <C>
Term notes A & B under Credit Facility, interest
payable in monthly installments, principal due in
quarterly installments through September 2002, net 10% at December 31, 1997
of unamortized debt discount of $384,976 and (floating rate of 1.5%
$242,729, respectively............................ above prime) $ 3,790,024 $34,757,271
Notes payable--Seller, refinanced as described
below............................................. 4,400,000
Note payable to bank, in monthly installments of
principal and interest of $5,029, due October
2005.............................................. 11 1/4% 337,009 313,096
Other............................................... 51,228 41,195
----------- -----------
8,578,261 35,111,562
Less: Current maturities............................ 835,650 2,876,607
----------- -----------
$ 7,742,611 $32,234,955
=========== ===========
</TABLE>
Credit Facility--In September 1997 the Company entered into an amended and
restated credit agreement with Provident Bank (the 'Credit Facility') consisting
of a revolving credit line of $1.0 million, Term Note A of $12 million and Term
Note B of $17 million, the proceeds of which were used to refinance existing
term loans with the same bank of $10.4 million and finance acquisitions (Note
2). In December 1997 the Company further increased its Credit Facility to $36
million by increasing the availability under Term Note B to $23 million through
the participation of an additional bank, the proceeds of which were used to
finance acquisitions (Note 2). In February 1998, the Company increased its
Credit Facility by obtaining a $5.8 million Term Note C (Note 14).
The revolving credit line of $1 million bears interest at prime + 1.5%,
terminates on September, 2002 and can be used for refinancing existing debt,
financing working capital, financing acquisitions and for general corporate
purposes. There were no amounts outstanding on the revolving credit line at
December 31, 1997.
F-20
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 6--LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE--(CONTINUED)
The Credit Facility is collateralized by substantially all of the assets of the
Company and contains various restrictive covenants, including maintenance of
specified levels of net worth and debt coverage ratios. All such covenants were
satisfied or waived by the bank at December 31, 1997 and 1996. The Credit
Facility also restricts certain payments by the Company including the payment of
dividends, retirement of equity securities or retirement of any subordinated
debt through premium payments.
In accordance with the provisions of the Credit Facility, the Company maintains
a $2.5 million key-man life insurance policy on its President and Chief
Executive Officer.
Refinancing--In January 1997, seller-financing of $4,400,000 was paid with
$100,000 from the Company's operating cash and the proceeds from a $4,300,000
bank term note, issued under the Company's credit agreement with its principal
lender. Accordingly, the note payable at December 31, 1996 was classified in
accordance with the terms of this new bank term note.
Subordinated Notes--In November 1997, the Company issued $6 million in
subordinated notes payable to the seller in connection with the Nelson Ferman
Acquisition (Note 2). The notes bear interest at 10 1/2% which is payable
monthly. The principal and any unpaid interest on one note in the amount of $2
million is due on the earlier of the consummation of a private debt offering or
January 1999. The principal on the $4 million note is due the earlier of the
consummation of a private debt offering or November 2002.
During 1995 and 1996, the Company sold 8% subordinated notes totalling
$1,100,000 to certain related parties. In October 1997, the Company repaid
$500,000 of these subordinated notes payable and in December 1997, the Company
converted the remaining $600,000 of subordinated notes payable into 600 shares
of Class B redeemable preferred stock valued at $600,000 (Note 7).
The Company had a $600,000 12% subordinated note payable which was issued in
connection with its acquisition of certain theaters in December 1996. Such note
was repaid in August 1997 upon consummation of the Company's initial public
offering.
Long-term debt and subordinated notes payable at December 31, 1997 mature
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ---------------------------------------------------------------------
<S> <C>
1998................................................................. $ 2,876,607
1999................................................................. 8,984,318
2000................................................................. 6,989,036
2001................................................................. 7,024,619
2002................................................................. 15,091,387
2003 and thereafter.................................................. 145,595
-----------
$41,111,562
===========
</TABLE>
NOTE 7--STOCKHOLDERS' EQUITY
Stock Split--In May 1997, the Company's Board of Directors approved a 600 to 1
stock split which has been retroactively reflected in the accompanying
consolidated financial statements.
Initial Public Offering--In August 1997, the Company consummated an initial
public offering (the 'Offering') through the sale of 1,150,000 shares of its
common stock, $.01 par value for total proceeds of approximately $7.1 million,
net of offering costs of approximately $2.1 million.
Preferred Stock--The Company's Certificate of Incorporation authorizes the
issuance of up to 2,500,000 shares of preferred stock. The Board of Directors is
authorized to issue shares of preferred stock from time to time in
F-21
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 7--STOCKHOLDERS' EQUITY--(CONTINUED)
one or more series and to establish and designate any such series and to
determine the number of shares and the relative conversion rights, voting
rights, terms of redemption and liquidation.
Class A Preferred Stock and Warrant--In May and July 1996, the Company issued
779 shares of Class A preferred stock and warrants in exchange for $2,500,000.
Each share of Class A preferred stock is convertible at any time at the option
of the holders into 600 shares of common stock. Upon the occurrence of certain
events, the shares of Class A preferred stock will automatically convert into
shares of common stock. The warrants, which entitled the holder to purchase up
to 471 shares of Class A preferred stock were exchanged at the time of the
offering for a new warrant exercisable for 282,600 shares of common stock.
The warrant is not exercisable until June 1, 2001 unless, prior to that date,
the Company sells all or substantially all of its assets, liquidates, dissolves
or merges with another corporation in a transaction which results in a change in
control of the Company's voting stock. The number of shares of common stock for
which the warrant is exercisable is subject to reduction, including not being
exercisable into any shares, based on a formula and the fair value of the
Company's stock as defined, upon the occurrence of certain events.
Class B Redeemable Preferred Stock--During 1997 the Company authorized 20,000
shares and issued 1,350 shares of Class B non-voting, 10 1/2% cumulative
redeemable preferred stock with a liquidation value of $1,000 per share. The
holders of the Class B redeemable preferred stock are entitled to receive
preferential dividends, when and as declared by the Board of Directors. So long
as any shares of Class B redeemable preferred stock are outstanding, unless all
dividends on the Class B redeemable preferred stock have been paid, no dividend
or other distribution may be paid or made on the common stock, Class A preferred
stock or any other capital stock of the Company ranking junior as to dividends
to the Class B redeemable preferred stock. In the event of any sale of all or
substantially all of the assets of the Company or any liquidation, dissolution
or winding up of the Company, the holders of the Class B redeemable preferred
stock will be entitled to receive an amount per share equal to a liquidation
value ($1,000) plus all unpaid dividends per share on the Class B redeemable
preferred stock, prior to any distribution to holders of the common stock, Class
A preferred stock or any other capital stock of the Company ranking junior upon
liquidation or dissolution. The holder of Class B redeemable preferred stock can
redeem upon the earlier to occur of dissolution of the Company, within ten
business days after the date of closing of a private placement offering with
aggregate proceeds of $70 million, or five years after the date of issuance of
such shares. The Company can redeem these shares at any time.
Warrants--In consideration of services provided at the time of the Offering, the
Company issued to the underwriter of the Offering, for a nominal amount of
$1,000, warrants to purchase 100,000 shares of common stock with an initial
exercise price of $9.60 per share. As provided in the warrant agreement, the
exercise price and the number of shares that may be purchased upon the exercise
of the warrants are subject to modification and adjustment upon the occurrence
of certain events, as defined in the warrant agreement. The warrants are
exercisable for a four year period commencing on August 12, 1998. The fair value
of services provided of approximately $200,000 has been determined based on the
fair value of the warrants using an option pricing model in accordance with SFAS
123 and has no impact on stockholders' equity as the services provided are
considered additional offering costs.
During 1995 and 1996, the Company issued 200 warrants, convertible into 120,000
shares of common stock, together with the issuance of certain subordinated debt.
Concurrent with the consummation of the Offering, holders of warrants to
purchase 97,500 shares of common stock (at exercise prices ranging from $3.33 to
$6.67 per share) exchanged such warrants for 66,000 shares of common stock and
also amended the terms of certain subordinated notes payable. The fair value of
the common stock issued, less the value of the warrants surrendered, was
recorded as interest expense of $104,000 in the accompanying financial
statements. The remaining warrants were canceled upon retirement of the
subordinated debt on December 12, 1997 (Note 6) in accordance with the terms of
the debt and warrant agreement.
F-22
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 7--STOCKHOLDERS' EQUITY--(CONTINUED)
In connection with the bank financing as described in Note 6 and pursuant to a
May 1996 warrant agreement (amended in December 1996), the Company issued
seven-year warrants in May and December 1996 to its principal lender to purchase
43,800 and 50,400 shares of the Company's common stock, respectively, at an
exercise price of $.01 per share. In June 1997, the Company repurchased those
warrants for $1 million which approximated the put price at that time. As a
result, the repurchase has been recorded as a charge to additional
paid-in-capital.
Terminated Redemption Rights--A certain common stockholder had the right to sell
its shares of common stock at a redemption price based upon a formula. If such
stockholder did not exercise that right, the Company had the right to purchase
those shares of common stock from such stockholder at a price based upon the
same formula. Such stockholder and the Company terminated those rights upon
consummation of the Offering.
The holder of the outstanding shares of the Company's Class A preferred stock,
$.01 par value had the right to sell to the Company all of those shares or the
shares of common stock into which those shares had been converted at a
redemption price determined in accordance with a specified formula. Such holder
terminated that right upon consummation of the Offering in exchange for the
issuance of 60,000 shares of common stock. The fair value of the 60,000 shares
of common stock issued, less the estimated value of the redemption right
terminated, was recorded as a preferred stock dividend of $26,000 during 1997.
As of December 31, 1996, the Company reported the Class A redeemable
preferred stock and the redeemable common stock at the current redemption value
separately between liabilities and stockholders' equity, since redemption was
outside of the Company's control. A corresponding reduction was made to
stockholders' equity, as the equivalent of treasury stock. The per share
redemption value of the Class A redeemable preferred stock was based on the
greater of gross revenues (as defined) or six times theater operating income
before general and administrative expenses, interest and taxes for the preceding
twelve months divided by the number of shares of common stock issued and, as if
converted or exercised, all convertible securities, options, warrants and
similar instruments. The redemption value of the common stock was based on book
value per share computed on a fully diluted basis.
NOTE 8--INCOME TAXES
Deferred income taxes reflect the tax consequences on future years of
differences between the bases of assets and liabilities for financial reporting
purposes and income tax purposes. A valuation allowance is provided when it is
more likely than not that some portion of the deferred tax assets will not be
realized. The Company has determined, based on its recurring net losses since
inception, that a full valuation allowance of $85,000, $172,000 and $621,000 is
appropriate at December 31, 1995, 1996 and 1997.
F-23
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 8--INCOME TAXES--(CONTINUED)
The income tax effect of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred tax assets
Net operating loss carryforwards..................................... $ 678,000
Other................................................................ 46,000
---------
Gross deferred tax assets.............................................. 724,000
Deferred tax liabilities
Property, equipment and leaseholds................................... (103,000)
---------
621,000
Valuation allowance.................................................... (621,000)
---------
Net deferred tax assets.............................................. $
=========
</TABLE>
A reconciliation between the statutory federal income tax rate of 34% and the
effective rate of income tax expense for the years ended December 31, 1995, 1996
and 1997 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Income tax benefit at federal statutory rate............. $(72,000) $(74,000) $(452,000)
State income tax benefit, net of federal tax effect...... (13,000) (13,000) (79,000)
Increase in net operating loss carryforwards............. 85,000 87,000 531,000
-------- -------- ---------
Provision (benefit) for income taxes..................... $ $ $
======== ======== =========
</TABLE>
The Company has available at December 31, 1997 net operating loss
carryforwards totaling approximately $1,698,000 that may be applied against
future consolidated federal and state taxable income of the respective
subsidiary companies. The loss carryforwards will expire through 2012.
Certain losses are subject to limitation by the provisions of Section 382 of the
Internal Revenue Code due to a more than 50% change in ownership which occurred
upon the consummation of the Company's Offering.
NOTE 9--STOCK BASED COMPENSATION
In August 1997, the Company adopted the Stock Incentive Plan (the 'Plan') which
provides for the granting of awards to purchase shares of the Company's common
stock to officers, directors and key employees and non-employees at the
discretion of a committee of the Board of Directors. Awards granted under the
Plan may be in the form of Non-Qualified Stock Options, Incentive Stock Options,
Stock Appreciation Rights, Restricted Shares and Performance Awards. The
exercise price of each share of stock awarded under the Plan shall be determined
by the committee; provided however, that the exercise price shall in all cases
be equal to or greater than the quoted market price of the Company's common
stock on the date of grant. At December 31, 1997, 200,000 shares of common stock
are reserved for issuance under the Plan. Awards granted under the Plan become
fully vested upon a change in control of the Company.
During 1997, the Company granted 122,500 incentive stock options with exercise
prices ranging from $8 to $12 and with a weighted average exercise price of
$8.40 per share. No options became exercisable or were forfeited during 1997.
The awards granted during 1997 terminate in 10 years and have a graded vesting
schedule that provides for 100% vesting in four years as follows: Year 1--10%,
Year 2--35%, Year 3--65%, Year 4--100%.
F-24
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 9--STOCK BASED COMPENSATION--(CONTINUED)
Pro forma information, as required by SFAS 123, has been determined as if the
Company had accounted for stock options awarded under the Plan under the fair
value method as defined by SFAS 123. The fair value of these options was
estimated at the date of grant using the Black Scholes option pricing model with
the following weighted-average assumptions: risk-free rate of 6.5%; expected
common stock market price volatility factor of 30%; and an average expected life
of the options of six years. The weighted average fair value of each option on
the date of grant using the option pricing model was $3.26. If fair value based
accounting in accordance with SFAS 123 had been used to measure stock based
compensation cost, the Company's consolidated net loss would have increased by
$40,000 or $0.03 per share for the year ended December 31, 1997. This pro forma
impact only takes into account options granted since January 1, 1997 and is
likely to increase in future years as additional options are granted and
amortized ratably over the vesting period.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Theater Leases--A substantial portion of the Company's theaters and the
corporate office are operated under lease arrangements with initial lease terms
and renewal options. Future minimum rental payments for all non-cancellable
operating leases having initial or remaining lease terms in excess of one year
as of December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998................................................................. $ 2,685,334
1999................................................................. 2,699,106
2000................................................................. 2,646,440
2001................................................................. 2,557,795
2002................................................................. 2,602,006
2003 and thereafter.................................................. 17,837,239
-----------
$31,027,920
===========
</TABLE>
Certain theaters operated by the company have operating leases that contain
escalating clauses. For these leases, the aggregate rent payments over the lease
term are recognized on a straight-line basis over the lease term. The
differences between the expense charged to operations and amounts payable under
such leases are recorded annually as deferred rent expense, which will
ultimately reverse over the lease term. In addition, leases require additional
amounts to be paid for common area maintenance and/or contingent rental payments
based on a percent of net revenues of the theater in excess of a predetermined
amount. Total rent expense for the years ended December 31, 1995, 1996 and 1997
was approximately $209,000, $802,000 and $1,287,000, respectively.
Acquisition Commitments--During September 1995, the Company entered into an
option agreement providing for the lease of three New York theater locations
with the option to purchase certain assets of the three theaters through
September 2000. In consideration of the option granted, the Company made an
initial $200,000 payment which was financed by the seller. Until exercise of the
option, the Company is required to make annual payments which are recorded as
interest expense in the accompanying financial statements. It is the Company's
intention to ultimately exercise this option.
In November 1997, the Company entered into an agreement to acquire a theater
upon completion of construction of such theater for a price of $1 million to be
paid in common stock of the Company; provided however, that in no event shall
the common shares to be issued be greater than 90,909 or less than 76,923
shares. The closing date under this agreement will occur within ten business
days after receipt of a valid construction permit, but in no event later than
January 1999. Neither the Company nor the seller is obligated to close on this
agreement if a valid construction permit is not obtained by June 1998.
F-25
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 10--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Employment Agreement--The Company is obligated through May 2003 to pay its
President and Chief Executive Officer an annual base salary of $120,000, plus an
additional amount based on gross revenue, provided that such total does not to
exceed $750,000.
NOTE 11--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid for interest.................................................. $ 42,877 $ 623,656 $1,179,000
Non-cash investing and financing activities
Issuance of common stock as consideration for theaters acquired....... 1,110,000 1,203,125
Issuance of subordinated notes payable as consideration for theaters
acquired........................................................... 5,000,000 6,000,000
Issuance of Class B redeemable preferred stock as consideration for
theaters acquired.................................................. 750,000
Conversion of subordinated notes payable into Class B redeemable
preferred
stock.............................................................. 600,000
Repurchase of warrants................................................ 1,000,000
Common stock issued upon termination of preferred stock redemption
right.............................................................. 26,000
Fair value of warrants issued in connection with subordinated debt and
bank financing..................................................... 19,610 439,533
Conversion of subordinated note payable (related party) into common
stock.............................................................. 80,000
Project acquisition costs in exchange for option payable.............. 200,000
</TABLE>
NOTE 12--SUPPLEMENTAL DISCLOSURE OF LOSS PER SHARE
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Net Loss................................................................. $(216,316) $(218,328) $(1,328,938)
Less: Preferred stock dividends.......................................... (26,000)
--------- --------- -----------
Loss available to common stockholders.................................... $(216,316) $(218,328) $(1,354,938)
========= ========= ===========
Weighted average shares outstanding...................................... 600,000 744,038 1,312,865
========= ========= ===========
Basic and diluted loss per share......................................... $ (.36) $ (0.29) $ (1.03)
========= ========= ===========
</TABLE>
The Class A preferred stock and warrant, underwriter warrants and incentive
stock options outstanding are potentially convertible into 972,500 shares of
common stock and have not been included in the computation of diluted loss per
share as the effect would have been antidilutive. The Company's loss per share
for the years ended December 31, 1995 and 1996 have been restated in accordance
with SFAS 128, as described in Note 1.
NOTE 13--RELATED PARTY TRANSACTIONS
In June 1997 the Company entered into a consulting and confidentiality agreement
with a director and stockholder of the Company to assist the Company in the
identification of theater acquisition candidates and provide other services as
requested by the Company. The director/stockholder is also an executive vice
president of First New York Realty Co., Inc. ('First New York'). To the extent,
if any, that the director/stockholder identifies any person who is interested in
leasing a site to the Company in his capacity as an employee of First New York
and the Company determines to lease that site, First New York could be entitled
to a commission from
F-26
<PAGE>
CLEARVIEW CINEMA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
NOTE 13--RELATED PARTY TRANSACTIONS--(CONTINUED)
that person and the director/stockholder would then be entitled to a commission
from First New York. During the years ended December 31, 1995, 1996 and 1997 the
Company incurred $0, $12,000 and $17,000, respectively in consulting fees to the
director/stockholder.
In May 1997 the Company renewed its agreement with an affiliated entity who is a
preferred stockholder and whose managing directors are directors of the Company,
to provide business strategy and financial and investment management services
for a fee equal to $60,000 per year. The Company incurred fees for such services
of $30,000 and $50,000 in 1996 and 1997, respectively. No such fees were paid in
1995.
A director of the Company is an officer of the entity that served as the
underwriter for the Offering. The director was appointed to the Company's board
of directors subsequent to consummation of the Offering. Amounts paid to the
underwriter for services provided at the time of the Offering were $1,013,000.
NOTE 14--SUBSEQUENT EVENTS
In February 1998, the Company extended its existing Credit Facility through the
issuance of a Term Note C in the amount of $5.8 million to be used for
additional acquisitions. Interest is due quarterly at prime plus 1.5%. Principal
payments are to be paid quarterly commencing October 1, 1998 with final payment
due September 2002. The Company borrowed $3.8 million under Term Note C to fund
the acquisition of three theaters subsequent to December 31, 1997. The Company
continues to pursue the acquisition of additional theaters, the development of
new theaters and the addition of screens to existing theaters.
In March 1998, the Company adopted the Clearview Cinema Group 401(K) Plan (the
'401(K) Plan') that covers all employees of the Company who have reached the age
of 21 and have completed one year of service, as defined. The 401(K) Plan
provides for employee elective contributions up to 15% of annual compensation,
with matching contributions by the Company of 50% of the first 6% of the
employees' compensation contributed. Additionally, the Company, at its
discretion may make profit-sharing contributions to the 401(K) Plan. Employees
vest 100% in the Company's matching contributions and profit sharing
contributions after three years of service.
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the United Artist Theatre Circuit,
Inc. Theaters at Bronxville, Larchmont, Wayne, New City and Mamaroneck (the 'UA
Theaters'), as of December 31, 1996 and the related combined statements of
income and divisional equity and cash flows for each of the two years in the
period ended December 31, 1996. These combined financial statements are the
responsibility of the management of United Artist Theatre Circuit, Inc. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the UA Theaters at
December 31, 1996 and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the combined financial statements, United Artist
Theatre Circuit, Inc. changed its method of accounting for impairment of
long-lived assets in accordance with SFAS 121 in 1996.
WISS & COMPANY, LLP
Woodbridge, New Jersey
June 4, 1997
F-28
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................... $ 61,716 $ 65,666
Inventories........................................................................ 22,122 22,930
Other current assets............................................................... 19,366 43,799
------------ -----------
Total current assets............................................................ 103,204 132,395
------------ -----------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION................................ 4,846,814 4,827,793
------------ -----------
OTHER ASSETS:
Due from parent and affiliate...................................................... 2,955,667 3,247,520
Security deposits.................................................................. 2,000 2,000
------------ -----------
2,957,667 3,249,520
------------ -----------
$ 7,907,685 $ 8,209,708
=========== ===========
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............................................. $ 731,595 $ 932,282
DIVISIONAL EQUITY.................................................................... 7,176,090 7,277,426
------------ -----------
$ 7,907,685 $ 8,209,708
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-29
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF INCOME AND DIVISIONAL EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------------- --------------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
THEATER REVENUES:
Box office....................................... $3,503,949 $3,578,346 $ 864,313 $ 961,187
Concession....................................... 1,004,651 1,048,292 239,725 278,823
Other............................................ 147,248 174,334 35,051 39,238
---------- ---------- ---------- ----------
4,655,848 4,800,972 1,139,089 1,279,248
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Film rental and booking fees..................... 1,556,970 1,603,729 362,806 482,578
Cost of concession sales......................... 171,003 176,031 42,005 43,294
Theater operating expenses....................... 1,734,320 1,828,092 444,099 470,704
General and administrative....................... 71,634 71,366 16,933 19,890
Depreciation and amortization.................... 224,947 216,154 56,033 49,142
Impairment of long-lived assets.................. -- 224,908 -- --
---------- ---------- ---------- ----------
3,758,874 4,120,280 921,876 1,065,608
---------- ---------- ---------- ----------
OPERATING INCOME................................... 896,974 680,692 217,213 213,640
INTEREST EXPENSE................................... 588,577 444,534 111,000 112,304
---------- ---------- ---------- ----------
NET INCOME......................................... 308,397 236,158 106,213 101,336
DIVISIONAL EQUITY:
Beginning of period.............................. 6,631,535 6,939,932 6,939,932 7,176,090
---------- ---------- ---------- ----------
End of period.................................... $6,939,932 $7,176,090 $7,046,145 $7,277,426
========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-30
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------ ----------------------
1995 1996 1996 1997
--------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 308,397 $ 236,158 $ 106,213 $ 101,336
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Depreciation and amortization.......................... 224,947 216,154 56,033 49,142
Loss in impairment of long-lived asset................. -- 224,908 -- --
Changes in operating assets and liabilities:
Inventories.......................................... 299 (1,442) (1,073) (808)
Other current assets................................. 471 19,510 14,586 (24,433)
Security deposits.................................... -- (2,000) (2,000) --
Accounts payable and accrued expenses................ (73,043) 274,470 51,129 200,687
--------- ----------- --------- ---------
Net cash flows from operating activities.......... 461,071 967,758 224,888 325,924
--------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (180,994) (46,942) (28,277) (30,121)
Advances to parent and affiliate.......................... (250,028) (1,004,461) (289,193) (291,853)
--------- ----------- --------- ---------
Net cash flows from investing activities.......... (431,022) (1,051,403) (317,470) (321,974)
--------- ----------- --------- ---------
NET CHANGE IN CASH.......................................... 30,049 (83,645) (92,582) 3,950
CASH, BEGINNING OF PERIOD................................... 115,312 145,361 145,361 61,716
--------- ----------- --------- ---------
CASH, END OF PERIOD......................................... $ 145,361 $ 61,716 $ 52,779 $ 65,666
========= =========== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ -- $ -- $ -- $ --
--------- ----------- --------- ---------
Income taxes paid......................................... $ -- $ -- $ -- $ --
--------- ----------- --------- ---------
</TABLE>
See accompanying notes to combined financial statements.
F-31
<PAGE>
UNITED ARTISTS THEATRE CIRCUIT, INC. CINEMAS AT
BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
NOTES TO COMBINED FINANCIAL STATEMENTS
(Data relating to March 31, 1997 and 1996 are unaudited)
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of the United Artist Theatre Circuit, Inc. theaters at Bronxville,
Larchmont, Wayne, New City and Mamaroneck (the 'UA Theaters'). All significant
inter-location balances and transactions have been eliminated in combination.
Nature of the Business--The UA Theaters are regional motion picture houses
located in suburban communities in the New York/New Jersey metropolitan area.
Revenues and Film Rental Costs--The UA Theaters recognize revenues from box
office admissions and concession sales at the time of sale. Film rental costs
are based a film's box office receipts and length of a film's run.
Seasonality--The UA Theaters' business is seasonal with a large portion of
their revenues and profits being derived during the summer months (June through
August) and the holiday season (November and December).
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Inventories--Inventories consist of concession products and are stated at
the lower of cost (first-in, first-out method) or market.
Property and Equipment--Property and equipment are stated at cost.
Buildings and improvements, theater equipment and office furniture and equipment
are depreciated using straight line and accelerated methods over the estimated
useful lives of the assets. In general, the estimated useful lives used in
computing depreciation and amortization are: buildings and improvements--39
years; theater equipment--5 to 10 years; office furniture and equipment--5 to 10
years. Leasehold improvements are amortized using the straight-line method over
the term of the related lease or the estimated useful life of the asset,
whichever is less.
Rent Expense--The Wayne theater included in the combined financial
statements is operated under a lease that contains predetermined increases in
the rent payable during the term of such lease. For this lease, the aggregate
rental expense over the lease term is recognized on a straight-line basis over
the lease term. The differences between the expense charged to operations and
the amount payable under that lease are recorded annually as deferred rent
expense, which will ultimately reverse over the lease term.
Additional rent is paid for common area maintenance and may also be charged
based on a percentage of net revenue in excess of a predetermined amount.
Financial Instruments--Financial instruments include cash, security
deposits, accounts payable and accrued expenses The amounts reported for
financial instruments are considered to be reasonable approximations of their
fair values, based on market information concerning financial instruments with
similar characteristics available to management.
Impairment of Long-Lived Assets--In 1996, the United Artists Theatre
Circuit, Inc. ('UA') adopted Statement of Financial Accounting Standards
('SFAS') No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of' (See Note 4). SFAS No. 121 prescribes that
an impairment loss is recognized in the event that facts and circumstances
indicate that the carrying amount of an asset may not be recoverable.
F-32
<PAGE>
UNITED ARTISTS THEATRE CIRCUIT, INC. CINEMAS AT
BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(Data relating to March 31, 1997 and 1996 are unaudited)
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
Interim Reporting--The interim financial statements included herein reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Such adjustments
consist solely of normal recurring accruals. Results for interim periods are not
necessarily indicative of results for a full year.
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Land............................................................. $1,520,650 $1,520,650
Buildings and improvements....................................... 1,584,363 1,584,363
Leasehold improvements........................................... 1,922,135 1,928,550
Office furniture and equipment................................... 874,058 897,702
------------ ----------
5,901,206 5,931,265
Less: Accumulated depreciation and amortization.................. 1,054,392 1,103,472
------------ ----------
$ 4,846,814 $4,827,793
=========== ==========
</TABLE>
NOTE 3--COMMITMENTS AND CONTINGENCIES:
Theater Leases--Certain of the UA Theaters are operated under lease
arrangements. The following is a schedule of future minimum rental payments
required for all non-cancellable operating leases (for theater facilities) that
have initial or remaining lease terms in excess of one year at December 31,
1996:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------
<S> <C>
1997................................................... $ 121,293
1998................................................... 121,293
1999................................................... 121,293
2000................................................... 121,293
2001................................................... 122,439
2002 and thereafter.................................... 961,689
-----------
$1,569,300
==========
</TABLE>
Rent expense for theater operating leases in 1995 and 1996 was
approximately $108,000 and $151,000, respectively.
NOTE 4--IMPAIRMENT OF LONG-LIVED ASSETS:
In the third quarter of 1996, UA recorded a $224,908 charge for the
difference between the fair value and the carrying value of the New City theater
location. The fair value was determined based on an offer received by UA to sell
such location for approximately $1,300,000, reduced further for estimated sales
costs.
NOTE 5--RELATED PARTY TRANSACTIONS:
Operating Expenses, Management Fees and Interest Expense--The UA Theaters'
operations through the date of sale were significantly controlled by UA. In that
regard, the cash deposited to the UA Theaters' operating
F-33
<PAGE>
UNITED ARTISTS THEATRE CIRCUIT, INC. CINEMAS AT
BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(Data relating to March 31, 1997 and 1996 are unaudited)
- --------------------------------------------------------------------------------
NOTE 5--RELATED PARTY TRANSACTIONS:--(CONTINUED)
accounts was transferred to UA which used the funds to pay operating expenses,
along with the funds from other UA affiliated theaters, on a company-wide basis
using an integrated system.
Interest expense represents an allocation of interest costs incurred by UA
and is charged to the UA Theaters based on each theater's respective net assets.
NOTE 6--SUBSEQUENT EVENTS (UNAUDITED):
In July, 1997, UA entered into an agreement to sell substantially all of
the assets, including leasehold interests, equipment and various operating
contracts, of the UA Theaters to Clearview Cinema Group, Inc. for $8,650,000.
F-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the Nelson Ferman Theaters at
Parsippany and Roxbury (the 'NF Theaters'), as of September 30, 1997 and the
related combined statements of income and changes in retained earnings and cash
flows for the nine months ended September 30, 1997 and the year ended December
31, 1996. These combined financial statements are the responsibility of the
management of Nelson Ferman, Inc. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financials are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the NF Theaters at
September 30, 1997, and the results of their operations and their cash flows for
of the nine months ended September 30, 1997 and the year ended December 31,
1996, in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
October 22, 1997
F-35
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................................ $ 37,017
Other current assets................................................................ 84,415
----------
Total current assets............................................................. $ 121,432
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION................................. 3,828,748
OTHER ASSETS:
Due from affiliate.................................................................. 125,488
Other assets........................................................................ 36,403 161,891
---------- ----------
$4,112,071
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................................................ $ 302,917
Current portion of deferred income.................................................. 100,000
Accounts payable and accrued expenses............................................... 723,674
----------
Total current liabilities........................................................ $1,126,591
LONG-TERM LIABILITIES:
Long-term debt, less current maturities............................................. 1,633,333
Deferred income, net of current portion............................................. 625,000
----------
2,258,333
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock........................................................................ 504,000
Additional paid-in capital.......................................................... 27,000
Retained earnings................................................................... 196,147
----------
Total Stockholders' Equity....................................................... 727,147
----------
$4,112,071
==========
</TABLE>
See accompanying notes to combined financial statements.
F-36
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF INCOME
AND CHANGES IN RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
THEATER REVENUES:
Box office........................................................................ $4,812,495 $ 4,015,770
Concession........................................................................ 1,129,729 989,484
Other............................................................................. 39,167 35,979
---------- -----------
5,981,391 5,041,233
---------- -----------
OPERATING EXPENSES:
Film rental and booking fees...................................................... 2,373,986 1,925,740
Theater operating expenses........................................................ 1,848,016 1,354,756
General and administrative expenses............................................... 1,103,057 819,520
Depreciation and amortization..................................................... 403,075 298,980
---------- -----------
5,728,134 4,398,996
---------- -----------
OPERATING INCOME.................................................................... 253,257 642,237
INTEREST EXPENSE.................................................................... 250,156 188,963
---------- -----------
NET INCOME.......................................................................... 3,101 453,274
RETAINED EARNINGS (DEFICIT), BEGINNING OF PERIOD.................................... (260,228) (257,127)
---------- -----------
RETAINED EARNINGS (DEFICIT), END OF PERIOD.......................................... $ (257,127) $ 196,147
========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................................ $ 3,101 $ 453,274
Adjustments to reconcile net income (loss) to net cash flows from operating
activities:
Depreciation and amortization.................................................. 403,075 298,980
Recognition of deferred revenue................................................ (100,000) (75,000)
Amortization of accrued rent................................................... 25,146 18,860
Changes in operating assets and liabilities:
Other current assets......................................................... (28,286) 32,466
Other assets................................................................. 10,000 12,000
Accounts payable and accrued expenses........................................ 19,681 (157,215)
---------- ---------
Net cash flows from operating activities.................................. 332,717 583,365
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................................ (114,423) --
Advances to parent and affiliate.................................................. (89,878) (494,209)
---------- ---------
Net cash flows from investing activities.................................. (204,301) (494,209)
---------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on long-term debt........................................................ (156,604) (151,250)
---------- ---------
NET CHANGE IN CASH.................................................................. (28,188) (62,094)
CASH, BEGINNING OF PERIOD........................................................... 127,299 99,111
---------- ---------
CASH, END OF PERIOD................................................................. $ 99,111 $ 37,017
========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................................................... $ 250,156 $ 188,963
========== =========
Income taxes paid................................................................. $ -- $ --
========== =========
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of two theater affiliates of Nelson Ferman, Inc. ('Nelson Ferman') at
Parsippany and Roxbury (the 'NF Theaters'). All significant inter-location
balances and transactions have been eliminated in combination.
Nature of the Business--The NF Theaters operated multi-screen theaters in
Morris County, New Jersey.
Revenues and Film Rental Costs--The NF Theaters recognize revenues from box
office admissions at the time of sale. Concession sales are recognized as a
commission from a third party, when earned. Film rental costs are based on a
film's box office receipts and length of a film's run.
Seasonality--The NF Theaters' business is seasonal with a large portion of
their revenues and profits being derived during the summer months (June through
August) and the holiday season (November and December).
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost. Theater
equipment and office furniture and equipment are depreciated using straight line
and accelerated methods over the estimated useful lives of the assets of 7
years. Leasehold improvements are amortized using the straight-line method over
the term of the related lease or the estimated useful life of the asset,
whichever is less.
Rent Expense--The NF Theaters included in the combined financial statements
are operated under leases that contain predetermined increases in the rentals
payable during the term of such leases. For these leases, the aggregate rental
expense over the lease terms is recognized on a straight-line basis over the
lease terms. The differences between the expense charged to operations and the
amount payable under that lease are recorded annually as deferred rent expense,
which will ultimately reverse over the lease terms.
Additional rent is paid for common area maintenance and may also be charged
based on a percentage of net revenue in excess of a predetermined amount.
Financial Instruments--Financial instruments include cash and accounts
payable and accrued expenses. The amounts reported for financial instruments are
considered to be reasonable approximations of their fair values, based on market
information of financial instruments with similar characteristics available to
management.
Income taxes--The NF Theaters have elected under Section 1361 of the
Internal Revenue Code and under New Jersey corporate statutes to be taxed as
small business corporations. Under these provisions, all earnings and losses of
the NF Theaters are reported on the tax returns of the shareholders.
Accordingly, no provision has been made for federal income taxes and the NF
Theaters are subject to state taxes at a nominal rate.
Impairment of Long-Lived Assets--In 1996, Nelson Ferman adopted Statement
of Financial Accounting Standards ('SFAS') No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.'
The effect of the adoption of that statement did not have a material effect on
the financial statements.
F-39
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements................................ $4,063,081
Furniture and equipment............................... 1,563,084
----------
5,626,165
Less: Accumulated depreciation and amortization....... 1,797,417
----------
$3,828,748
==========
</TABLE>
NOTE 3--LONG-TERM DEBT:
Long-Term Debt--A summary of long-term debt at September 30, 1997 follows:
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION RATE
- --------------------------------------------------------------------------------------- ---------
<S> <C> <C>
Notes payable, due in monthly installments of $14,583 plus interest, through November
2000 with the remaining balance of $1,239,583 due in Prime
January 2001......................................................................... plus .25% $1,808,333
Other.................................................................................. Various 127,917
----------
1,936,250
Less: Current maturities............................................................... 302,917
----------
$1,633,333
==========
</TABLE>
The above debt is secured by the leasehold interest and other operating
assets of the NF Theaters and is guaranteed by all affiliates of Nelson Ferman,
including its stockholders.
Long-term debt matures as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
- ------------------------
<S> <C>
1998.................................................................. $ 302,917
1999.................................................................. 175,000
2000.................................................................. 175,000
2001.................................................................. 1,283,333
----------
$1,936,250
==========
</TABLE>
NOTE 4--DEFERRED INCOME:
The NF Theaters entered into an agreement with the concession vendor of the
Parsippany location in November, 1994, wherein the concessionaire paid
$1,000,000 as advance commissions. The commissions are being recognized as
income ratably over the term of the concession agreement, which expires in
November 2004. At September 30, 1997, the unamortized deferred commission
amounted to approximately $725,000.
The agreement stipulates that if the NF Theater at Parsippany cancels the
agreement prior to its expiration, the remaining unamortized balance must be
refunded to the concessionaire.
F-40
<PAGE>
NELSON FERMAN THEATERS AT PARSIPPANY AND ROXBURY
COMBINED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
NOTE 5--COMMON STOCK:
Common stock consists of the following at September 30, 1997:
<TABLE>
<S> <C>
Parsippany:
No par value, authorized and issued 100 shares........................ $500,000
Roxbury:
No par value, authorized and issued 100 shares........................ 4,000
--------
$504,000
========
</TABLE>
NOTE 6--COMMITMENTS AND CONTINGENCIES:
Theater Leases--The following is a schedule of future minimum rental
payments required for all non-cancelable operating leases (for theater
facilities) that have initial or remaining lease terms in excess of one year at
September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- ------------------------
<S> <C>
1997.................................................................. $ 353,805
1998.................................................................. 353,805
1999.................................................................. 361,523
2000.................................................................. 361,523
2001.................................................................. 375,478
2002 and thereafter................................................... 5,954,209
----------
$7,760,343
==========
</TABLE>
Rent expense for theater operating leases for the year ended December 30,
1996 and the nine months ended September 30, 1997 was approximately $570,000 and
$384,000, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS:
Operating Expenses, Management Fees and Interest Expense--The NF Theaters'
operations through the date of sale were significantly controlled by Nelson
Ferman. In that regard, the cash deposited to the NF Theaters' operating
accounts was transferred to Nelson Ferman, which used the funds to pay operating
expenses, along with the funds from other Nelson Ferman affiliated theaters, on
a company-wide basis using an integrated system.
Interest expense represents an allocation of interest costs incurred by
Nelson Ferman and is charged to the NF Theaters based on each theater's
respective net assets.
NOTE 8--SUBSEQUENT EVENT (UNAUDITED):
In November 1997, Nelson Ferman sold substantially all of the assets,
including leasehold interests, equipment and various operating contracts of the
NF Theaters at Parsippany and Roxbury to Clearview Cinema Group, Inc.
('Clearview') for $18.5 million; $11.6 million in cash, 10 1/2% subordinated
notes aggregating $6.0 million, and common stock of Clearview valued at
$500,000, with an additional $400,000 held in escrow until the satisfaction of
certain obligations of Nelson Ferman.
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the CJM Theaters at Kin-Mall,
Middlebrook, Cedar Grove and Bellevue (the 'CJM Theaters') as of September 30,
1997 and the related combined statements of income and retained earnings and
cash flows for the nine months ended September 30, 1997 and the year ended
December 31, 1996. These combined financial statements are the responsibility of
the management of CJM Entertainment, Inc. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the CJM Theaters at
September 30, 1997, and the results of their operations and their cash flows for
the nine months ended September 30, 1997 and the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
December 4, 1997
F-42
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................................ $1,030,467
Inventories......................................................................... 15,657
Other current assets................................................................ 31,668
----------
Total current assets............................................................. $1,077,792
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION............................... 2,479,993
OTHER ASSETS.......................................................................... 30,280
----------
$3,588,065
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE AND ACCRUED EXPENSES................................................. $ 377,445
AMOUNTS DUE TO OFFICER................................................................ 2,313,489
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock........................................................................ $ 19,000
Retained earnings................................................................... 878,131
----------
Total stockholders' equity....................................................... 897,131
----------
$3,588,065
==========
</TABLE>
See accompanying notes to combined financial statements.
F-43
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
THEATER REVENUES:
Box office........................................................................ $3,774,264 $ 3,532,934
Concession........................................................................ 1,211,383 1,015,434
Other............................................................................. 10,008 12,300
---------- -----------
4,995,655 4,560,668
---------- -----------
OPERATING EXPENSES:
Film rental and booking fees...................................................... 1,703,429 1,608,263
Cost of concessions............................................................... 248,766 194,289
Theater operating expenses........................................................ 1,823,464 1,695,748
General and administrative expenses............................................... 181,116 114,834
Depreciation and amortization..................................................... 314,976 191,781
---------- -----------
4,271,751 3,804,915
---------- -----------
OPERATING INCOME.................................................................... 723,904 755,753
INTEREST EXPENSE.................................................................... 182,296 151,409
---------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES............................................ 541,608 604,344
PROVISION FOR INCOME TAXES.......................................................... 18,761 25,500
---------- -----------
NET INCOME.......................................................................... 522,847 578,844
RETAINED EARNINGS, BEGINNING OF PERIOD.............................................. 326,579 643,381
DISTRIBUTIONS TO STOCKHOLDERS....................................................... (206,045) (344,094)
---------- -----------
RETAINED EARNINGS, END OF PERIOD.................................................... $ 643,381 $ 878,131
========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 522,847 $ 578,844
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization.................................................. 314,976 191,781
Changes in operating assets and liabilities:
Inventories.................................................................. 40 (2,795)
Other current assets......................................................... 2,060 (10,553)
Other assets................................................................. (29,668) 1,501
Accounts payable and accrued expenses........................................ 28,296 (148,958)
---------- -----------
Net cash flows from operating activities.................................. 838,551 609,820
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................................................ (398,904) (293,327)
---------- -----------
Net cash flows from investing activities.................................. (398,904) (293,327)
---------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Distributions to stockholders..................................................... (206,045) (344,094)
Net advances from officer......................................................... 58,418 30,666
Proceeds from issuance of common stock............................................ 2,000
---------- -----------
Net cash flows from financing activities.................................. (145,627) (313,428)
---------- -----------
NET CHANGE IN CASH.................................................................. 294,020 3,065
CASH, BEGINNING OF PERIOD........................................................... 733,382 1,027,402
---------- -----------
CASH, END OF PERIOD................................................................. $1,027,402 $ 1,030,467
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................................................... $ 182,296 $ 151,409
========== ===========
Income taxes paid................................................................. $ 8,500 $ 18,000
========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-45
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of certain theater affiliates of CJM Entertainment, Inc. ('CJM') at
Kin-Mall, Middlebrook, Cedar Grove and Bellevue (the 'CJM Theaters'). All
significant inter-location balances and transactions have been eliminated in
combination.
Nature of the Business--The CJM Theaters operated multi-screen theaters
located in Morris, Essex and Monmouth Counties, New Jersey.
Revenues and Film Rental Costs--The CJM Theaters recognize revenues from
box office admissions and concession sales at the time of sale. Film rental
costs are based on a film's box office receipts and length of a film's run.
Seasonality--The CJM Theaters' business is seasonal with a large portion of
their revenues and profits being derived during the summer months (June through
August) and the holiday season (November and December).
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost. Theater
equipment and office furniture and equipment are depreciated using straight line
and accelerated methods over the estimated useful lives of the assets of 7
years. Leasehold improvements are amortized using the straight-line method over
the term of the related lease or the estimated useful life of the asset, which
ever is less.
Rent Expense--The CJM Theaters included in the combined financial
statements are operated under leases that contain predetermined increases in the
rentals payable during the term of such leases. For these leases, the aggregate
rental expense over the lease terms is recognized on a straight-line basis over
the lease terms. The differences between the expense charged to operations and
the amount payable under that lease are recorded annually as deferred rent
expense, which will ultimately reverse over the lease term.
Additional rent is paid for common area maintenance and may also be charged
based on a percentage of net revenue in excess of a predetermined amount.
Financial Instruments--Financial instruments include cash and accounts
payable and accrued expenses The amounts reported for financial instruments are
considered to be reasonable approximations of their fair values, based on market
information of financial instruments with similar characteristics available to
management.
Income Taxes--The CJM Theaters have elected under Section 1361 of the
Internal Revenue Code and under New Jersey corporate statutes to be taxed as
small business corporations. Under these provisions, all earnings and losses of
the CJM Theaters are reported on the tax returns of the shareholders.
Accordingly, no provision has been made for federal income taxes and the CJM
Theaters are subject to state taxes at a nominal rate.
Impairment of Long-Lived Assets--In 1996, the CJM Theaters adopted
Statement of Financial Accounting Standards ('SFAS') No. 121, 'Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of'. The effect of adoption of the statement did not have a material effect on
the financial statements.
F-46
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE--(CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements....................................... $2,323,240
Furniture and other equipment................................ 1,480,472
----------
3,803,712
Less: Accumulated depreciation and amortization.............. 1,323,719
----------
$2,479,993
==========
</TABLE>
NOTE 3--COMMON STOCK:
Common stock consist of the following at September 30, 1997:
<TABLE>
<S> <C>
Kin-Mall:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. $ 2,000
Middlebrook:
No par value, authorized 2500 shares, issued and outstanding 100
shares.............................................................. 10,000
Cedar Grove:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. 5,000
Bellevue:
No par value, authorized 2500 shares, issued and outstanding 200
shares.............................................................. 2,000
-------
$19,000
=======
</TABLE>
NOTE 4--COMMITMENTS AND CONTINGENCIES:
Theater Leases--The following is a schedule of future minimum rental
payments required for all non-cancellable operating leases that have initial or
remaining lease terms in excess of one year at September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- -------------------------
<S> <C>
1998.................................................................. $ 712,112
1999.................................................................. 668,135
2000.................................................................. 448,250
2001.................................................................. 470,325
2002.................................................................. 430,326
2003 and thereafter................................................... 2,249,744
----------
$4,978,892
==========
</TABLE>
Rent expense for theater operating leases for the nine months ended
September 30, 1997 and the year ended December 31, 1996, was approximately
$608,000 and $750,000, respectively.
NOTE 5--RELATED PARTY TRANSACTIONS:
Due to Officer--The amount due to officer represent advances made to each
of the respective CJM Theaters' since their inception. No specified payment
terms have been determined.
F-47
<PAGE>
CJM THEATERS AT KIN-MALL, MIDDLEBROOK,
CEDAR GROVE AND BELLEVUE--(CONTINUED)
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6--SUBSEQUENT EVENT (UNAUDITED):
In December 1997, CJM sold substantially all of the assets, including
leasehold interests, equipment and various operating contracts of the CJM
Theaters at Kin-Mall, Middlebrook, Cedar Grove and Bellevue to Clearview Cinema
Group, Inc. ('Clearview').
CJM received 62,500 shares of common stock of Clearview in exchange for
certain furniture, fixtures, equipment, and personal property related to the
operation of its Bellevue theater, a four-screen theater located in Upper
Montclair, New Jersey and a leasehold interest in the real property on which
that theater is located.
Pursuant to three separate asset purchase agreements, CJM sold the
respective leasehold interests and furniture, fixtures, equipment and personal
property related to the operation of its eight-screen Kin-Mall theater located
in Kinnelon, New Jersey; its five-screen theater located in Cedar Grove, New
Jersey; and its ten-screen Middlebrook theater located in Ocean Township, New
Jersey. The aggregate purchase price of these three acquisitions totaled $8.75
million; $7.25 million in cash and the right to receive 1,500 shares of
Clearview's Class B Non-Voting Cumulative Redeemable Preferred Stock (the 'Class
B Preferred Stock'). CJM will receive cash of $1.5 million (plus interest
accrued at 10 1/2%) in lieu of the Class B Preferred Stock if Clearview
consummates a specified debt offering by certain prescribed dates. In addition,
the right to receive 750 of the 1,500 shares of Clearview's Class B Preferred
Stock will also terminate if, prior to December 12, 1999, any other party
receives all material governmental approvals for the construction of a new
theater complex in a specified location.
F-48
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
made in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any security other than the Shares offered
hereby nor does it constitute an offer to sell, or a solicitation of an offer to
buy, any of the Shares to any person in any jurisdiction in which it would be
unlawful to make such an offer or solicitation to such person. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has not been any change in the
facts set forth in this Prospectus or in the affairs of the Company since the
date hereof.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 8
Use of Proceeds................................ 13
Price Range of Common Stock.................... 13
Dividend Policy................................ 13
Capitalization................................. 14
Unaudited Pro Forma Combined Financial
Information.................................. 15
Selected Financial Data........................ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 28
Business....................................... 35
Management..................................... 48
Certain Transactions........................... 52
Principal Stockholders......................... 55
Selling Stockholder............................ 56
Plan of Distribution........................... 56
Description of Capital Stock................... 56
Description of New Credit Facility............. 61
Description of Notes........................... 62
Experts........................................ 81
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
---------------------
SHARES OF
COMMON STOCK
------------------
PROSPECTUS
------------------
================================================================================
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is hereby made to Section 145 of the General Corporation Law of
the State of Delaware (the 'DCL'), which provides that a corporation will have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a 'proceeding'), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, with respect to the payment of certain
amounts under certain circumstances.
Article V ('Article V') of the Amended and Restated By-laws of Clearview
Cinema Group, Inc. (the 'Company') provides that the Company will indemnify and
hold harmless, to the fullest extent permitted by applicable law, any person who
was or is made or is threatened to be made a party or is otherwise involved in
any proceeding by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Company or is or
was a director or officer of the Company and is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust, enterprise or non-profit entity,
including service with respect to employee benefit plans.
Any indemnification pursuant to Article V (unless ordered by a court) will
be made by the Company only upon a determination that indemnification is proper
in the circumstances because the director or officer, as the case may be, has
met the applicable standard of conduct set forth in Article V. Such
determination will be made (a) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(b) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders. to
the extent, however, that a director or officer of the Company has been
successful on the merits or otherwise in defense of a proceeding, or in defense
of any claim, issue or matter therein, he or she will be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith, without the necessity of authorization in the
specific case. Except for proceedings to enforce rights to indemnification
(which are governed by Section 5.5 of Article V), the Company is not obligated
to indemnify any director or officer in connection with a proceeding (or part
thereof) initiated by that person unless that proceeding was authorized or
consented to by the Board of Directors of the Company.
Expenses (including attorneys' fees) incurred by a director or officer in
defending or investigating any threatened or pending civil, criminal,
administrative or investigative action, suit or proceeding will be paid by the
Company in advance of the final disposition of such Action, suit or proceeding
upon receipt of an undertaking by or on behalf of that director or officer to
repay those amounts if it ultimately is determined that he or she is not
entitled to be indemnified by the Company as authorized in Article V, if such an
undertaking is required at the time by the DCL. In addition, the board of
Directors of the Company, without approval from the stockholders, may borrow
money on behalf of the Company form time to time to discharge the Company's
obligations with respect to indemnification, the advancement and reimbursement
of expenses, and the purchase and maintenance of insurance on behalf of any
person, whether or not the Company would have the power or the obligation to
indemnify him or her against such liability under the provisions of Article V.
Article V provides that the rights to indemnification and advancement of
expenses conferred by Article V are not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may otherwise be
entitled. Article V further provides that the Board of Directors of the Company
is authorized to provide rights to indemnification and the advancement of
expenses to employees and agents of the Company similar to those conferred in
Article V on directors and officers of the Company. Nothing in Article V
precludes the indemnification of any person whom the Company has the power or
obligation to indemnify under the provisions of the DCL, including without
limitation, the provisions of Section 145 thereof, or otherwise.
Article V states that any repeal or modification of the Article will not
adversely affect any right or protection of a director of the Company existing
at the time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification. Further, the rights conferred by
Article V, unless otherwise
II-1
<PAGE>
provided when authorized or ratified, continue as to any person who has ceased
to be a director of the Company and inure to the benefit of the heirs, executors
and administrators of such person.
Article IX ('Article IX') of the Amended and Restated Certificate of
Incorporation of the Company provides that the personal liability of a director
of the Company is eliminated to the fullest extent permitted by Section
102(b)(7) of the DCL, as the same may be amended and supplemented. Article IX
states that, without limiting the generality of the foregoing, no director will
be personally liable to the Company or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions no in good faith or which involve misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DCL, (relating to
unlawful distributions and redemption's of shares), or (iv) for any transaction
from which the director derived an improper personal benefit.
The rights conferred by Article IX are presumed to have been relied upon by
directors of the Company in serving or continuing to serve the Company and are
enforceable as contract rights. Those rights are not exclusive of any other
rights to which the directors of the Company may otherwise be entitled. The
Company may enter into contracts to provide the directors of the Company with
rights to indemnification to the maximum extent permitted by the DCL. The
Company may create trust funds, grant security interests in the assets of the
Company, obtain letters of credit or use other means to ensure payment of such
amounts as may be necessary to perform the obligations provided for in Article
IX, the Amended and Restated By-laws of the Company or any such contract.
The rights conferred by Article IX continue as to any person who has ceased
to be a director of the Company and inure to the benefit of the heirs, executors
and administrators of such person. Any repeal or modification of Article IX by
the stockholders of the Company will not adversely affect any right or
protection of a director of the Company existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such repeal or
modification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees payable to the Securities and
Exchange Commission and other estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................................... $ [ ]
Listing Fee............................................................................ [ ]
Printing and Engraving Expenses........................................................ [ ]
Accounting Fees and Expenses........................................................... [ ]
Legal Fees and Expenses................................................................ [ ]
Blue Sky Qualification Fees and Expenses............................................... [ ]
Transfer Agent Fees and Expenses....................................................... [ ]
Miscellaneous.......................................................................... [ ]
------------
Total............................................................................. $ [ ]
=============
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Pursuant to an Investment and Stockholders Agreement dated December 21,
1994, the Company sold 250 shares of its common stock, $.01 par value (the
'Common Stock'), to CMNY Capital II, L.P. ('CMNY') for an aggregate purchase
price of $500,000 in cash. Concurrently, the Company, pursuant to a Contribution
and Exchange Agreement dated December 21, 1994, issued to A. Dale Mayo ('Mayo')
and Brett E. marks ('Marks') 550 and 200 shares of Common Stock, respectively,
in exchange for (i) all of the outstanding shares of capital stock of Clearview
Theater Group, Inc., CCC Madison Triple Cinema Corp., CCC Chester Twin Cinema
Corporation and CCC Manasquan Cinema Corporation (collectively, the
'Subsidiaries') and (ii) promissory notes of certain Subsidiaries with an
aggregate principal amount of $250,000.
II-2
<PAGE>
On June 20, 1995, Michael C. Rush ('Rush') purchased (i) 20 shares of
Common Stock, pursuant to a Stock Purchase Agreement, for an aggregate purchase
price of $40,000 in cash from Mayo and (ii) a convertible promissory note in the
principal amount of $80,000 from the Company. The terms of the convertible
promissory note provided Rush with the right to convert that note at any time on
or prior to June 20, 1996 into 20 shares of Common Stock, and Rush exercised
that right on May 15, 1996.
On August 31, 1995, the Company issued three 8% Subordinated Promissory
Notes with the principal amounts of $300,000, $50,000 and $50,000 (each a
'Subordinated Note') to CMNY, CMCO, Inc. ('CMCO') and Robert G. Davidoff
('Davidoff'), respectively. The principal of these Subordinated Notes is payable
in one installment on August 31, 1997. With each Subordinated Note sold, the
Company issued one Common Stock Purchase Warrant A ('Warrant A') and one Common
Stock Purchase Warrant B ('Warrant B'; Warrants A and Warrants B being
collectively referred to herein as the 'Warrants'). Each of these Warrants
entitles its holder for a five-year period to purchase a specified number of
shares of Common Stock at an exercise price of $2,000 per share, subject to
adjustment as set forth in each Warrant. Each Warrant is exercisable from
September 1, 1996 through August 31, 2001, and each Warrant B is exercisable
from August 31, 1995 through August 31, 2000.
On October 11, 1995, the Company issued two additional Subordinated Notes
with a principal amount of $50,000 each to Davidoff and CMCO. The principal of
these Subordinated Notes is payable in one installment on October 11, 1997. With
each Subordinated Note sold, the Company issued one Warrant A and one Warrant B.
Each of these Warrants entitles its holder for a five-year period to purchase a
specified number of shares of Common Stock at an exercise price of $2,000 per
share, subject to adjustment as set forth in each Warrant. Each of these
Warrants is the same as the Warrants previously issued with an exercise price of
$2,000 per share, except that these Warrant A's are exercisable from October 11,
1996 through October 11, 2001, and these Warrant B's are exercisable from
October 11, 1995 through October 11, 2000.
On December 13, 1996, the Company issued two more Subordinated Notes with a
principal amount of $300,000 each to Davidoff and CMCO. The principal of these
Subordinated Notes is payable in one installment on December 13, 1998. With each
Subordinated Note sold, the Company issued one Warrant A and one Warrant B. Each
of these Warrants entitles its holder for a five-year period to purchase a
specified number of shares of Common Stock at an exercise price of $4,000 per
share, subject to adjustment as set forth in each Warrant. However, each Warrant
A is cancelable and non-exercisable if the Company repays the corresponding
Subordinated Note in full prior to December 13, 1997. These Warrant A's are
exercisable from December 13, 1997 through December 13, 2002, and these Warrant
B's are exercisable from December 13, 1996 through December 13, 2001.
The holders of the Subordinated Notes received Warrants exercisable for the
number of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
AUGUST 31, 1995 OCTOBER 11, 1995 DECEMBER 13, 1996
SUBORDINATED SUBORDINATED SUBORDINATED
NOTES NOTES NOTES
--------------- ---------------- -----------------
<S> <C> <C> <C>
CMNY.............................................. 75 -- --
CMCO.............................................. 12.5 12.5 37.5
Davidoff.......................................... 12.5 12.5 37.5
</TABLE>
The Company acquired the assets of Emerson Cinema, Inc. in exchange for 347
shares of Common Stock pursuant to the Agreement and Plan of Reorganization
dated May 29, 1996 ('Plan of Reorganization').
In connection with an Asset Purchase Agreement dated December 31, 1996, the
Company, as purchaser, issued on that same date a Senior Subordinated Note (the
'Senior Note') to the seller, Magic Cinemas, L.L.C. in the principal amount of
$600,000. The principal of the Senior Note is payable in full on the earlier of
(i) December 13, 2001 and (ii) the date of the closing of an initial public
offering of the Company's debt or equity securities.
Pursuant to a Subscription Agreement dated July 31, 1996, Rush purchased
another 5 shares of Common Stock at $4,000 per share for an aggregate purchase
price of $20,000. Also on that date, Paul and Cindy Kay
II-3
<PAGE>
purchased 16 shares of Common Stock from the Company at $3,124 per share for an
aggregate purchase price of $50,000.
The Company sold a total of 779 shares of its Class A Preferred Stock to
MidMark Capital, L.P. ('MidMark'). Pursuant to a Preferred Stock and Warrant
Purchase Agreement dated May 29, 1996 and for a purchase price of $1,750,000,
MidMark purchased 684 shares of Class A Preferred Stock. Pursuant to a Preferred
Stock and Warrant Purchase Agreement dated July 2, 1996 and for a purchase of
$750,000, MidMark purchased another 95 shares of Class A Preferred Stock.
In connection with the Company's Common Stock offering, the Common Stock
split 600 to 1. Since the Company's Common Stock Offering, the Company has
issued 196,002 unregistered shares of its Common Stock, and 1,350 shares of its
Class B Preferred Stock, of which 750 shares of Class B Preferred Stock remain
outstanding. 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 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').
In December 1997, the Company issued 600 shares of Class B Preferred Stock
to Mr. Davidoff and CMCO in exchange for the 8% subordinated promissory notes.
The Company repurchased such shares in June 1998 with the proceeds of the Notes
Offering.
During the quarter ended March 31, 1998, the Company issued a total of
14,782 shares of its Common Stock and 750 shares of its Class B Preferred Stock.
On February 13, 1998, the Company issued 14,782 shares of its Common Stock,
which represented the number of shares with an aggregate average market value of
$200,000 for the ten trading days prior to February 13, 1998, to Clairidge
Cinemas, Inc. ('Clairidge') as a portion of the purchase price under an Asset
Purchase Agreement dated as of February 13, 1998, by and among the Company, its
wholly-owned subsidiary CCC Clairidge Cinema Corp., and Clairidge, pursuant to
which the Company's subsidiary acquired a leasehold interest and certain
furniture, fixtures, equipment and personal property related to the operation of
six-screen theater in Montclair, New Jersey.
On March 31, 1998, the Company issued 540 shares of its Class B Preferred
Stock to Middlebrook Galleria Cinemas, Inc. ('Middlebrook'), as a portion of the
purchase price under an Asset Purchase Agreement dated November 14, 1997, by and
among the Company, its wholly-owned subsidiary CCC Middlebrook Cinema Corp., and
Middlebrook and Mr. Sayegh, as amended by an Amendment No. 1 dated as of
December 12, 1997 (the 'Middlebrook Amendment No. 1'); pursuant to which the
Company's subsidiary acquired a leasehold interest and certain furniture,
fixtures, equipment and personal property related to the operation of a
ten-screen theater in Middlebrook, New Jersey. Under the Middlebrook Amendment
No. 1, the Company and Middlebrook agreed to issue the 540 shares of the
Company's Class B Preferred Stock to replace a promissory note made by the
Company in favor of Middlebrook in the amount of $540,000.
On March 31, 1998, the Company issued 210 shares of its Class B Preferred
Stock to C.J.M. Enterprises, Inc. ('CJM'), as a portion of the purchase price
under an Asset Purchase Agreement dated November 14, 1997, by and among the
Company, its wholly-owned subsidiary CCC Cedar Grove Cinema Corp., and CJM and
Mr. Sayegh, as amended by an Amendment No. 1 dated December 12, 1997 (the 'Cedar
Grove Amendment No. 1'); pursuant to which the Company's subsidiary acquired a
leasehold interest and certain furniture, fixtures,
II-4
<PAGE>
equipment and personal property related to the operation of a five-screen
theater in Cedar Grove, New Jersey. Under the Cedar Grove Amendment No. 1, the
Company and CJM agreed to issue the 210 shares of the Company's Class B
Preferred Stock to replace a promissory note made by the Company in favor of CJM
in the amount of $210,000.
On April 30, 1998, the Company issued 76,923 shares of its Common Stock to
John Nelson, Seth Ferman, Pamela Ferman and Martin Drescher in connection with
an Agreement and Plan of Merger dated April 30, 1998, by and between the
Company's subsidiary, CCC Mansfield Cinema Corp., and Warren County Cinemas,
Inc., a Delaware Corporation ('Warren Cinemas'), pursuant to which Warren
Cinemas was merged into the Company's subsidiary.
In connection with the above-described sales of securities the Company
relied upon the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933, as amended (the 'Securities Act'), as construed by the
United States Supreme Court in Securities and Exchange Commission v. Ralston
Purina Co., (1953).
Each of the transactions was the result of arm's length negotiations with
purchasers who were knowledgeable about the Company due to their relationships
with the Company or otherwise had access to the same kinds of information
required by the Act to be disclosed in the form of a registration statement. In
addition, each purchaser possessed the experience and skills necessary to
evaluate the risks involved with the purchase of securities of the Company.
At the time of their purchases, Mayo and Marks were both directors and
officers and Paul Kay was an officer of the Company. MidMark and CMNY are small
business investment companies licensed by the Small Business Administration
under the Small Business Investment Act of 1958, as amended. In addition,
Davidoff, a managing director of CMCO and a general partner of CMNY, was a
director of the Company at the time CMCO purchased securities of the Company.
Emerson Cinema, Inc. and Magic Cinema, L.L.C. had been involved in the movie
exhibition industry for several years. A former chief executive officer of Home
Unity Savings Bank, a $900,000,000 asset savings bank and a former managing
director of Lehman Brothers, New York, Rush is a sophisticated investor with a
net income in excess of $200,000 in each year during the period 1993-1996.
ITEM 27. EXHIBITS.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
2.01 Agreement of Purchase and Sale by and among United Artists Theatre Exhibit 2.01 to Registration
Circuit, Inc., United Artists Properties I Corp., Mamaroneck Statement on Form SB-2 filed May 27, 1997
Playhouse Holding Corporation and CCC Bronxville Cinema Corp., CCC
Mamaroneck Cinema Corp., CCC Wayne Cinema Corp., CCC BC Realty
Corp., CCC Cinema 304 Corp., CCC Larchmont Cinema Corp. and the
Company, dated July 21, 1997
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
3.01 Amended and Restated Certificate of Incorporation of Clearview Exhibit 3.01 to Quarterly Report
Cinema Group, Inc. on Form 10-QSB for the Quarter
ended June 30, 1997
3.02 Amended and Restated By-laws of Clearview Cinema Group, Inc. Exhibit 3.02 to Quarterly Report
on Form 10-QSB for the Quarter
ended June 30, 1997
4.01 Specimen Common Stock Certificate Exhibit 4.01 to Registration
Statement on Form SB-2 filed May 27, 1997
4.02 Certificate of Designations, Preferences, Rights and Limitations of Exhibit 4.02 to Annual Report on
Class B Nonvoting Cumulative Redeemable Preferred Stock of Clearview Form 10-KSB for the year ended
Cinema Group, Inc. December 21, 1998
4.03 Certificate of Designation of Class C Convertible Preferred Stock of Exhibit 4.01 to Current Report on
Clearview Cinema Group, Inc., dated April 23, 1998 Form 8-K filed April 23, 1998
4.04 Indenture dated as of June 12, 1998 by and among Clearview Cinema Filed Herewith
Group, Inc., its subsidiaries as guarantors, and The Bank of New
York
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the Filed Herewith
securities being registered
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Exhibit 9.01 to Registration
Mayo as Voting Trustee, dated December 21, 1994 Statement on Form SB-2 filed May 27, 1997
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Exhibit 9.02 to Registration
Mayo as Voting Trustee, dated June 20, 1995 Statement on Form SB-2 filed May 27, 1997
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Exhibit 9.03 to Registration
Dale Mayo as Voting Trustee, dated May 29, 1996 Statement on Form SB-2 filed May 27, 1997
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Exhibit 9.04 to Registration
Mayo as Voting Trustee, dated July 31, 1996 Statement on Form SB-2 filed May 27, 1997
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Exhibit 9.05 to Registration
Mayo as Voting Trustee, dated August 30, 1996 Statement on Form SB-2 filed May 27, 1997
9.06 Voting Trust Agreement dated as of November 21, 1997 by and among Exhibit 9.01 to Current Report on
F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Dale Mayo, as Trustee Form 8-K filed November 21, 1997
9.07 Voting Trust Agreement dated as of December 12, 1997 by and among Exhibit 9.01 to Current Report on
The New Bellevue Theater Corp., Jesse Sayegh and A. Dale Mayo, as Form 8-K filed December 12, 1997
Trustee
9.08 Voting Trust Agreement dated as of February 13, 1998 by and between Filed Herewith
Clairidge Cinemas, Inc. and A. Dale Mayo, as Trustee
9.09 Voting Trust Agreement dated as of April 30, 1998 by and among John Filed Herewith
Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and A. Dale
Mayo, as Trustee
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
10.01 Employment Agreement by and between the Company and A. Dale Mayo, Exhibit 10.08 to Registration
dated May 29, 1996 Statement on Form SB-2 filed May 27, 1997
10.02 Collective Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.36 to Registration
Movies at Port Washington, Inc. and the Company, CCC Grand Avenue Statement on Form SB-2 filed May 27, 1997
Cinema Corp., CCC Port Washington Cinema Corp., dated September 8,
1995
10.03 Management Agreement by and among Cinema Herricks, Inc., the Exhibit 10.37 to Registration
Company, and CCC Herricks Cinema Corp. dated September 8, 1995 Statement on Form SB-2 filed May 27, 1997
10.04 Letter modifying Management Agreement and Collective Agreement dated Exhibit 10.38 to Registration
November 17, 1995 Statement on Form SB-2 filed May 27, 1997
10.05 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.39 to Registration
Movies at Port Washington, Inc., the Company, CCC Grand Avenue Statement on Form SB-2 filed May 27, 1997
Cinema Corp. and CCC Port Washington Cinema Corp., dated
September 8, 1995
10.06 Escrow Agreement by and among Cinema Herricks, Inc., the Company and Exhibit 10.40 to Registration
CCC Cinema Herricks Corp., dated September 8, 1995 Statement on Form SB-2 filed May 27, 1997
10.07 Non-Competition Agreement, by and among the Company, CCC Emerson Exhibit 10.46 to Registration
Cinema, Inc., and John Nelson, Pamela Ferman and Seth Ferman, dated Statement on Form SB-2 filed May 27, 1997
May 29, 1996
10.08 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Exhibit 10.47 to Registration
Cinema Corp., CCC Bergenfield Cinema Corp., CCC Closter Cinema Corp. Statement on Form SB-2 filed May 27, 1997
and the Company, dated December 13, 1996
10.09 Assignment of Real Estate Lease, by and between Allwood Clifton Exhibit 10.48 to Registration
Cinema, Inc. and CCC Allwood Cinema Corp., dated May 29, 1996, Statement on Form SB-2 filed May 27, 1997
assigning that certain lease dated November 5, 1986 by and between
96 Market Associates, as lessor and Assignor, as amended pursuant to
the Lease Modification Agreement dated October 10, 1989
10.10 Assignment of Real Estate Lease by and between New City Cinemas, Exhibit 10.49 to Registration
Inc. and CCC New City Cinema Corp., dated May 29, 1996, assigning Statement on Form SB-2 filed May 27, 1997
that certain lease dated January 18, 1965, by and between Bridon
Realty Co., as lessor, and Irving Sherman and David Sanders, as
assigned by Irving Sherman and David Sanders to New City Town
Theatre, Inc. pursuant to an Assignment Agreement dated February 10,
1981, as further amended pursuant to an Addendum to Lease dated
November 14, 1990, as further assigned by New City Town Theatre,
Inc. to Assignor pursuant to an Assignment and Assumption of Lease
dated November 14, 1990
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
10.11 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. Exhibit 10.50 to Registration
and CCC Emerson Cinema Corp., dated May 29, 1996, assigning that Statement on Form SB-2 filed May 27, 1997
certain lease by and between Robert 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
10.12 Form of Lock-up Agreement Exhibit 10.52 to Registration
Statement on Form SB-2 filed May 27, 1997
10.13 Consent and Waiver Agreement dated May 23, 1997 by and among the Exhibit 10.53 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May 27, 1997
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul
and Cindy Kay and Louis G. Novick
10.14 Termination Agreement for Stockholders and Registration Rights Exhibit 10.54 to Registration
Agreement dated May 23, 1997 by and among the Company, CMNY Capital Statement on Form SB-2 filed May 27, 1997
II, L.P., MidMark Capital, L.P., A. Dale Mayo, Brett E. Marks,
Michael C. Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis
G. Novick
10.15 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.55 to Registration
the Company, MidMark Capital, L.P., and A. Dale Mayo Statement on Form SB-2 filed May 27, 1997
10.16 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.56 to Registration
the Company, CMNY Capital II, L.P., CMCO, Inc., Robert G. Davidoff, Statement on Form SB-2 filed May 27, 1997
A. Dale Mayo, Brett E. Marks and Michael C. Rush
10.17 Registration Rights Agreement dated May 23, 1997 by and among the Exhibit 10.58 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May 27, 1997
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul
and Cindy Kay and Louis G. Novick
10.18 Form of Consulting Agreement by and between the Company and MidMark Exhibit 10.59 to Registration
Associates, Inc. Statement on Form SB-2 filed May 27, 1997
10.19 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan Exhibit 10.63 to Registration
Statement on Form SB-2 filed May 27, 1997
10.20 Consulting and Confidentiality Agreement by and between the Company Exhibit 10.64 to Registration
and Brett E. Marks Statement on Form SB-2 filed May 27, 1997
10.21 Second Amended and Restated Credit Agreement by and between Filed Herewith
Clearview Cinema Group, Inc. and The Provident Bank, dated June 12,
1998
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
10.22 Agreement, dated as of September 1, 1997, by among Clearview Cinema Exhibit 10.02 to Quarterly Report
Group, Inc., First New York Reality Co. Inc., and Brett Marks on Form 10-QSB for the Quarter
ended June 30, 1997
10.23 Registration Rights Agreement dated as of November 21, 1997 by and Exhibit 10.03 to Current Report on
among Clearview Cinema Group, Inc., F&N Cinema, Inc. and Roxbury Form 8-K filed November 21, 1997
Cinema, Inc.
10.24 Assignment by F&N Cinema, Inc. dated November 7, 1997 assigning to Exhibit 10.04 to Current Report on
CCC Parsippany Cinema Corp. that certain Ground Lease between The Form 8-K filed November 21, 1997
Trustees of Net Realty Holding Trust and F&N Cinema, Inc. dated May
12, 1993, as amended by the First Amendment to Ground Lease dated
July 11, 1994, and as further amended by Second Amendment to Ground
Lease dated December 19, 1994
10.25 Assignment, Acceptance of Assignment and Consent to Assignment of Exhibit 10.05 to Current Report on
Lease between Roxbury Cinema Inc. and CCC Succasunna Cinema Corp., Form 8-K filed November 21, 1997
dated November 21, 1997, assigning that certain Lease between First
Roxbury Company and Roxbury Cinema Inc. dated May 24, 1989, as
amended by Lease Modification Agreement dated May 2, 1990, and as
further amended by Second Lease Modification Agreement dated
December 20, 1994
10.26 Lease dated December 1997 between Jesse Y. Sayegh and CCC Bellevue Exhibit 10.01 to Current Report on
Cinema Corp. together with Rider to Lease, as amended by Rider Form 8-K filed December 12, 1997
Attachment to Lease dated December 12, 1997
10.27 Registration Rights Agreement dated as of December 12, 1997 by and Exhibit 10.02 to Current Report on
among Clearview Cinema Group, Inc., The New Bellevue Theater Corp. Form 8-K filed December 12, 1997
and Jesse Sayegh
10.28 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.03 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Cedar Grove Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and Leonard Diener Investment
Company, assigning that certain Lease Agreement by and between
Beatrice Diener d/b/a/ Leonard Diener Investment Company and Jesse
Sayegh dated May 29, 1990, as amended by letter dated March 26, 1997
10.29 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.04 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Kin Mall Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and C.J.M. Enterprises, Inc.,
assigning that certain Lease by and between Lester M. Entin
Associates and C.J.M. Enterprises, Inc. dated December 17, 1991, as
amended by First Amendment to lease dated December 31, 1996
10.30 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.05 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Middlebrook Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc., Westwood Oaks, Inc. and
Westwood Oaks Associates, assigning that certain Lease by and
between Westwood Oaks, Inc. and Jesse Sayegh dated September 28,
1993, together with Rider LC to Lease
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
10.31 Securities Purchase Agreement dated as of April 23, 1998, by and Exhibit 10.01 to Current Report on
between Clearview Cinema Group, Inc. and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc.
10.32 Registration Rights Agreement dated as April 23, 1998, by and Exhibit 10.02 to Current Report on
between Clearview Cinema Group, Inc., and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc. (n/k/a Marshall Capital Management, Inc.)
10.33 Registration Rights Agreement dated as of February 13, 1998 by and Filed Herewith
between Clairidge Cinemas, Inc. and Clearview Cinema Group, Inc.
10.34 Registration Rights Agreement dated as of April 30, 1998 by and Filed Herewith
among John Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and
Clearview Cinema Group, Inc.
10.35 Registration Rights Agreement dated as of June 12, 1998 by and among Filed Herewith
Clearview Cinema Group, Inc., its subsidiaries as guarantors, and
Lehman Brothers, Inc.
16.02 Letter regarding change in certifying accountants Exhibit 16.01 to Current Report on
Form 8-K filed December 16, 1997
21.01 Significant Subsidiaries Exhibit 10.39 to Annual Report on
Form 10-KSB for the year ended
December 31, 1998
23.01 Consent of PricewaterhouseCoopers LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
24.01 Powers of Attorney (included on signature page of this registration Filed Herewith
statement)
</TABLE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
II-10
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-11
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this its registration statement on Form
SB-2 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the Town of Chatham, State of New Jersey, on June __, 1998.
CLEARVIEW CINEMA GROUP, INC.
By: _____________________________________
A. Dale Mayo
Chairman of the Board,
President and Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints A. Dale Mayo, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documentation in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in or about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------- ------------------------------------------------------- --------------
<S> <C> <C>
Chairman of the Board, President, Chief June __, 1998
- --------------------------------------- Executive Officer (Principal Executive Officer) and
A. Dale Mayo Director
Treasurer and Chief Financial Officer (Principal June __, 1998
- --------------------------------------- Financial and Accounting Officer)
Joan M. Romine
Director June __, 1998
- ---------------------------------------
Sueanne H. Mayo
Director June __, 1998
- ---------------------------------------
Wayne Clevenger
Director June __, 1998
- ---------------------------------------
Robert Davidoff
Director June __, 1998
- ---------------------------------------
Brett E. Marks
Director June __, 1998
- ---------------------------------------
Denis Newman
Director June __, 1998
- ---------------------------------------
Philip M. Getter
</TABLE>
II-12
<PAGE>
EXHIBIT INDEX
<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 Theatre Exhibit 2.01 to Registration
Circuit, Inc., United Artists Properties I Corp., Mamaroneck Statement on Form SB-2 filed May 27, 1997
Playhouse Holding Corporation and CCC Bronxville Cinema Corp., CCC
Mamaroneck Cinema Corp., CCC Wayne Cinema Corp., CCC BC Realty
Corp., CCC Cinema 304 Corp., CCC Larchmont Cinema Corp. and the
Company, dated July 21, 1997
3.01 Amended and Restated Certificate of Incorporation of Clearview Exhibit 3.01 to Quarterly Report
Cinema Group, Inc. on Form 10-QSB for the Quarter
ended June 30, 1997
3.02 Amended and Restated By-laws of Clearview Cinema Group, Inc. Exhibit 3.02 to Quarterly Report
on Form 10-QSB for the Quarter
ended June 30, 1997
4.01 Specimen Common Stock Certificate Exhibit 4.01 to Registration
Statement on Form SB-2 filed May 27, 1997
4.02 Certificate of Designations, Preferences, Rights and Limitations of Exhibit 4.02 to Annual Report on
Class B Nonvoting Cumulative Redeemable Preferred Stock of Clearview Form 10-KSB for the year ended
Cinema Group, Inc. December 21, 1998
4.03 Certificate of Designation of Class C Convertible Preferred Stock of Exhibit 4.01 to Current Report on
Clearview Cinema Group, Inc., dated April 23, 1998 Form 8-K filed April 23, 1998
4.04 Indenture dated as of June 12, 1998 by and among Clearview Cinema Filed Herewith
Group, Inc., its subsidiaries as guarantors, and The Bank of New
York
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the Filed Herewith
securities being registered
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Exhibit 9.01 to Registration
Mayo as Voting Trustee, dated December 21, 1994 Statement on Form SB-2 filed May 27, 1997
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Exhibit 9.02 to Registration
Mayo as Voting Trustee, dated June 20, 1995 Statement on Form SB-2 filed May 27, 1997
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Exhibit 9.03 to Registration
Dale Mayo as Voting Trustee, dated May 29, 1996 Statement on Form SB-2 filed May 27, 1997
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Exhibit 9.04 to Registration
Mayo as Voting Trustee, dated July 31, 1996 Statement on Form SB-2 filed May 27, 1997
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Exhibit 9.05 to Registration
Mayo as Voting Trustee, dated August 30, 1996 Statement on Form SB-2 filed May 27, 1997
9.06 Voting Trust Agreement dated as of November 21, 1997 by and among Exhibit 9.01 to Current Report on
F&N Cinema, Inc., Roxbury Cinema, Inc. and A. Dale Mayo, as Trustee Form 8-K filed November 21, 1997
9.07 Voting Trust Agreement dated as of December 12, 1997 by and among Exhibit 9.01 to Current Report on
The New Bellevue Theater Corp., Jesse Sayegh and A. Dale Mayo, as Form 8-K filed December 12, 1997
Trustee
9.08 Voting Trust Agreement dated as of February 13, 1998 by and between Filed Herewith
Clairidge Cinemas, Inc. and A. Dale Mayo, as Trustee
9.09 Voting Trust Agreement dated as of April 30, 1998 by and among John Filed Herewith
Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and A. Dale
Mayo, as Trustee
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
10.01 Employment Agreement by and between the Company and A. Dale Mayo, Exhibit 10.08 to Registration
dated May 29, 1996 Statement on Form SB-2 filed May 27, 1997
10.02 Collective Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.36 to Registration
Movies at Port Washington, Inc. and the Company, CCC Grand Avenue Statement on Form SB-2 filed May 27, 1997
Cinema Corp., CCC Port Washington Cinema Corp., dated September 8,
1995
10.03 Management Agreement by and among Cinema Herricks, Inc., the Exhibit 10.37 to Registration
Company, and CCC Herricks Cinema Corp. dated September 8, 1995 Statement on Form SB-2 filed May 27, 1997
10.04 Letter modifying Management Agreement and Collective Agreement dated Exhibit 10.38 to Registration
November 17, 1995 Statement on Form SB-2 filed May 27, 1997
10.05 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Exhibit 10.39 to Registration
Movies at Port Washington, Inc., the Company, CCC Grand Avenue Statement on Form SB-2 filed May 27, 1997
Cinema Corp. and CCC Port Washington Cinema Corp., dated
September 8, 1995
10.06 Escrow Agreement by and among Cinema Herricks, Inc., the Company and Exhibit 10.40 to Registration
CCC Cinema Herricks Corp., dated September 8, 1995 Statement on Form SB-2 filed May 27, 1997
10.07 Non-Competition Agreement, by and among the Company, CCC Emerson Exhibit 10.46 to Registration
Cinema, Inc., and John Nelson, Pamela Ferman and Seth Ferman, dated Statement on Form SB-2 filed May 27, 1997
May 29, 1996
10.08 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Exhibit 10.47 to Registration
Cinema Corp., CCC Bergenfield Cinema Corp., CCC Closter Cinema Corp. Statement on Form SB-2 filed May 27, 1997
and the Company, dated December 13, 1996
10.09 Assignment of Real Estate Lease, by and between Allwood Clifton Exhibit 10.48 to Registration
Cinema, Inc. and CCC Allwood Cinema Corp., dated May 29, 1996, Statement on Form SB-2 filed May 27, 1997
assigning that certain lease dated November 5, 1986 by and between
96 Market Associates, as lessor and Assignor, as amended pursuant to
the Lease Modification Agreement dated October 10, 1989
10.10 Assignment of Real Estate Lease by and between New City Cinemas, Exhibit 10.49 to Registration
Inc. and CCC New City Cinema Corp., dated May 29, 1996, assigning Statement on Form SB-2 filed May 27, 1997
that certain lease dated January 18, 1965, by and between Bridon
Realty Co., as lessor, and Irving Sherman and David Sanders, as
assigned by Irving Sherman and David Sanders to New City Town
Theatre, Inc. pursuant to an Assignment Agreement dated February 10,
1981, as further amended pursuant to an Addendum to Lease dated
November 14, 1990, as further assigned by New City Town Theatre,
Inc. to Assignor pursuant to an Assignment and Assumption of Lease
dated November 14, 1990
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- -----------------------------------------
<S> <C> <C>
10.11 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. Exhibit 10.50 to Registration
and CCC Emerson Cinema Corp., dated May 29, 1996, assigning that Statement on Form SB-2 filed May 27, 1997
certain lease by and between Robert 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
10.12 Form of Lock-up Agreement Exhibit 10.52 to Registration
Statement on Form SB-2 filed May 27, 1997
10.13 Consent and Waiver Agreement dated May 23, 1997 by and among the Exhibit 10.53 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May 27, 1997
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul
and Cindy Kay and Louis G. Novick
10.14 Termination Agreement for Stockholders and Registration Rights Exhibit 10.54 to Registration
Agreement dated May 23, 1997 by and among the Company, CMNY Capital Statement on Form SB-2 filed May 27, 1997
II, L.P., MidMark Capital, L.P., A. Dale Mayo, Brett E. Marks,
Michael C. Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis
G. Novick
10.15 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.55 to Registration
the Company, MidMark Capital, L.P., and A. Dale Mayo Statement on Form SB-2 filed May 27, 1997
10.16 Exchange and Termination Agreement dated May 23, 1997 by and among Exhibit 10.56 to Registration
the Company, CMNY Capital II, L.P., CMCO, Inc., Robert G. Davidoff, Statement on Form SB-2 filed May 27, 1997
A. Dale Mayo, Brett E. Marks and Michael C. Rush
10.17 Registration Rights Agreement dated May 23, 1997 by and among the Exhibit 10.58 to Registration
Company, CMNY Capital II, L.P., MidMark Capital, L.P., Emerson Statement on Form SB-2 filed May 27, 1997
Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul
and Cindy Kay and Louis G. Novick
10.18 Form of Consulting Agreement by and between the Company and MidMark Exhibit 10.59 to Registration
Associates, Inc. Statement on Form SB-2 filed May 27, 1997
10.19 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan Exhibit 10.63 to Registration
Statement on Form SB-2 filed May 27, 1997
10.20 Consulting and Confidentiality Agreement by and between the Company Exhibit 10.64 to Registration
and Brett E. Marks Statement on Form SB-2 filed May 27, 1997
10.21 Second Amended and Restated Credit Agreement by and between Filed Herewith
Clearview Cinema Group, Inc. and The Provident Bank, dated June 12,
1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
10.22 Agreement, dated as of September 1, 1997, by among Clearview Cinema Exhibit 10.02 to Quarterly Report
Group, Inc., First New York Reality Co. Inc., and Brett Marks on Form 10-QSB for the Quarter
ended June 30, 1997
10.23 Registration Rights Agreement dated as of November 21, 1997 by and Exhibit 10.03 to Current Report on
among Clearview Cinema Group, Inc., F&N Cinema, Inc. and Roxbury Form 8-K filed November 21, 1997
Cinema, Inc.
10.24 Assignment by F&N Cinema, Inc. dated November 7, 1997 assigning to Exhibit 10.04 to Current Report on
CCC Parsippany Cinema Corp. that certain Ground Lease between The Form 8-K filed November 21, 1997
Trustees of Net Realty Holding Trust and F&N Cinema, Inc. dated May
12, 1993, as amended by the First Amendment to Ground Lease dated
July 11, 1994, and as further amended by Second Amendment to Ground
Lease dated December 19, 1994
10.25 Assignment, Acceptance of Assignment and Consent to Assignment of Exhibit 10.05 to Current Report on
Lease between Roxbury Cinema Inc. and CCC Succasunna Cinema Corp., Form 8-K filed November 21, 1997
dated November 21, 1997, assigning that certain Lease between First
Roxbury Company and Roxbury Cinema Inc. dated May 24, 1989, as
amended by Lease Modification Agreement dated May 2, 1990, and as
further amended by Second Lease Modification Agreement dated
December 20, 1994
10.26 Lease dated December 1997 between Jesse Y. Sayegh and CCC Bellevue Exhibit 10.01 to Current Report on
Cinema Corp. together with Rider to Lease, as amended by Rider Form 8-K filed December 12, 1997
Attachment to Lease dated December 12, 1997
10.27 Registration Rights Agreement dated as of December 12, 1997 by and Exhibit 10.02 to Current Report on
among Clearview Cinema Group, Inc., The New Bellevue Theater Corp. Form 8-K filed December 12, 1997
and Jesse Sayegh
10.28 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.03 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Cedar Grove Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and Leonard Diener Investment
Company, assigning that certain Lease Agreement by and between
Beatrice Diener d/b/a/ Leonard Diener Investment Company and Jesse
Sayegh dated May 29, 1990, as amended by letter dated March 26, 1997
10.29 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.04 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Kin Mall Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc. and C.J.M. Enterprises, Inc.,
assigning that certain Lease by and between Lester M. Entin
Associates and C.J.M. Enterprises, Inc. dated December 17, 1991, as
amended by First Amendment to lease dated December 31, 1996
10.30 Assignment and Assumption and Consent to Assignment of Lease dated Exhibit 10.05 to Current Report on
December 12, 1997 by and among Jesse Sayegh, CCC Middlebrook Cinema Form 8-K filed December 12, 1997
Corp., Clearview Cinema Group, Inc., Westwood Oaks, Inc. and
Westwood Oaks Associates, assigning that certain Lease by and
between Westwood Oaks, Inc. and Jesse Sayegh dated September 28,
1993, together with Rider LC to Lease
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PRIOR FILING OR
NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- ------ -------------------------------------------------------------------- ----------------------------------
<S> <C> <C>
10.31 Securities Purchase Agreement dated as of April 23, 1998, by and Exhibit 10.01 to Current Report on
between Clearview Cinema Group, Inc. and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc.
10.32 Registration Rights Agreement dated as April 23, 1998, by and Exhibit 10.02 to Current Report on
between Clearview Cinema Group, Inc., and Proprietary Convertible Form 8-K filed April 23, 1998
Investment Group, Inc. (n/k/a Marshall Capital Management, Inc.)
10.33 Registration Rights Agreement dated as of February 13, 1998 by and Filed Herewith
between Clairidge Cinemas, Inc. and Clearview Cinema Group, Inc.
10.34 Registration Rights Agreement dated as of April 30, 1998 by and Filed Herewith
among John Nelson, Seth Ferman, Pamela Ferman, Martin Drescher and
Clearview Cinema Group, Inc.
10.35 Registration Rights Agreement dated as of June 12, 1998 by and among Filed Herewith
Clearview Cinema Group, Inc., its subsidiaries as guarantors, and
Lehman Brothers, Inc.
16.02 Letter regarding change in certifying accountants Exhibit 16.01 to Current Report on
Form 8-K filed December 16, 1997
21.01 Significant Subsidiaries Exhibit 10.39 to Annual Report on
Form 10-KSB for the year ended
December 31, 1998
23.01 Consent of PricewaterhouseCoopers LLP Filed Herewith
23.02 Consent of Wiss & Company LLP Filed Herewith
24.01 Powers of Attorney (included on signature page of this registration Filed Herewith
statement)
</TABLE>
Exhibit 4.4
================================================================================
CLEARVIEW CINEMA GROUP, INC
10 7/8% SENIOR NOTES DUE 2008
INDENTURE
Dated as of June 12, 1998
THE BANK OF NEW YORK, as
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.1 DEFINITIONS....................................................................... 1
SECTION 1.2 OTHER DEFINITIONS................................................................. 17
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT..................................................................... 18
SECTION 1.4 RULES OF CONSTRUCTION............................................................. 18
SECTION 1.5 ONE CLASS OF SECURITIES........................................................... 19
ARTICLE 2.
THE NOTES
SECTION 2.1 FORM AND DATING................................................................... 19
SECTION 2.2 EXECUTION AND AUTHENTICATION...................................................... 20
SECTION 2.3 REGISTRAR AND PAYING AGENT........................................................ 21
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST............................................... 21
SECTION 2.5 HOLDER LISTS...................................................................... 22
SECTION 2.6 TRANSFER AND EXCHANGE............................................................. 22
SECTION 2.7 REPLACEMENT NOTES................................................................. 36
SECTION 2.8 OUTSTANDING NOTES................................................................. 36
SECTION 2.9 TREASURY NOTES.................................................................... 36
SECTION 2.10 TEMPORARY NOTES................................................................... 37
SECTION 2.11 CANCELLATION...................................................................... 37
SECTION 2.12 DEFAULTED INTEREST................................................................ 37
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 2.13 CUSIP OR CINS NUMBERS............................................................. 38
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.1 NOTICES TO TRUSTEE................................................................ 38
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED................................................. 38
SECTION 3.3 NOTICE OF REDEMPTION.............................................................. 39
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.................................................... 39
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE....................................................... 40
SECTION 3.6 NOTES REDEEMED IN PART............................................................ 40
SECTION 3.7 OPTIONAL REDEMPTION............................................................... 40
SECTION 3.8 MANDATORY REDEMPTION.............................................................. 41
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS.......................................................................... 41
ARTICLE 4.
COVENANTS
SECTION 4.1 PAYMENT OF NOTES.................................................................. 43
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY................................................... 43
SECTION 4.3 REPORTS........................................................................... 44
SECTION 4.4 COMPLIANCE CERTIFICATE............................................................ 45
SECTION 4.5 TAXES............................................................................. 45
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.................................................... 45
SECTION 4.7 RESTRICTED PAYMENTS............................................................... 46
SECTION 4.8 DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES............................................................ 48
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 4.9 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK................................................................... 49
SECTION 4.10 ASSET SALES....................................................................... 51
SECTION 4.11 TRANSACTIONS WITH AFFILIATES...................................................... 53
SECTION 4.12 LIENS............................................................................. 53
SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS................................................... 53
SECTION 4.14 LIMITATION ON ISSUANCES AND SALES OF EQUITY
INTERESTS IN RESTRICTED SUBSIDIARIES.............................................. 54
SECTION 4.15 BUSINESS ACTIVITIES............................................................... 54
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES.................................................. 54
SECTION 4.17 PAYMENTS FOR CONSENTS............................................................. 54
SECTION 4.18 CORPORATE EXISTENCE............................................................... 55
SECTION 4.19 OFFER TO REPURCHASE UPON CHANGE OF CONTROL........................................ 55
ARTICLE 5.
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS.......................................... 56
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED................................................. 57
ARTICLE 6.
EVENTS OF DEFAULT
SECTION 6.1 EVENTS OF DEFAULT................................................................. 58
SECTION 6.2 ACCELERATION...................................................................... 59
SECTION 6.3 OTHER REMEDIES.................................................................... 60
SECTION 6.4 WAIVER OF PAST DEFAULTS........................................................... 61
SECTION 6.5 CONTROL BY MAJORITY............................................................... 61
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 6.6 LIMITATION ON SUITS............................................................... 61
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE
PAYMENT........................................................................... 62
SECTION 6.8 COLLECTION SUIT BY TRUSTEE........................................................ 62
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.................................................. 62
SECTION 6.10 PRIORITIES........................................................................ 62
SECTION 6.11 UNDERTAKING FOR COSTS............................................................. 63
ARTICLE 7.
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE................................................................. 63
SECTION 7.2 RIGHTS OF TRUSTEE................................................................. 64
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE...................................................... 66
SECTION 7.4 TRUSTEE'S DISCLAIMER.............................................................. 66
SECTION 7.5 NOTICE OF DEFAULTS................................................................ 66
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES........................................ 66
SECTION 7.7 COMPENSATION AND INDEMNITY........................................................ 67
SECTION 7.8 REPLACEMENT OF TRUSTEE............................................................ 68
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.................................................. 69
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION..................................................... 69
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY........................................................................... 69
SECTION 7.12 OTHER CAPACITIES.................................................................. 69
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
<S> <C> <C>
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR
COVENANT DEFEASANCE............................................................... 69
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.................................................... 70
SECTION 8.3 COVENANT DEFEASANCE............................................................... 70
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE........................................ 71
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES
TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS........................................................................ 72
SECTION 8.6 REPAYMENT TO COMPANY.............................................................. 73
SECTION 8.7 REINSTATEMENT..................................................................... 73
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES............................................... 73
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES.................................................. 74
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT............................................... 76
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS................................................. 76
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.................................................. 76
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC................................................... 76
ARTICLE 10.
SUBSIDIARY GUARANTEES
SECTION 10.1 UNCONDITIONAL GUARANTEES.......................................................... 76
SECTION 10.2 SEVERABILITY...................................................................... 77
SECTION 10.3 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.................................... 77
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10.4 CONTRIBUTION...................................................................... 78
SECTION 10.5 SUBORDINATION OF SUBROGATION AND OTHER
RIGHTS............................................................................ 78
SECTION 10.6 RELEASE OF A SUBSIDIARY GUARANTOR................................................. 78
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS...................................................... 79
SECTION 11.2 NOTICES........................................................................... 79
SECTION 11.3 COMMUNICATION BY HOLDERS OF NOTES WITH
OTHER HOLDERS OF NOTES............................................................ 80
SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT......................................................................... 80
SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..................................... 80
SECTION 11.6 RULES BY TRUSTEE AND AGENTS....................................................... 81
SECTION 11.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND SHAREHOLDERS........................................................ 81
SECTION 11.8 GOVERNING LAW..................................................................... 81
SECTION 11.9 NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS........................................................................ 81
SECTION 11.10 SUCCESSORS........................................................................ 82
SECTION 11.11 SEVERABILITY...................................................................... 82
SECTION 11.12 COUNTERPART ORIGINALS............................................................. 82
SECTION 11.13 TABLE OF CONTENTS, HEADINGS, ETC.................................................. 82
</TABLE>
-vi-
<PAGE>
EXHIBITS:
A Form of Note
B Form of Certificate of Transfer
C Form of Certificate of Exchange
D Form of Supplemental Indenture
-vii-
<PAGE>
INDENTURE dated as of June 12, 1998 among Clearview Cinema
Group, Inc., a Delaware company (the "Company"), the Subsidiary Guarantors (as
defined herein) identified on the signature pages hereto and The Bank of New
York, a New York banking corporation, as trustee (the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree
as follows for the benefit of the other parties and for the equal and ratable
benefit of the Holders of the 10 7/8% Senior Notes due 2008 (the "Initial
Notes") and the 10 7/8% Senior Notes due 2008 if and when issued in the Exchange
Offer (the "New Notes" and, together with the Initial Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Affiliate Transaction" has the meaning set forth in Section
4.11.
"Agent" means any Registrar, Paying Agent, co-registrar,
authenticating agent or securities custodian.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practice (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.19 hereof and/or
<PAGE>
2
the provisions of Section 5.1 hereof and not by the provisions of Section 4.10
hereof), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $5000,000
or (b) for Net Proceeds in excess of $500,000. Notwithstanding the foregoing,
the following items shall not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Restricted Subsidiary that is a Subsidiary Guarantor
or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary
that is a Subsidiary Guarantor, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by Section 4.7 hereof and (iv)
dispositions of Cash Equivalents.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person or the general partner, in the case of a limited partnership, or member,
in the case of a limited liability company, of such Person (or, if such Person
is a partnership, one of its general partners) to have been duly adopted by the
Board of Directors of such Person or the general partner, in the case of a
limited partnership, or member, in the case of a limited liability company, of
such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
<PAGE>
3
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through (v) of
this definition.
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than the Principal (as defined
below) or a Related Party (as defined below) of the Principal, (ii) the adoption
of a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that (A) any "person" (as defined above),
other than the Principal and its Related Parties, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 40% of the Voting Stock of the
Company (measured by voting power rather than number of shares) and (B) the
Principal and its Related Parties "beneficially own" (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the Voting Stock
of the Company (measured by voting power rather than number of shares) than any
such "person" (as defined above), (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors
(as defined below) or (v) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning assigned to it in the preamble to
this Indenture.
<PAGE>
4
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
debt costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than any item that was accrued in
the ordinary course of business), in each case, on a consolidated basis and
determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the Company or one of its Subsidiaries.
"Consolidated Net Tangible Assets" means, with respect to the
Company and its Restricted Subsidiaries, the total amount of consolidated assets
of the Company and its Restricted Subsidiaries (less applicable reserves and
other properly deductible items), determined on a consolidated basis and in
accordance with GAAP, after deducting therefrom (i) all current liability items
and (ii) all goodwill, trade names, trademarks, service marks, patents,
unamortized debt discount and expense, and all other intangibles.
<PAGE>
5
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 hereof or such other address as
to which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
the Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (i) of the definition of Permitted Debt.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.6 hereof, in
the form of Exhibit A-1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.3
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
<PAGE>
6
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.7 hereof.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $1.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of this
Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the 'Calculation Date'), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (and Consolidated Cash Flow related to any
such acquisition shall be calculated on a pro forma basis giving effect to any
pro forma expense and cost reductions as determined by the Company in accordance
with Article 11 of Regulation S-X under the Securities Act), and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
<PAGE>
7
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs
(other than debt issuance costs in respect of the Notes and the execution of the
New Credit Facility on the date of the Indenture) and of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest of such Person and
its Restricted Subsidiaries that was capitalized during such period and (iii)
any interest expense on Indebtedness of another Person that is guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of Preferred Stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.1, 2.6(b)(iv), 2.6(d)(ii)
or 2.6(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.6(g)(ii), which is required to be placed on all Global Notes issued under this
Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
<PAGE>
8
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness issued with original
issue discount, and (ii) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $80.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including Guarantees of Indebtedness or other
Obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
last paragraph of Section 4.7 hereof.
<PAGE>
9
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain or loss, together
with any related provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"New Credit Facility" means that certain Credit Agreement,
dated as of June 12, 1998, by and among the Company and The Provident Bank,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time
(including, without limitation, involving any increase in amount or replacement
lender).
<PAGE>
10
"New Notes" has the meaning assigned to it in the preamble to
this Indenture.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Non-US. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Initial Notes by the
Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of any Person by either the principal executive officer or the principal
financial officer or the principal accounting officer of such Person that meets
the requirements of Section 11.5 hereof.
"144A Global Note" means a global note in the form of Exhibit
A-l hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee, that meets the requirements
of Section 11.5 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
<PAGE>
11
"Pending Acquisitions" means the proposed acquisitions of the
Headquarters 10 in Morristown, N.J., the Great Neck Squire Cinemas in Great
Neck, N.Y., the Franklin Square Cinemas in Franklin Square, N.Y., the Colony
Cinemas in Livingston, N.J. and the West Milford Cinemas in West Milford, N.J.
movie theaters.
"Permitted Business" means the business being operated by the
Company and its Restricted Subsidiaries on the date of this Indenture and any
other business related, ancillary or complementary to any such business as
determined in good faith by the Board of Directors from time to time.
"Permitted Investments" means (i) any Investment in the
Company or in a Restricted Subsidiary of the Company that is a Subsidiary
Guarantor, (ii) any Investment in Cash Equivalents; (iii) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person, if as a result
of such Investment (A) such Person becomes a Restricted Subsidiary of the
Company and a Subsidiary Guarantor or (B) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company that is a Subsidiary Guarantor; (iv) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the provisions of Section 4.10 hereof; (v) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (vi) loans or advances to
employees made in the ordinary course of business not to exceed $250,000 at any
one time outstanding; and (vii) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (vii) that are at the
time outstanding, not to exceed the greater of $2.5 million or 5% of the
Company's Consolidated Net Tangible Assets determined at the time of each such
Investment without giving effect to subsequent changes in value.
"Permitted Liens" means (i) Liens securing Indebtedness under
the New Credit Facility that was permitted by the terms of the Indenture to be
incurred; (ii) Liens in favor of the Company; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any assets other than those of the Person merged into or
consolidated with the Company; (iv) Liens on property existing at the time of
acquisition thereof by the Company or any Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of Section 4.9 covering only the assets acquired with such
Indebtedness; (vii) Liens existing on the date of this Indenture; (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens of the Company or any Restricted Subsidiary of
the Company with respect to obligations that do not exceed $5.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary; and (x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries.
<PAGE>
12
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable (as determined in good faith by the
Company) to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such person over the holder
of the other Capital Stock issued by such Person.
"Principal" means A. Dale Mayo.
"Private Placement Legend" means the legend set forth in
Section 2.6(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 12, 1998, by and among the Company, the Subsidiary
Guarantors and the other parties named on the signature pages thereof, as such
agreement may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
<PAGE>
13
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means, with respect to the Principal, (A) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Office of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
<PAGE>
14
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated under the Securities
Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes and the Guarantees issued under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date of this Indenture.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Strategic Equity Investment" means an Investment in the
Company by a Strategic Equity Investor.
"Strategic Equity Investor" means, as of any date, any Person
(other than an Affiliate of the Company) engaged in a Permitted Business which
has a Total Equity Market Capitalization of at least $1 billion.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantees of the Notes by
the Subsidiary Guarantors pursuant to the provisions of this Indenture.
"Subsidiary Guarantors" means (i) each Subsidiary in existence
on the date of the Indenture and (ii) any other Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.3 hereof.
<PAGE>
15
"Total Equity Market Capitalization" means the product of (i)
the average of the reported closing share prices of the referent Person as of
the five trading days immediately preceding the date of any Strategic Equity
Investment and (ii) the total number of shares outstanding of the referent
Person as reported in the last document publicly filed with the Commission by
such Person.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary acquired or
created after the date of this Indenture that is designated by the Board of
Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only
to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not Guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the provisions of Section 4.7 hereof. If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date in accordance with the provisions of Section 4.9
hereof, the Company shall be in default of such provision). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.9 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
<PAGE>
16
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
SECTION 1.2 OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"......................................4.11
"Asset Sale Offer"...........................................4.10
"Authentication Order"........................................2.2
"Change of Control Offer" ...................................4.19
"Change of Control Payment"..................................4.19
"Change of Control Payment Date" ............................4.19
"Covenant Defeasance".........................................8.3
"DTC" ........................................................2.3
"Event of Default"............................................6.1
"Excess Proceeds"............................................4.10
"Funding Subsidiary Guarantor"...............................10.4
"incur" ......................................................4.9
"Legal Defeasance" ...........................................8.2
"Offer Amount"................................................3.9
"Offer Period" ...............................................3.9
"Paying Agent"................................................2.3
"Payment Default" ............................................6.1
"Permitted Debt"..............................................4.9
"Purchase Date" ..............................................3.9
"Redemption Date".............................................3.7
"Registrar"...................................................2.3
"Representative".............................................10.2
"Restricted Payments".........................................4.7
<PAGE>
17
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes and the Subsidiary
Guarantees;
"indenture security Holder" means a Holder of a Security;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"Obligor" on the indenture securities means the Company, the
Subsidiary Guarantors and any successor obligor upon the indenture securities.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time.
SECTION 1.5 ONE CLASS OF SECURITIES.
The Initial Notes and the New Notes shall vote and consent
together on all matters as one class and none of the Initial Notes or the New
Notes shall have the right to vote or consent as a separate class on any matter.
<PAGE>
18
ARTICLE 2.
THE NOTES
SECTION 2.1 FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby. However, to the extent any provision of any Security conflicts
with the express provisions of this Indenture, the provisions of this Indenture
shall govern and be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form
of Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-l attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with written
instructions given by the Holder thereof as required by Section 2.6 hereof.
(c) Temporary Global Notes
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as Custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or Cedel Bank,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note bearing a Private Placement Legend, all as contemplated by
Section 2.6(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in the Regulation S Permanent Global Note pursuant to the Applicable Procedures.
Simultaneously with the authentication of the Regulation S Permanent Global
Note, the Trustee shall cancel the Regulation S Temporary Global Note. The
aggregate principal amount of the Regulation S Temporary Global Note and the
Regulation S Permanent Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Depositary
or its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
<PAGE>
19
(d) Euroclear/Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Global Note that are held by Participants
through Euroclear or Cedel Bank.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds
that office at the time a Security is authenticated, the Security shall
nevertheless be valid. A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers of the Company (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount of $80,000,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.7 hereof.
The Trustee may (at the expense of the Company) appoint an
authenticating agent acceptable to the Company to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Holders or an Affiliate of the Company and has the same
protections under Article 7 herein.
<PAGE>
20
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee in writing of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.5 HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
<PAGE>
21
SECTION 2.6 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for Definitive
Notes if (i) the Company delivers to the Trustee written notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 90
days after the date of such notice from the Depositary or (ii) the Company in
its sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act. Upon the occurrence of either of the preceding events in (i) or
(ii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee in writing. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.7 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.6(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.6(b),(c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.6(b)(i).
<PAGE>
22
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.6(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.6(f) hereof, the requirements of this
Section 2.6(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under
the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.6(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Permanent Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
<PAGE>
23
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.6(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the New Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
<PAGE>
24
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.6(h) hereof, and the Company shall execute and the Trustee shall upon
receipt of an Authentication Order authenticate and deliver to the
Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.6(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall (at the expense of the Company) deliver such Definitive
Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.6(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
<PAGE>
25
(ii) Notwithstanding Sections 2.6(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not
be exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a
transfer pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the New Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for an Unrestricted
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of an
Unrestricted Definitive Note that does not bear the
Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
<PAGE>
26
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.6(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.6(h) hereof, and the Company shall execute and the Trustee
shall upon receipt of an Authentication Order authenticate and (at the
expense of the Company) deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.6(c)(iv) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of
such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall (at the expense of the Company) deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.6(c)(iv) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Note
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
<PAGE>
27
(E) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof, the Trustee shall cancel the Restricted
Definitive Note, increase or cause to be increased the
aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note, and in the case of
clause (C) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the New Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
<PAGE>
28
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.6(d)(ii), the Trustee shall
cancel the Definitive Notes and increase or cause to be
increased the aggregate principal amount of the Unrestricted
Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a written request
for such an exchange or transfer, the Trustee shall cancel the
applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted
Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.6(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.6(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
<PAGE>
29
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the New Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in
the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
<PAGE>
30
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.2, the Trustee shall
authenticate and make available for delivery (i) one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for acceptance by
Persons that certify in the applicable Letters of Transmittal that (x) they are
not broker-dealers, (y) they are not participating in a distribution of the New
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and (at the expense
of the Company) deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISION OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A OF THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
<PAGE>
31
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.6 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED
IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.6 OF THE
INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
<PAGE>
32
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular
Global Note have been exchanged for Definitive Notes or a particular Global Note
has been redeemed, repurchased or cancelled in whole and not in part, each such
Global Note shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon receipt of an Authentication Order in
accordance with Section 2.2 hereof or upon receipt of a written request
of the Registrar.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.6, 3.9, 4.10, 4.19
and 9.5 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
<PAGE>
33
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of 15 days before the day of mailing of a
notice of redemption under Section 3.2 hereof and ending at the close
of business on the day of such mailing, (B) to register the transfer of
or to exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part or (C)
to register the transfer of or to exchange a Note between a record date
and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and
none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.2
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.6 to effect a registration of transfer or exchange may be
submitted by facsimile.
(ix) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depositary participants or beneficial owners of
interests in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 2.7 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. An indemnity bond must be supplied by the
Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company and the
Trustee may charge for their expenses in replacing a Note.
<PAGE>
34
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.8 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section 2.9
hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note; however, Notes held by the Company or a
Subsidiary of the Company shall not be deemed to be outstanding for purposes of
Section 3.7(b) hereof.
If a Note is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.9 TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company or any Subsidiary Guarantor, or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any Subsidiary Guarantor shall be considered as
though not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent, only Notes that a Responsible Officer of the Trustee actually knows are
so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee.
<PAGE>
35
Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
such cancelled Notes (subject to the record retention requirement of the
Exchange Act) in accordance with its customary procedures. The Company may not
issue new Notes to replace Notes that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.1 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13 CUSIP OR CINS NUMBERS.
The Company in issuing the Notes may use "CUSIP" or "CINS"
numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" or
"CINS" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Notes, and any such redemption shall not
be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" or "CINS" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least 30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
<PAGE>
36
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.3 NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.9 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes (including CUSIP or CINS
numbers) to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
<PAGE>
37
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.3 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company upon
written request of the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.1 hereof.
SECTION 3.6 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon receipt of an Authentication Order, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
<PAGE>
38
SECTION 3.7 OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.7, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.7 prior to June 1, 2003. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on June 1 of the years indicated below:
Year Redemption Price
---- ----------------
2003.......................................... 105.4375%
2004.......................................... 103.6250%
2005.......................................... 101.8125%
2006 and thereafter........................... 100.0000%
(b) Notwithstanding the provisions of clause (a) of this
Section 3.7, at any time prior to June 1, 2001, the Company may, on any one or
more occasions, redeem up to 33% of the aggregate principal amount of Notes
originally issued under this Indenture at a redemption price of 110.875% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
public offering of Common Stock of the Company or the net cash proceeds from a
Strategic Equity Investment in the Company; provided that at least $53.3 million
in aggregate principal amount of Notes issued under this Indenture remains
outstanding immediately after the occurrence of such redemption (excluding Notes
held by the Company and its Subsidiaries); and provided further, that such
redemption shall occur within 45 days of the date of the closing of such public
offering or Strategic Equity Investment.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
SECTION 3.8 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
SECTION 3.9 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
<PAGE>
39
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a written notice to the Trustee and to each of
the Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall
state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.9 and Section 4.10 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company default in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased
and may not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, or transfer by book-entry transfer, to the Company,
a depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election
if the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Note purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
<PAGE>
40
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry
transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.9. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon receipt of an Authentication Order from the Company
shall authenticate and mail or deliver such new Note to such Holder, in a
principal amount equal to any unpurchased portion of the Note surrendered. Any
Note not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the provisions
of Sections 3.1 through 3.6 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.1 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes on
the dates and in the manner provided in the Notes. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due. The Company shall pay all Liquidated Damages, if any, in the same
manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to the then applicable interest rate on the Notes to the extent
lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
<PAGE>
41
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.3.
SECTION 4.3 REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall furnish to the
Trustee and the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K (or 10-QSB or 10-KSB, as applicable) if the Company were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company' certified independent accountants and (ii) all current
reports that would be required to be filed with the SEC on Form 8-K if the
Company were required to file such reports, in each case within the time periods
specified in the SEC's rules and regulations. In addition, following the
consummation of the exchange offer contemplated by the Registration Rights
Agreement, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
(b) For so long as any Notes remain outstanding, the Company
and the Subsidiary Guarantors shall furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
<PAGE>
42
(c) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.4 COMPLIANCE CERTIFICATE.
(a) The Company and each Subsidiary Guarantor (to the extent
that such Guarantor is so required under the TIA) shall deliver to the Trustee,
within 90 days after the end of each fiscal quarter, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he or she
may have knowledge and what action the Company is taking or proposes to take
with respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Notes is prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or propose to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.3(a) above shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.5 TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
<PAGE>
43
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.
The Company and each Subsidiary Guarantor covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each Subsidiary Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.7 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or to the
Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or other Affiliate of the Company (other than any such
Equity Interests owned by the Company or any Restricted Subsidiary); (iii) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes,
except a payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under Section 4.9 hereof; and
<PAGE>
44
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture (excluding
Restricted Payments permitted by clauses (ii), (iii), (iv), (vi) and
(vii) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the date of the Indenture to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company since the date of
the Indenture as a contribution to its common equity capital or from
the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus
(iv) 50% of any dividends received by the Company or a Restricted
Subsidiary that is a Subsidiary Guarantor after the date of the
Indenture from an Unrestricted Subsidiary of the Company, to the extent
that such dividends were not otherwise included in Consolidated Net
Income of the Company for such period, plus (v) to the extent that any
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary
after the date of the Indenture, the lesser of (A) the fair market
value of the Company's Investment in such Subsidiary as of the date of
such redesignation or (B) such fair market value as of the date on
which such Subsidiary was originally designated as an Unrestricted
Subsidiary.
The foregoing provisions will not prohibit: (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (ii)
of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of such Subsidiary's
common Equity Interests on a pro rata basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Subsidiary of the Company held by any member of the Company's (or any of
its Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period; (vi) the redemption or repayment on the date of the
Indenture of (A) $1,350,000 aggregate liquidation preference of outstanding
Series B Preferred Stock and (B) $6,000,000 aggregate principal amount of
outstanding subordinated promissory notes issued in connection with the
acquisition of the Nelson Ferman Theaters, in each case with the net proceeds
from the offering of the Notes; (vii) the payment of dividends to holders of
any class or series of Disqualified Stock of the Company issued or incurred
after the date of the Indenture in accordance with the covenant described in
Section 4.9 hereof, provided that after giving effect to any such dividend as a
Fixed Charge on a pro forma basis, the Company and its Restricted Subsidiaries
would have had a Fixed Charge Coverage Ratio of at least 2.0 to 1; and (viii)
other Restricted Payments in an aggregate amount not to exceed $500,000;
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted by clauses (ii), (iii), (iv), (v), (vii) and (viii)
of this paragraph, no Default or Event of Default shall have occurred and be
continuing.
<PAGE>
45
The Board of Directors may designate any Restricted Subsidiary
acquired or created after the date of the Indenture (other than any Restricted
Subsidiary created to effect the Pending Acquisitions) to be an Unrestricted
Subsidiary if such designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value of
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Upon such designation, the Subsidiary Guarantee, if any, of such
designated Unrestricted Subsidiary shall be automatically released.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $1.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section 4.7
were computed, together with a copy of any fairness opinion or appraisal
required by the terms of this Indenture.
SECTION 4.8 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole (as determined in good faith by the Company), than those contained in
the agreements governing the Indebtedness being refinanced, (i) secured
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described in Section 4.12 hereof that limits the right of the
debtor to dispose of the assets securing such Indebtedness, (j) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (k) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
<PAGE>
46
SECTION 4.9 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, Guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of such incurrence or issuance, (i) the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
(ii) any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt),
in each case if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this Section 4.9
shall not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters
of credit (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) under Credit Facilities; provided
that the aggregate principal amount of all Indebtedness outstanding
under all Credit Facilities under this clause (i) after giving effect
to such incurrence does not exceed an amount equal to $15 million, less
the aggregate amount of all Net Proceeds of Asset Sales applied to
repay Indebtedness under a Credit Facility pursuant to Section 4.10
hereof;
<PAGE>
47
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness
represented by the Notes and by the Subsidiary Guarantors of
Indebtedness represented by the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of the Subsidiary
Guarantors of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary
Guarantor, in an aggregate principal amount not to exceed $5.0 million
at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
by this Indenture to be incurred under the first paragraph hereof or
clauses (ii) and (iv) of this paragraph;
(vi) the incurrence by the Company or any Subsidiary Guarantor
of intercompany Indebtedness between or among the Company and any
Subsidiary Guarantor; provided, however, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the Notes and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than the Company or a Subsidiary Guarantor
thereof and (B) any sale or other transfer of any such Indebtedness to
a Person that is not either the Company or a Subsidiary Guarantor
thereof shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary Guarantor, as the
case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) the Guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Restricted Subsidiary of
the Company that was permitted to be incurred by another provision of
this Section 4.9;
(ix) the incurrence by the Company or any Subsidiary
Guarantor of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including
all Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (ix), not to
exceed $10.0 million; and
<PAGE>
48
(x) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company that was not
permitted by this clause (x).
For purposes of determining compliance with this Section 4.9,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (x) above or
is entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest or accretion or
amortization of original issue discount will not be deemed to be an incurrence
of Indebtedness for purposes of this Section 4.9; provided, in each such case,
that the amount thereof is included in Fixed Charges of the Company as accrued.
The Company shall not incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated in right of
payment to the Notes on substantially identical terms; provided, however, that
no Indebtedness of the Company shall be deemed to be contractually subordinated
in right of payment to any other Indebtedness of the Company solely by virtue of
being unsecured.
SECTION 4.10 ASSET SALES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless: (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet), of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this Section
4.10.
<PAGE>
49
Within 270 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the New Credit Facility, or (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, an entity that
is engaged in another Permitted Business and that becomes a Restricted
Subsidiary, the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Permitted Business ("Replacement
Assets"); provided, however, that in connection with any repayment of
Indebtedness under the New Credit Facility pursuant to clause (a), the Company
will retire such Indebtedness and will cause the related commitment to be
reduced in an amount equal to the principal amount so repaid. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5.0 million, the Company will be required to make an
offer to all Holders of Notes (an "Asset Sale Offer") in accordance with the
procedures set forth in Section 3.9 to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase,
in accordance with the procedures set forth in this Indenture. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
this Indenture. If the aggregate principal amount of Notes tendered into such
Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
Notwithstanding the immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) 100% of the
consideration for such Asset Sale constitutes either Replacement Assets or cash
or Cash Equivalents or any combination thereof and (ii) such Asset Sale is for
fair market value as determined in good faith by the Company's Board of
Directors; provided, that if the total consideration with respect to any such
Asset Sale is greater than $10.0 million (as determined in good faith by the
Company's Board of Directors), the Company shall obtain a fairness opinion from
an independent accounting, appraisal or investment banking firm of national
standing; provided further, that any consideration not constituting Replacement
Assets received by the Company or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Proceeds subject to the provisions of the immediately
preceding paragraph.
<PAGE>
50
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless: (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an independent accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) any employment agreement approved by
the Board of Directors and entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees to Persons who are not otherwise Affiliates of the
Company and (iv) Restricted Payments that are permitted by the provisions of
Section 4.7 hereof.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness or trade payables (other than Permitted Liens) upon any of
its property or assets, now owned or hereafter acquired, unless all payments due
under this Indenture, the Notes and the Subsidiary Guarantees are secured on an
equal and ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if (i)
the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of 4.9
hereto and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under Section 4.12 hereto, (ii) the gross cash proceeds
of such sale and leaseback transaction are at least equal to the fair market
value (as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company applies
the proceeds of such transaction in accordance with the provisions of Section
4.10 hereto.
<PAGE>
51
SECTION 4.14 LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Restricted Subsidiary of the Company to any
Person (other than the Company or a Restricted Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests owned by the Company in such Restricted Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the provisions of Section 4.10
hereto, and (ii) will not permit any Restricted Subsidiary of the Company to
issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Restricted Subsidiary of the Company, except that any
Restricted Subsidiary acquired or created after the date of this Indenture in
connection with an acquisition of a theater (other than any Restricted
Subsidiary created to effect the Pending Acquisitions) may issue Equity
Interests representing not more than 20% of the aggregate Voting Stock of such
Restricted Subsidiary to the seller of such theater as part of the consideration
for the acquisition thereof.
SECTION 4.15 BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall acquire or
create another Subsidiary after the date hereof, then such newly acquired or
created Subsidiary shall execute a supplemental indenture in form and substance
substantially similar to Exhibit D hereto providing that such Subsidiary shall
become a Subsidiary Guarantor under this Indenture and shall deliver any Opinion
of Counsel required by this Indenture, provided, however, this Section 4.16
shall not apply to any Subsidiary that has been properly designated as an
Unrestricted Subsidiary in accordance with this Indenture for so long as it
continues to constitute an Unrestricted Subsidiary.
SECTION 4.17 PAYMENTS FOR CONSENTS.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
<PAGE>
52
SECTION 4.18 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence and the corporate or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate or other
existence of any of its Subsidiaries, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.19 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in this Section 4.19 (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 10
days following any Change of Control, the Company shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by this Indenture and described in such
notice. The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (iii) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
shall upon receipt of an Authentication Order promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. Prior to complying with the provisions of this
Section 4.19, but in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding indebtedness under the New Credit
Facility or obtain the requisite consents, if any, under the New Credit Facility
to permit the repurchase of Notes required by this Section 4.19. The Company
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date. The Change of Control
provisions described above will be applicable whether or not other provisions of
this Indenture are applicable.
<PAGE>
53
(c) Notwithstanding anything to the contrary in this Section
4.19, the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in a
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.19 and Section 3.9 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
ARTICLE 5.
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) The Company may not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described in Section 4.9 hereof.
(b) No Subsidiary Guarantor shall consolidate with or merge
with or into (whether or not such Subsidiary Guarantor is the surviving Person),
another corporation, Person or entity whether or not affiliated with such
Subsidiary Guarantor unless (i) subject to the provisions of Section 10.6
hereof, the Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) (A) is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia and (B) assumes all the obligations of such Subsidiary Guarantor
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under this Indenture and the Registration Rights
Agreement; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Company would be permitted by virtue
of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.9
hereof. Notwithstanding the foregoing clause (iii), each Subsidiary Guarantor
may consolidate with or merge into the Company or another Subsidiary Guarantor.
<PAGE>
54
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
(a) Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.1(a) hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease, conveyance
or other disposition is made shall succeed to, and be substituted for (so that
from and after the date of such consolidation, merger, sale, lease, conveyance
or other disposition, the provisions of this Indenture referring to the
"Company" shall refer instead to the successor corporation and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor Person had been named as the
Company herein; provided, however, that the predecessor Company shall not be
relieved from the obligation to pay the principal of and interest on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.1(a) hereof.
(b) Subject to Section 10.6 hereof, upon any consolidation or
merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of any Subsidiary
Guarantor in accordance with Section 5.1(b) hereof, the successor corporation
formed by such consolidation or into or with which such Subsidiary Guarantor is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Subsidiary
Guarantors" shall refer instead to the successor corporation and not to such
Subsidiary Guarantor), and may exercise every right and power of such Subsidiary
Guarantor under this Indenture with the same effect as if such successor Person
had been named as a Subsidiary Guarantor herein; provided, however, that the
predecessor Subsidiary Guarantor shall not be relieved from the obligation to
pay the principal of and interest on the Notes except in the case of a sale of
all of the Company's assets that meets the requirements of Section 5.1(b)
hereof.
ARTICLE 6.
EVENTS OF DEFAULT
SECTION 6.1 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the Notes and such
default continues for a period of 30 days;
(b) the Company defaults in payment when due of any principal
of or premium, if any, on the Notes (including, without limitation,
pursuant to the provisions described in Sections 4.10 and 4.19 hereto);
(c) the Company or any of its Subsidiaries fails to comply
with the provisions described in Section 5.1 hereto;
<PAGE>
55
(d) the Company or any of its Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement
in this Indenture or the Notes for 30 days after written notice to the
Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding;
(e) the Company or any of its Restricted Subsidiaries default
under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries
(or the payment of which is Guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date of this Indenture, which default
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(f) the Company or any of its Subsidiaries fail to pay a final
judgment or final judgments for the payment of money which are entered
by a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5.0 million;
(g) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) generally is not paying its debts as they become
due; or
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case;
<PAGE>
56
(ii) appoints a custodian of the Company or any of
its Significant Subsidiaries or for all or substantially all
of the property of the Company or any of its Significant
Subsidiaries; or
(vi) orders the liquidation of the Company or any of
its Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
(i) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and effect
or any Subsidiary Guarantor, or any Person acting on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee.
SECTION 6.2 ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default specified in clauses (g) or (h) of
Section 6.1 with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes shall become due and payable without further action or
notice. Holders of the Notes may not enforce this Indenture or the Notes except
as provided in this Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding payment of the premium that the Company would
have had to pay if the Company then had elected to redeem the Notes pursuant to
the optional redemption provisions of this Indenture and if the maturity of the
Notes is accelerated, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes. If an Event of Default occurs prior to June 1, 2003 and if the maturity
of the Notes is accelerated, by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to June 1, 2003, then the premium
specified below shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes during the twelve-month
period ending on June 1 of the years indicated below:
Year Percentage
1998.................................... 110.875%
1999.................................... 110.875%
2000 ................................... 110.875%
2001.................................... 109.0625%
2002 ................................... 107.2500%
<PAGE>
57
The Holders of a majority in aggregate principal amount of the
Notes then outstanding by written notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event or Default and
its consequences under this Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee,
in its sole discretion, may pursue any available remedy to collect the payment
of principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal of, premium and Liquidated Damages, if
any, or interest on, the Notes (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Notes may rescind an acceleration and
its consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability. The Trustee may take any
other action consistent with this Indenture relating to any such direction.
SECTION 6.6 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
<PAGE>
58
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee security and indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of security and indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the compensation, fees,
expenses, disbursements and advances of the Trustee, its agents and counsel.
<PAGE>
59
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under or
in connection with this Indenture. To the extent that the payment of any such
compensation, fees, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under or in connection
with this Indenture out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a perfected, first
priority Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise, and such Lien in favor of a
predecessor Trustee shall be senior to the Lien in favor of the current Trustee.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee (including any predecessor Trustee), its
agents and attorneys for amounts due under Section 7.7 hereof, including payment
of all compensation, fees, expenses and liabilities incurred, and all advances
made, by the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
<PAGE>
60
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5 hereof.
<PAGE>
61
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request or direction of any Holders, unless such Holder shall
have offered and, if requested, provided to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered and, if
requested, provided to the Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
(g) No permissive right of the Trustee to act hereunder shall
be construed as a duty.
<PAGE>
62
(h) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate, an Opinion of Counsel, or both.
(i) Except with respect to Section 4.1 hereof, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge (including actual knowledge) of any Default or Event of Default except
(i) any Event of Default occurring pursuant to Sections 6.1(a) and 6.1(b) hereof
or (ii) any Default or Event of Default of which a Responsible Officer of the
Trustee shall have received written notification or obtained actual knowledge.
(j) The Trustee shall not be deemed to have notice or
knowledge (including actual knowledge) of any matter unless a Responsible
Officer has actual knowledge thereof or unless written notice thereof is
received by the Trustee at the Corporate Trust Office of the Trustee and such
notice references the Notes generally, the Company or this Indenture.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Notes, the
Registration Rights Agreement or the Offering Memorandum; it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture; it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if the Trustee receives written notice thereof, the Trustee shall (at the
expense of the Company) mail to Holders of Notes a notice of the Default or
Event of Default within 90 days after it occurs. Except in the case of a Default
or Event of Default in payment of principal of, premium, if any, Liquidated
Damages, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
<PAGE>
63
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall (at the expense of the Company) mail to the
Holders of the Notes a brief report dated as of such reporting date that
complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA ss. 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange or any delisting therefrom.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company and the Subsidiary Guarantors jointly and
severally agree to pay to the Trustee from time to time compensation as agreed
upon in writing by the Trustee and the Company, and, in the absence of any such
agreement, reasonable compensation for its acceptance of this Indenture and
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company and the Subsidiary
Guarantors shall reimburse the Trustee promptly upon request for all
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and the Subsidiary Guarantors shall indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company and the Subsidiary Guarantors (including this
Section 7.7) and defending itself against any claim (whether asserted by the
Company, the Subsidiary Guarantors or any Holder or any other person) or
liability in connection with, relating to, or arising out of (i) the exercise or
performance of any of its powers or duties hereunder, or in connection herewith,
and (ii) the validity, invalidity, adequacy or inadequacy of this Indenture, the
Subsidiary Guarantees, the Notes, the Registration Rights Agreement and the
Offering Memorandum, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall notify the
Company and the Subsidiary Guarantors promptly of any claim for which it intends
to seek indemnity. Failure by the Trustee to so notify the Company and the
Subsidiary Guarantors shall not relieve the Company and the Subsidiary
Guarantors of their obligations hereunder. The Company and the Subsidiary
Guarantors shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company and the
Subsidiary Guarantors shall pay the fees and expenses of such counsel. The
Company and the Subsidiary Guarantors need not pay for any settlement made
without their consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Subsidiary Guarantors
to the Trustee under this Indenture shall survive the satisfaction and discharge
of this Indenture and shall be secured by a Lien as provided in Section 6.9
hereof.
<PAGE>
64
To secure the Company's and the Subsidiary Guarantors' payment
obligations in this Section, the Trustee shall have a Lien prior to the Notes on
all money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may by a Board Resolution remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after receiving a written request by any
Holder of a Note who has been a bona fide Holder of a Note for at least six
months, fails to comply with Section 7.10, such Holder of a Note may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
<PAGE>
65
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.7 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section 7.7 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee or Agent, as the case may be.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that together with its direct parent, if any,
or in the case of a corporation included in a bank holding company system, its
related bank holding company, has a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12 OTHER CAPACITIES.
All references in this Indenture to the Trustee shall be
deemed to refer to the Trustee in its capacity as Trustee and in its capacities
as any Agent, to the extent acting in such capacities, and every provision of
this Indenture relating to the conduct or affecting the liability or offering
protection, immunity or indemnity to the Trustee shall be deemed to apply with
the same force and effect to the Trustee acting in its capacities as any Agent.
<PAGE>
66
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
The Company may, at its option and at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Notes and the
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article 8.
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
and to have each Subsidiary Guarantor's obligations discharged with respect to
its Subsidiary Guarantee on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.4 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.2 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee and any
Agent hereunder and the Company's and Subsidiary Guarantors' obligations in
connection therewith, including, without limitation, Article 7 and Section 8.5
and 8.7 hereunder, and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 hereof.
<PAGE>
67
SECTION 8.3 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, the Company and each Subsidiary Guarantor
shall, subject to the satisfaction of the conditions set forth in Section 8.4
hereof, be released from its obligations under the covenants contained in
Sections 4.3, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17,
4.19 and clauses (iii) and (iv) of Section 5.1(a) and clauses (ii) and (iii) of
Section 5.1(b) hereof with respect to the outstanding Notes on and after the
date the conditions set forth in Section 8.4 are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.1 hereof of the option applicable to this
Section 8.3 hereof, subject to the satisfaction of the conditions set forth in
Section 8.4 hereof, Sections 6.1(c) through 6.1(f) hereof shall not constitute
Events of Default.
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States acceptable to the Trustee confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
<PAGE>
68
(c) in the case of an election under Section 8.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States acceptable to the Trustee confirming that the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Sections 6.1(g) or 6.1(h) hereof are concerned, at any time in the period
ending on the 123rd day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its Restricted
Subsidiaries are bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel (subject to customary qualifications and assumptions) to the effect
that on the 123rd day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others;
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; and
(i) the Trustee shall have received such other documents,
assurances and Opinion of Counsel as the Trustee shall have reasonably required.
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.5, the "Trustee") pursuant to Section 8.4 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent), to the
Holders of such Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
<PAGE>
69
The Company and the Subsidiary Guarantors jointly and
severally agree to pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.4 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount thereof that
would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
SECTION 8.6 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, Liquidated Damages, if any, or interest on any Note and remaining
unclaimed for two years after such principal, and premium, if any, Liquidated
Damages, if any, or interest has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non callable Government Securities in accordance with Section
8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted by such court or governmental authority to apply all such money in
accordance with Section 8.2 or 8.3 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, Liquidated Damages, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
<PAGE>
70
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Company,
the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture
or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Company's obligations
to the Holders of the Notes by a successor to the Company pursuant to Article 5
hereof;
(d) to add additional Guarantees with respect to the Notes,
including any new Subsidiary Guarantees, or to release any Subsidiary Guarantee
in accordance with Sections 4.7 and 10.6 hereof;
(e) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Note; or
(f) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.2 hereof, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
<PAGE>
71
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, the Company and
the Trustee may amend or supplement this Indenture (including Sections 3.9, 4.10
and 4.19 hereof) and the Notes and the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.4 and 6.7 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, Liquidated Damages, if any,
or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Without the
consent of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, such Notes), no waiver or amendment to this Indenture may
make any change in the provisions of Sections 3.9, 4.10 or 4.19 hereof that
adversely affects the rights of any Holder of Notes. Section 2.8 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.2.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of evidence satisfactory
to the Trustee of the consent of the Holders of Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.2 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.2 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
<PAGE>
72
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the redemption
of the Notes except as provided above with respect to Sections 3.9, 4.10 and
4.19 hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding Notes and
a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described in Sections 4.10 and
4.19); or
(h) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
<PAGE>
73
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.1 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.4 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBSIDIARY GUARANTEES
SECTION 10.1 UNCONDITIONAL GUARANTEES.
Each Subsidiary Guarantor hereby unconditionally, jointly and
severally, Guarantees to each Holder of a Note authenticated by the Trustee and
to the Trustee and its successors and assigns that: the principal of, interest
and Liquidated Damages, if any, on the Notes will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and interest on
any overdue interest on the Notes and all other obligations of the Company to
the Holders or the Trustee hereunder or under the Notes will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; subject,
however, to the limitations set forth in Section 10.3. Each Subsidiary Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor, to
the extent permitted by applicable law, hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that the
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes and this Indenture. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or any
Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Subsidiary Guarantor, any
amount paid by the Company or any Subsidiary Guarantor to the Trustee or such
Holder, and each Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Subsidiary Guarantor further
agrees that, as between each Subsidiary Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the obligations
Guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purpose of the Subsidiary Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
Guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article 6, such obligations (whether or not due and payable)
shall become due and payable by each Subsidiary Guarantor for the purpose of the
Subsidiary Guarantee.
<PAGE>
74
SECTION 10.2 SEVERABILITY.
In case any provision of this Article 10 shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.3 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor, and by its acceptance hereof each
Holder and the Trustee, hereby confirms that it is the intention of all such
parties that the Subsidiary Guarantee not constitute a fraudulent transfer or
conveyance for purposes of Title 11 of the United States Code, as amended, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar U.S. federal or state or other applicable law. To effectuate the
foregoing intention, the Holders and each Subsidiary Guarantor hereby
irrevocably agree that the obligations of each Subsidiary Guarantor under the
Subsidiary Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor pursuant to Section 10.4, result in the
obligations of such Subsidiary Guarantor not constituting such a fraudulent
transfer or conveyance.
SECTION 10.4 CONTRIBUTION.
In order to provide for just and equitable contribution among
the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in
the event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under the Subsidiary Guarantee, such Funding
Subsidiary Guarantor shall be entitled to a contribution from all other
Subsidiary Guarantors in a pro rata amount, based on the net assets of each
Subsidiary Guarantor (including the Funding Subsidiary Guarantor), determined in
accordance with GAAP, subject to Section 10.3, for all payments, damages and
expenses incurred by such Funding Subsidiary Guarantor in discharging the
Company's obligations with respect to the Notes or any other Subsidiary
Guarantor's obligations under the Subsidiary Guarantee, as the case may be.
SECTION 10.5 SUBORDINATION OF SUBROGATION AND OTHER RIGHTS.
Each Subsidiary Guarantor hereby agrees that any claim against
the Company that arises from the payment, performance or enforcement of such
Subsidiary Guarantor's obligations under the Subsidiary Guarantee or this
Indenture, including, without limitation, any right of subrogation, shall be
subject and subordinate to, and no payment with respect to any such claim of
such Subsidiary Guarantor shall be made before, the payment in full in cash of
all outstanding Notes in accordance with the provisions provided therefor in
this Indenture.
SECTION 10.6 RELEASE OF A SUBSIDIARY GUARANTOR.
In the event of a sale or other disposition of all of the
assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the provisions of Section 4.10
hereto.
<PAGE>
75
ARTICLE 11.
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 31 8(c), the imposed duties shall
control.
SECTION 11.2 NOTICES.
Any notice or communication by the Company, the Subsidiary
Guarantors or the Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail (registered or certified,
return receipt requested), telecopier or overnight air courier Guaranteeing next
day delivery, to the others' address
If to the Company and/or any Subsidiary Guarantor:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, NJ 07928
Telecopier No.: (973) 377-4646
Attention: A. Dale Mayo
With a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Telecopier No.: (412) 355-6501
Attention: Janice C. Hartman, Esq.
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Administration
The Company, the Subsidiary Guarantors or the Trustee, by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
<PAGE>
76
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier Guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier Guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it, except for notices or communications to the Trustee, which shall be
effective only upon actual receipt thereof.
If the Company mail a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
<PAGE>
77
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.6 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND SHAREHOLDERS.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes, the Subsidiary Guarantees, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
SECTION 11.8 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY
GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
<PAGE>
78
SECTION 11.10 SUCCESSORS.
All agreements of the Company and the Subsidiary Guarantors in
this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
78
SIGNATURES
CLEARVIEW CINEMA GROUP, INC.
By: ________________________________________
Name: A. Dale Mayo
Title: Chairman of the Board, President,
and Chief Executive Officer
CCC ALLWOOD CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC B.C. REALTY 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
<PAGE>
80
CCC BAYONNE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC BEDFORD CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC 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 CARMEL CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
81
CCC CEDAR GROVE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC CHESTER TWIN CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
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 COBBLE HILL CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
82
CCC COLONY 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 FRANKLIN SQUARE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC GRAND AVENUE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC GREAT NECK CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
83
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
CCC MANASQUAN CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
84
CCC MANHASSET CINEMA CORP.
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 MORRISTOWN CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC NARBERTH CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
85
CCC NEW CITY CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC PARSIPPANY CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC PORT WASHINGTON CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC ROSLYN CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC SCREENING ZONE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC SUCCASUNNA CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
86
CCC SUMMIT CINEMA 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
CCC WAYNE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC WEST MILFORD CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
CCC WOODBRIDGE CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
87
CLEARVIEW THEATER GROUP, INC.
By: ________________________________________
Name: A. Dale Mayo
Title: President
MILLBURN TWIN CINEMA CORP.
By: ________________________________________
Name: A. Dale Mayo
Title: President
THE BANK OF NEW YORK, as Trustee
By: ________________________________________
Name: A. Dale Mayo
Title: President
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1).............................................................7.10
(a)(2)...........................................................7.10
(a)(3)...........................................................N.A.
(a)(4)...........................................................N.A.
(a)(5)...........................................................7.10
(i)(b)...........................................................7.10
(ii)(c)..........................................................N.A.
311(a)...........................................................7.11
(b)..............................................................7.11
(iii)(c).........................................................N.A.
312(a).................................................................2.5
(b)(5)...........................................................11.3
(iv)(c)..........................................................11.3
313(a).................................................................7.6
(b)(1)...........................................................10.3
(b)(2)............................................................7.7
(v)(c)............................................................7.6
11.2
(v)(d)............................................................7.6
314(a)................................................................4.3;
11.2
(A)(b)...........................................................10.2
(c)(1)...........................................................11.4
(c)(2)...........................................................11.4
(c)(3)...........................................................N.A.
(vi)(e)..........................................................11.5
(f)..............................................................N.A.
315(a).................................................................7.1
(b)...............................................................7.5
11.2
(B)(c)............................................................7.1
(d)...............................................................7.1
(e)..............................................................6.11
316(a)(last sentence)..................................................2.9
(a)(1)(A).........................................................6.5
(a)(1)(B).........................................................6.4
(a)(2)...........................................................N.A.
(b)...............................................................6.7
(C)(c)...........................................................2.12
317(a)(1)..............................................................6.8
(a)(2)............................................................6.9
(b)...............................................................2.2
318(a)................................................................11.1
(b)..............................................................N.A.
(c)..............................................................11.1
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
Exhibit 5.1
July 2, 1998
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Re: Registration Statement on Form SB-2
Dear Ladies and Gentlemen:
We are acting as special counsel to Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form SB-2 filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, by the Company on July 2,
1998 (the "Registration Statement"). The Registration Statement relates to the
public offering (the "Offering") of up to 257,143 shares (the "Shares") of the
Company's Common Stock, $.01 par value (the "Common Stock") issuable upon
conversion of the Class C Convertible Preferred Stock ("Class C Preferred
Stock") by Marshall Capital Management, Inc., (the "Selling Stockholder").
We are familiar with the Registration Statement. We have examined and are
familiar with (i) the Company's Amended and Restated Certificate of
Incorporation and (ii) the Company's By-laws. We have also examined such other
documents, corporate records, certificates of public officials, instruments,
statutes and questions of law as we deemed necessary or appropriate to enable us
to express an informed opinion on the matters hereinafter set forth. In making
such examinations and rendering the opinions on the matters set forth below, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed, telecopied, photostatic
or other reproduced copies and the authenticity of the originals of such
documents, the due execution and delivery of all such documents, and the
accuracy and completeness of the records of the Company.
We express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware or as to any laws of the United
States of America other than the Securities Act of 1933, as amended.
<PAGE>
Clearview Cinema Group, Inc.
July 2, 1998
Page 2
Based upon and subject to the foregoing, we are of the opinion that:
(a) The Company has been duly organized and is validly existing under the
laws of the State of Delaware.
(b) The Shares, when issued and upon conversion of the Class C Preferred
Stock, will be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to the undersigned in the prospectus forming a
part thereof under the caption "Legal Matters."
Yours truly,
Kirkpatrick & Lockhart LLP
Exhibit 9.8
VOTING TRUST AGREEMENT
February 13, 1998
This VOTING TRUST AGREEMENT (this "Trust Agreement") is made by and
between the undersigned ("Stockholder") and A. Dale Mayo (the "Trustee").
Stockholder has acquired 14,782 shares (the "Stock") of the common
stock of Clearview Cinema Group, Inc., a Delaware corporation (the "Company"),
pursuant to that certain Asset Purchase Agreement dated as of February 13, 1998
by and among the Company, CCC Claridge Cinema Corp., Claridge Cinema's Inc., and
Craig Zeltner.
In accordance with Section 218 of the General Corporation Law of the
State of Delaware, the Stockholder desires to enter into this Voting Trust
Agreement with respect to the Stock, and the Trustee is willing to accept the
voting rights in respect of the Stock and to serve as the voting trustee under
the terms and conditions hereof.
The parties hereto, intending to be legally bound hereby, agree as
follows:
1. Simultaneously with the execution and delivery hereof, the
Stockholder shall deliver the certificates representing the Stock, duly executed
for transfer, to Trustee to be held under this Trust Agreement.
2. (A) Promptly after the delivery required by paragraph 1, the
Trustee shall deliver the certificates representing the Stock to the Company for
transfer and shall cause the shares represented thereby to be transferred to his
name as Trustee under this Trust Agreement. The new certificates representing
the Stock registered in the name of the Trustee shall be delivered to the
Trustee by the Company, and the Trustee shall hold those certificates in his
custody.
(B) The Trustee shall hold the shares of the Stock transferred to
him hereunder, and all other shares of the common stock that the Stockholder
shall transfer to him, in trust for the purposes and subject to the terms and
conditions of the Agreement.
3. At the same time as the delivery by the Trustee of the certificates
to the Company in accordance with the provisions of paragraph 2, the Trustee
shall issue to the Stockholder a Voting Trust Certificate for the number of
shares of the Stock deposited by the Stockholder, which Voting Trust Certificate
shall be in substantially the following form:
<PAGE>
[Front Side]
CLEARVIEW CINEMA GROUP, INC.
(a Delaware corporation)
Certificate No. _____ _____ Shares
VOTING TRUST CERTIFICATE
THIS IS TO CERTIFY that, subject to the provisions hereof and of the
Trust Agreement as hereinafter defined,_________________, or registered assigns,
will be entitled to receive upon the termination of the Trust Agreement, but
only upon surrender of this certificate, a certificate or certificates for _____
shares of common stock of Clearview Cinema Group, Inc., a Delaware corporation
(hereinafter called the "Company"), or of any other corporation into which
shares of common stock of the Company shall have been reclassified or converted,
or for which they shall have been exchanged.
Until the expiration or termination of the Trust Agreement, the
undersigned Trustee shall pay or deliver all cash dividends, and certain other
distributions mentioned in the Trust Agreement, on or in respect of the common
stock from time to time held by the undersigned Trustee thereunder, to the
person who, on the record date for the determination of stockholders entitled to
receive the dividends and other distributions, was the registered owner of this
Voting Trust Certificate.
This certificate has been issued under and pursuant to the provisions
of a Voting Trust Agreement (the "Trust Agreement"), by and between
_____________, as a stockholder of the Company and A. Dale Mayo, as Trustee,
dated as of ______________, 1998, as the same may be amended from time to time.
The Trust Agreement more fully defines and sets forth the rights and obligations
of the owner and holder of this certificate and of the Trustee and is
incorporated in and made a part of this Voting Trust Certificate with the same
effect as if set forth in full.
Subject to any restriction contained on the reverse side of this
certificate, this Voting Trust Certificate is transferable by its registered
owner, in person or by duly authorized attorney, on the books to be maintained
for that purpose by the undersigned Trustee, upon the terms and conditions
provided in the Trust Agreement.
WITNESS THE DUE EXECUTION HEREOF on this ______ day
of ______________, 1998.
________________________(SEAL)
A. Dale Mayo
Trustee under Voting Trust
Agreement, dated
_______________, 1998.
<PAGE>
[Reverse side]
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state Blue Sky or securities laws. These securities cannot
be resold without registration under such Act or applicable
state securities laws or an exemption therefrom.
4. The Voting Trust Certificate issued under this Trust Agreement shall
be transferable in the same manner, with the same effect, and subject to the
same restrictions as certificates for shares of the Stock. The Voting Trust
Certificate shall be transferable only at the principal executive office of the
Company or at any other place that the Company may maintain for its corporate
books and records.
5. The Trustee has no authority to sell or otherwise dispose of or
encumber any of the Stock.
6. The Trustee shall possess and be entitled, subject to the provisions
of this Agreement, to exercise all the rights and powers of an absolute owner of
all the shares of Stock deposited under this Trust Agreement, including without
limitation the right to receive dividends on the Stock (subject to paragraph 7
below) and the right to vote, consent in writing, or otherwise act with respect
to any corporate or stockholders' action, to increase or reduce the capital
stock of the Company, to classify or reclassify any of the shares as now or
hereafter authorized into preferred or common stock or other classes of stock
with or without par value, to amend the Certificate of Incorporation or by-laws
of the Company, to merge or consolidate the Company with other corporations, to
sell all or any part of its assets, to create any mortgage lien on any of its
property, or for any other corporate act or purpose. Except as otherwise
provided herein, no voting right shall pass to others by or under the Voting
Trust Certificate or by or under this Trust Agreement or by or under any
agreement express or implied. All shares of Stock shall be voted as directed by
the Trustee and shall be deemed to be represented for the purposes of
determining a quorum.
7. (A) All dividends paid on the Stock from time to time held under
this Trust Agreement, except stock dividends, shall be remitted by the Trustee,
promptly upon receipt, to the person or persons who, on the record date for the
determination of stockholders entitled to receive the dividends, were the record
owners of the Voting Trust Certificates representing the shares on which the
dividends were declared.
(B) Dividends paid in shares of common stock of the Company shall
be retained by the Trustee and added to the Stock held under this Trust
Agreement. The Trustee shall promptly issue to the appropriate persons Voting
Trust Certificates representing any Stock that the Trustee shall receive as a
dividend and retain in accordance with the provisions of this paragraph 7. Those
Voting Trust Certificates shall be in the form as set forth in this Trust
Agreement, with any changes that are appropriate.
<PAGE>
(C) All warrants or rights to subscribe to any class of voting
stock of the Company ("Warrants") that shall be received by the Trustee in
respect or on account of the Stock held under this Trust Agreement shall be
distributed by the Trustee to the holders of the Voting Trust Certificates in
the same manner as he is required to distribute cash dividends under this Trust
Agreement. If any voting stock is purchased by the Stockholder pursuant to the
Warrants, the Stockholder shall immediately deliver the certificates
representing all the shares of stock so purchased, duly executed for transfer,
to the Trustee to be added to the Stock held under the Trust Agreement. The
Trustee shall promptly issue to the Stockholder Voting Trust Certificates
representing any Stock that shall be so delivered to and held by the Trustee in
accordance with the provisions of this paragraph 7. The Voting Trust
Certificates shall be in the form as set forth in this Trust Agreement, with any
changes that are appropriate. No sale or other transfer of any of the Warrants
shall be made without first offering the Company a prior opportunity to purchase
the Warrants for a reasonable amount.
8. The Stockholder, at any time from and after the date of this Trust
Agreement, must deposit any additional capital stock of the Company purchased or
owned by him (but not specifically described within the Trust Agreement) with
the Trustee and such additional shares of Stock so deposited shall become
subject to all the terms and conditions of this Trust Agreement to the same
extent as if it were originally deposited under this Trust Agreement; provided,
however, that any shares of capital stock of the Company purchased by such
stockholder in a public market shall not be subject to this Voting Trust
Agreement.
9. (A) If, as the result of any split-up, combination or
reclassification of any Stock held by the Trustee under this Trust Agreement, or
as the result of any merger, consolidation, reorganization or sale of assets to
which the Company shall be a party, the Stock held by the Trustee under this
Trust Agreement shall be reclassified, converted into or become exchangeable for
any other securities, either of the Company or of any other corporation, the
Trustee shall exchange or surrender the Stock held by it for those other
securities and shall deliver the certificates evidencing the same to the Company
or other appropriate agency in exchange or surrender. The Trustee shall hold the
securities received upon the exchange or surrender for the purposes and upon the
same conditions as are provided in this Trust Agreement in respect of the shares
of the Stock.
(B) Upon any exchange or surrender, the Trustee may, if he
considers it to be advisable, issue new Voting Trust Certificates in lieu of and
in exchange for the outstanding Voting Trust Certificates. The Voting Trust
Certificates shall be in the form set forth in this Trust Agreement, with any
changes that are appropriate.
10. (A) The Trustee may serve as a director or officer of the Company
or any successor corporation, and he or any firm of which he may be a member, or
any corporation of which he may be a stockholder, director or officer, may
contract with the Company or any successor corporation, or be pecuniarily
interested in any transaction to which the Company or any successor corporation
may be a party, or in which it may be interested, as fully as though he were not
a Trustee.
<PAGE>
(B) The Trustee shall not be liable to any stockholder or the
registered owner or holder of any Voting Trust Certificate for any error of
judgment or for any neglect, default, negligence (including gross negligence)
except for his own willful and deliberate malfeasance.
(C) The Trustee shall not receive any compensation for his services
as Trustee, and he shall not be required to give any bond or security for the
discharge of his duties as Trustee.
(D) The Trustee hereby accepts the trust hereunder, subject to all
the terms and conditions contained in this Trust Agreement, and he agrees to
exercise the powers and perform the duties of Trustee as set forth in this Trust
Agreement.
11. (A) The trust created by this Trust Agreement is expressly declared
to be irrevocable.
(B) (i) This Trust Agreement shall terminate with respect only to
the shares of Stock that are sold by the Stockholder (a) pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended, or (b) pursuant to the
registration rights granted to the Stockholder in the Registration Rights
Agreement. A termination of this Trust Agreement as to any shares of Stock sold
pursuant to clauses (a) or (b) of the preceding sentence shall not affect any
shares of Stock continuing to be owned by the Stockholder (the "Remaining
Shares"), and this Trust Agreement shall continue in force with respect to the
Remaining Shares until terminated pursuant to Paragraph 11(B)(ii).
(ii) This Trust Agreement shall terminate upon the earlier of
(a) the twentieth anniversary hereof, (b) written notice of termination by the
Trustee, or (c) the death of the Trustee.
(C) (i) In the event of any proposed sale of Stock pursuant to
clauses (a) or (b) of the first sentence of Paragraph 11(B)(i), the Stockholder
shall notify the Trustee of the proposed sale and of the number of shares to be
sold, and, upon receipt of (a) confirmation, in a form reasonably requested by
the Trustee, of the consummation of the sale and (b) the Voting Certificate(s)
representing the purchased Stock, the Trustee shall deliver or request that the
Company deliver to the purchaser stock certificates for the purchased Stock,
and, if necessary, shall deliver to the Stockholder a Voting Certificate for the
Remaining Shares.
(ii) In the event of termination of this Trust Agreement pursuant
to Paragraph 11(B)(ii), as soon as practicable after the termination, the
Trustee shall deliver to or upon the order of the registered owners of the
Voting Trust Certificates, and upon surrender thereof, the shares of Stock
represented thereby, together with any other shares of voting stock of the
Company subject to this Trust Agreement.
12. Any notice or other communication required or permitted by this
Trust Agreement to be given by any party hereto shall be in writing, and any
communication and payment or delivery of securities required to be made by any
party to any other party shall be sent by first class prepaid mail, certified or
registered, return receipt requested, addressed in the case of the Stockholder,
to the address that is provided by the Stockholder and, in the case of the
<PAGE>
Trustee to:
A. Dale Mayo
97 Main Street
Chatham , New Jersey 07928
or in any other manner as any party shall hereafter designate by notice to the
other party.
13. This Trust Agreement shall be legally binding upon, and shall inure
to the benefit of, the Stockholder and their respective heirs, legal
representatives, and permitted successors and assigns.
14. The validity and effectiveness of this Trust Agreement shall be
governed by, and its provisions shall be construed and enforced in accordance
with, the laws of the State of Delaware.
15. If, for any reason, any provision or part of this Trust Agreement
is held invalid, that invalidity shall not affect any other provision or the
rest of provision of this Trust Agreement, as the case may be, and each
provision or part shall, to the full extent consistent with law, continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement as of the day and year first above written.
CLARIDGE CINEMAS INC.:
By:
------------------------
Trustee:
---------------------------
A. Dale Mayo
Exhibit 9.9
VOTING TRUST AGREEMENT
April 30, 1998
This VOTING TRUST AGREEMENT (this "Trust Agreement") is made
by and between each of the undersigned (each, a "Stockholder") and A. Dale Mayo
(the "Trustee").
Stockholder owns the number of shares (the "Stock") of the
common stock of Clearview Cinema Group, Inc., a Delaware Corporation (the
"Company") identified on the signature page hereto.
In accordance with Section 218 of the General Corporation Law
of the State of Delaware, Stockholder desires to enter into this Voting Trust
Agreement with respect to the Stock, and the Trustee is willing to accept the
voting rights in respect of the Stock and to serve as the voting trustee under
the terms and conditions hereof.
The parties hereto, intending to be legally bound hereby,
agree as follows:
1. Simultaneously with the execution and delivery hereof,
Stockholder shall deliver the certificates representing the Stock, duly executed
for transfer, to Trustee to be held under this Trust Agreement.
2. (A) Promptly after the delivery required by paragraph 1,
the Trustee shall deliver the certificates representing the Stock to the Company
for transfer and shall cause the shares represented thereby to be transferred to
his name as Trustee under this Trust Agreement. The new certificates
representing the Stock registered in the name of the Trustee shall be delivered
to the Trustee by the Company, and the Trustee shall hold those certificates in
his custody.
(B) The Trustee shall hold the shares of the Stock
transferred to him hereunder, and all other shares of the common stock that
Stockholder shall transfer to him, in trust for the purposes and subject to the
terms and conditions of the Agreement.
3. At the same time as the delivery by the Trustee of the
certificates to the Company in accordance with the provisions of paragraph 2,
the Trustee shall issue to Stockholder a Voting Trust Certificate for the number
of shares of the Stock deposited by Stockholder, which Voting Trust Certificate
shall be in substantially the following form:
<PAGE>
[Front Side]
CLEARVIEW CINEMA GROUP, INC.
(a Delaware corporation)
Certificate No. _____ _____ Shares
VOTING TRUST CERTIFICATE
THIS IS TO CERTIFY that, subject to the provisions
hereof and of the Trust Agreement as hereinafter defined, ____________,
or registered assigns, will be entitled to receive upon the termination
of the Trust Agreement, but only upon surrender of this certificate, a
certificate or certificates for _____ shares of common stock of
Clearview Cinema Group, Inc., a Delaware corporation (hereinafter
called the "Company"), or of any other corporation into which shares of
common stock of the Company shall have been reclassified or converted,
or for which they shall have been exchanged.
Until the expiration or termination of the Trust
Agreement, the undersigned Trustee shall pay or deliver all cash
dividends, and certain other distributions mentioned in the Trust
Agreement, on or in respect of the common stock from time to time held
by the undersigned Trustee thereunder, to the person who, on the record
date for the determination of stockholders entitled to receive the
dividends and other distributions, was the registered owner of this
Voting Trust Certificate.
This certificate has been issued under and pursuant
to the provisions of a Voting Trust Agreement (the "Trust Agreement"),
by and between _____________, as a stockholder of the Company and A.
Dale Mayo, as Trustee, dated as of ___________, 1997, as the same may
be amended from time to time. The Trust Agreement more fully defines
and sets forth the rights and obligations of the owner and holder of
this certificate and of the Trustee and is incorporated in and made a
part of this Voting Trust Certificate with the same effect as if set
forth in full.
Subject to any restriction contained on the reverse
side of this certificate, this Voting Trust Certificate is transferable
by its registered owner, in person or by duly authorized attorney, on
the books to be maintained for that purpose by the undersigned Trustee,
upon the terms and conditions provided in the Trust Agreement.
WITNESS THE DUE EXECUTION HEREOF on this ______ day
of ____________, 199_.
-2-
<PAGE>
________________________(SEAL)
A. Dale Mayo
Trustee under Voting Trust
Agreement, dated
_______________, 1997.
[Reverse side]
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state Blue Sky or securities laws. These securities cannot
be resold without registration under such Act or applicable
state securities laws or an exemption therefrom.
4. The Voting Trust Certificate issued under this Trust
Agreement shall be transferable in the same manner, with the same effect, and
subject to the same restrictions as certificates for shares of the Stock. The
Voting Trust Certificate shall be transferable only at the principal executive
office of the Company or at any other place that the Company may maintain for
its corporate books and records.
5. The Trustee has no authority to sell or otherwise dispose
of or encumber any of the Stock.
6. The Trustee shall possess and be entitled, subject to the
provisions of this Agreement, to exercise all the rights and powers of an
absolute owner of all the shares of Stock deposited under this Trust Agreement,
including without limitation the right to receive dividends on the Stock
(subject to paragraph 7 below) and the right to vote, consent in writing, or
otherwise act with respect to any corporate or stockholders' action, to increase
or reduce the capital stock of the Company, to classify or reclassify any of the
shares as now or hereafter authorized into preferred or common stock or other
classes of stock with or without par value, to amend the Certificate of
Incorporation or by-laws of the Company, to merge or consolidate the Company
with other corporations, to sell all or any part of its assets, to create any
mortgage lien on any of its property, or for any other corporate act or purpose.
Except as otherwise provided herein, no voting right shall pass to others by or
under the Voting Trust Certificate or by or under this Trust Agreement or by or
under any agreement express or implied. All shares of Stock shall be voted as
directed by the Trustee and shall be deemed to be represented for the purposes
of determining a quorum.
7. (A) All dividends paid on the Stock from time to time held
under this Trust Agreement, except stock dividends, shall be remitted by the
Trustee, promptly upon receipt, to the person or persons who, on the record date
for the determination of stockholders entitled to receive the dividends, were
the record owners of the Voting Trust Certificates representing the shares on
which the dividends were declared.
(B) Dividends paid in shares of common stock of the Company
shall be retained by the Trustee and added to the Stock held under this Trust
Agreement. The Trustee shall promptly issue to the appropriate persons Voting
Trust Certificates representing any Stock that the Trustee shall receive as a
dividend and retain in accordance with the provisions of this paragraph 7. Those
Voting Trust Certificates shall be in the form as set forth in this Trust
Agreement, with any changes that are appropriate.
-3-
<PAGE>
(C) All warrants or rights to subscribe to any class of
voting stock of the Company ("Warrants") that shall be received by the Trustee
in respect or on account of the Stock held under this Trust Agreement shall be
distributed by the Trustee to the holders of the Voting Trust Certificates in
the same manner as he is required to distribute cash dividends under this Trust
Agreement. If any voting stock is purchased by Stockholder pursuant to the
Warrants, Stockholder shall immediately deliver the certificates representing
all the shares of stock so purchased, duly executed for transfer, to the Trustee
to be added to the Stock held under the Trust Agreement. The Trustee shall
promptly issue to Stockholder Voting Trust Certificates representing any Stock
that shall be so delivered to and held by the Trustee in accordance with the
provisions of this paragraph 7. The Voting Trust Certificates shall be in the
form as set forth in this Trust Agreement, with any changes that are
appropriate. No sale or other transfer of any of the Warrants shall be made
without first offering the Company a prior opportunity to purchase the Warrants
for a reasonable amount.
8. Stockholder, at any time from and after the date of this
Trust Agreement, must deposit any additional capital stock of the Company
purchased or owned by him (but not specifically described within the Trust
Agreement) with the Trustee and such Additional shares of Stock so deposited
shall become subject to all the terms and conditions of this Trust Agreement to
the same extent as if it were originally deposited under this Trust Agreement;
provided, however, that any shares of capital stock of the Company purchased by
such stockholder in a public market shall not be subject to this Voting Trust
Agreement.
9. (A) If, as the result of any split-up, combination or
reclassification of any Stock held by the Trustee under this Trust Agreement, or
as the result of any merger, consolidation, reorganization or sale of assets to
which the Company shall be a party, the Stock held by the Trustee under this
Trust Agreement shall be reclassified, converted into or become exchangeable for
any other securities, either of the Company or of any other corporation, the
Trustee shall exchange or surrender the Stock held by it for those other
securities and shall deliver the certificates evidencing the same to the Company
or other appropriate agency in exchange or surrender. The Trustee shall hold the
securities received upon the exchange or surrender for the purposes and upon the
same conditions as are provided in this Trust Agreement in respect of the shares
of the Stock.
(B) Upon any exchange or surrender, the Trustee may, if he
considers it to be advisable, issue new Voting Trust Certificates in lieu of and
in exchange for the outstanding Voting Trust Certificates. The Voting Trust
Certificates shall be in the form set forth in this Trust Agreement, with any
changes that are appropriate.
10. (A) The Trustee may serve as a director or officer of the
Company or any successor corporation, and he or any firm of which he may be a
member, or any corporation of which he may be a stockholder, director or
officer, may contract with the Company or any successor corporation, or be
pecuniarily interested in any transaction to which the Company or any successor
corporation may be a party, or in which it may be interested, as fully as though
he were not a Trustee.
-4-
<PAGE>
(B) The Trustee shall not be liable to any stockholder or
the registered owner or holder of any Voting Trust Certificate for any error of
judgment or for any neglect, default, negligence (including gross negligence)
except for his own willful and deliberate malfeasance.
(C) The Trustee shall not receive any compensation for his
services as Trustee, and he shall not be required to give any bond or security
for the discharge of his duties as Trustee.
(D) The Trustee hereby accepts the trust hereunder,
subject to all the terms and conditions contained in this Trust Agreement, and
he agrees to exercise the powers and perform the duties of Trustee as set forth
in this Trust Agreement.
11. (A) The trust created by this Trust Agreement is expressly
declared to be irrevocable.
(B) (i) This Trust Agreement shall terminate with respect
only to the shares of Stock that are sold by Stockholder (a) pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended, or (b) pursuant to
the registration rights granted to Stockholder in the Registration Rights
Agreement. A termination of this Trust Agreement as to any shares of Stock sold
pursuant to clauses (a) or (b) of the preceding sentence shall not affect any
shares of Stock continuing to be owned by Stockholder (the "Remaining Shares"),
and this Trust Agreement shall continue in force with respect to the Remaining
Shares until terminated pursuant to Paragraph 11(B)(ii).
(ii) This Trust Agreement shall terminate upon the
earlier of (a) the twentieth anniversary hereof, (b) written notice of
termination by the Trustee, or (c) the death of the Trustee.
(C) (i) In the event of any proposed sale of Stock
pursuant to clauses (a) or (b) of the first sentence of Paragraph 11(B)(i),
Stockholder shall notify the Trustee of the proposed sale and of the number of
shares to be sold, and, upon receipt of (a) confirmation, in a form reasonably
requested by the Trustee, of the consummation of the sale and (b) the Voting
Certificate(s) representing the purchased Stock, the Trustee shall deliver or
request that the Company deliver to the purchaser stock certificates for the
purchased Stock, and, if necessary, shall deliver to Stockholder a Voting
Certificate for the Remaining Shares.
(ii) In the event of termination of this Trust
Agreement pursuant to Paragraph 11(B)(ii), as soon as practicable after the
termination, the Trustee shall deliver to or upon the order of the registered
owners of the Voting Trust Certificates, and upon surrender thereof, the shares
of Stock represented thereby, together with any other shares of voting stock of
the Company subject to this Trust Agreement.
12. Any notice or other communication required or permitted by
this Trust Agreement to be given by any party hereto shall be in writing, and
any communication and payment or delivery of securities required to be made by
any party to any other party shall be sent by first class prepaid mail,
certified or registered, return receipt requested, addressed in the case of
Stockholder, to the address that is provided by Stockholder and, in the case of
the Trustee to:
-5-
<PAGE>
A. Dale Mayo
97 Main Street
Chatham, New Jersey 07928
or in any other manner as any party shall hereafter designate by notice to the
other party.
13. This Trust Agreement shall be legally binding upon, and
shall inure to the benefit of, Stockholder and their respective heirs, legal
representatives, and permitted successors and assigns.
14. The validity and effectiveness of this Trust Agreement
shall be governed by, and its provisions shall be construed and enforced in
accordance with, the laws of the State of Delaware.
15. If, for any reason, any provision or part of this Trust
Agreement is held invalid, that invalidity shall not affect any other provision
or the rest of provision of this Trust Agreement, as the case may be, and each
provision or part shall, to the full extent consistent with law, continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Trust Agreement as of the day and year first above written.
--------------------------------------
John Nelson; No. of Shares 32,051
--------------------------------------
Seth Ferman; No. of Shares 16,026
--------------------------------------
Pamela Ferman; No. of Shares 16,026
--------------------------------------
Martin Drescher; No. of Shares 12,820
Trustee:
--------------------------------------
A. Dale Mayo
-6-
Exhibit 10.21
================================================================================
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
BY AND AMONG
CLEARVIEW CINEMA GROUP, INC.
Borrower,
THE PROVIDENT BANK,
Agent
AND
VARIOUS LENDERS DESCRIBED ON SCHEDULE 1 HERETO
June 12, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. INTERPRETATION..................................................................................1
Section 1.1 Provisions Pertaining to Definitions...................................................1
Section 1.2 Definitions............................................................................2
ARTICLE 2. THE LOANS......................................................................................19
Section 2.1 Commitments...........................................................................19
Section 2.2 Revolving Credit Loan.................................................................19
Section 2.3 Draws, Advances and Settlement of Payments and Advances...............................19
Section 2.4 The Notes.............................................................................20
Section 2.5 Interest Payable on the Loans.........................................................20
(a) Determination of Interest Rate........................................................20
(b) Monthly Installments..................................................................20
(c) Interest on Overdue Payments; Default Interest Rate...................................21
Section 2.6 Repayments and Prepayments of Principal...............................................21
(a) Commitment Reduction..................................................................21
(b) Revolving Credit Loan Overadvance.....................................................21
(c) Prepayments from Extraordinary Dispositions...........................................21
(d) Prepayment from Key Man Insurance.....................................................22
(e) Maturity..............................................................................22
Section 2.7 Payments and Computations.............................................................22
Section 2.8 Payments to be Free of Deductions.....................................................24
Section 2.9 Use of Proceeds.......................................................................24
Section 2.10 Additional Costs, Etc.................................................................24
Section 2.11 Agent and Lender Statements...........................................................25
Section 2.12 Letters of Credit.....................................................................25
ARTICLE 3. SECURITY AGREEMENT.............................................................................27
Section 3.1 Security Interest.....................................................................27
Section 3.2 Mortgages and Liens on Real Property..................................................27
Section 3.3 Pledge of Stock.......................................................................27
Section 3.4 Financing Statements Additional Documents.............................................28
Section 3.5 Accounts; Chattel Paper; Lease Agreements.............................................28
Section 3.6 Release of Collateral.................................................................29
ARTICLE 4. CONDITIONS PRECEDENT TO DISBURSEMENTS..........................................................29
Section 4.1 Conditions Precedent to Initial Closing...............................................29
Section 4.2 Conditions Precedent to Subsequent Loans..............................................32
ARTICLE 5. GENERAL REPRESENTATIONS AND WARRANTIES.........................................................32
Section 5.1 Existence, Etc........................................................................32
Section 5.2 Authority, Etc........................................................................33
<PAGE>
Section 5.3 Binding Effect of Documents, Etc......................................................34
Section 5.4 No Events of Default, Etc.............................................................35
Section 5.5 Financial Statements..................................................................35
Section 5.6 Changes; None Adverse................................................................35
Section 5.7 Title to Assets; Material Leases......................................................35
Section 5.8 Intellectual Property.................................................................35
Section 5.9 Indebtedness for Borrowed Money.......................................................36
Section 5.10 Litigation............................................................................36
Section 5.11 No Materially Adverse Contracts.......................................................36
Section 5.12 Taxes and Tax Returns, Etc............................................................36
Section 5.13 Contracts with Affiliates, Etc........................................................37
Section 5.14 Employee Benefit Plans................................................................37
Section 5.15 Governmental Regulation...............................................................38
Section 5.16 Securities Activities.................................................................38
Section 5.17 Disclosure............................................................................38
Section 5.18 No Material Default...................................................................38
Section 5.19 Environmental Conditions..............................................................38
Section 5.20 Licenses and Permits..................................................................39
Section 5.21 General Collateral Representation.....................................................40
ARTICLE 6. AFFIRMATIVE COVENANTS OF BORROWER..............................................................41
Section 6.1 Reports and Other Information.........................................................41
Section 6.2 Maintenance of Property; Authorization; Insurance.....................................44
Section 6.3 Key Man Life Insurance................................................................45
Section 6.4 Corporate Existence...................................................................46
Section 6.5 Inspection Rights.....................................................................46
Section 6.6 Payment of Taxes and Claims...........................................................46
Section 6.7 Compliance with Laws..................................................................46
Section 6.8 Notice of Other Events................................................................47
Section 6.9 Communication with Accountants........................................................47
Section 6.10 Payment of Indebtedness...............................................................47
Section 6.11 Performance of Obligations Under Certain Documents....................................47
Section 6.12 Governmental Consents and Approvals...................................................47
Section 6.13 Employee Benefit Plans and Guaranteed Pension Plans...................................48
Section 6.14 Further Assurances....................................................................48
Section 6.15 Borrower's Depository Accounts........................................................48
Section 6.16 Use of Proceeds.......................................................................49
Section 6.17 Subsidiaries..........................................................................49
Section 6.18 Acquired Real Property Interests......................................................49
ARTICLE 7. FINANCIAL COVENANTS............................................................................49
Section 7.1 Interest Coverage Ratio...............................................................49
Section 7.2 Credit Agreement Debt to EBITDA.......................................................49
ARTICLE 8. NEGATIVE COVENANTS OF BORROWER.................................................................50
Section 8.1 Limitation on Nature of Business......................................................50
<PAGE>
Section 8.2 Limitation on Fundamental Changes.....................................................50
Section 8.3 Restricted Payments...................................................................50
Section 8.4 Management Compensation...............................................................50
Section 8.5 Limitation on Disposition of Assets...................................................51
Section 8.6 Limitation on Investments.............................................................52
Section 8.7 Acquisition of Margin Securities......................................................52
Section 8.8 Limitation on Mortgages, Liens and Encumbrances.......................................52
Section 8.9 No Additional Negative Pledges........................................................53
Section 8.10 No Restrictions on Subsidiary Distributions to Borrower...............................53
Section 8.11 Limitation on Indebtedness............................................................54
Section 8.12 Limitation on Sales and Leasebacks....................................................54
Section 8.13 Transactions with Affiliates..........................................................54
Section 8.14 No Additional Bank Accounts...........................................................54
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.................................................................55
Section 9.1 Events of Default.....................................................................55
(a) Principal and Interest................................................................55
(b) Representation and Warranties.........................................................55
(c) Certain Covenants.....................................................................55
(d) Other Covenants.......................................................................55
(e) Loan Documents........................................................................55
(f) Litigation............................................................................55
(g) Default by Borrower under other Agreements............................................56
(h) Insolvency............................................................................56
(i) Judgment..............................................................................56
(j) ERISA.................................................................................56
(k) Change of Control.....................................................................57
(l) Material Adverse Change...............................................................57
Section 9.2 Termination of Commitments and Acceleration of Obligations............................57
Section 9.3 Remedies..............................................................................57
Section 9.4 No Implied Waiver; Rights Cumulative..................................................59
Section 9.5 Set-Off; Pro Rata Sharing.............................................................60
ARTICLE 10. CONCERNING THE AGENT AND THE LENDERS...........................................................60
Section 10.1 Appointment of the Agent..............................................................60
Section 10.2 Authority.............................................................................60
Section 10.3 Acceptance of Appointment.............................................................61
Section 10.4 Collateral Matters....................................................................61
Section 10.5 Agency for Perfection.................................................................62
Section 10.6 Application of Moneys.................................................................63
Section 10.7 Reliance by the Agent.................................................................63
Section 10.8 Exculpatory Provisions................................................................63
Section 10.9 Action by the Agent...................................................................64
Section 10.10 Amendments, Waivers and Consents......................................................64
Section 10.11 Indemnification.......................................................................64
Section 10.12 Reimbursement of the Agent............................................................65
<PAGE>
Section 10.13 Sharing of Funds Received.............................................................65
Section 10.14 Dealing with Lenders..................................................................65
Section 10.15 Agent as Lender.......................................................................65
Section 10.16 Duties Not to be Increased............................................................66
Section 10.17 Lender Credit Decisions...............................................................66
Section 10.18 Resignation of Agent..................................................................66
Section 10.19 Assignment of Notes; Participation....................................................66
ARTICLE 11. PROVISIONS OF GENERAL APPLICATION..............................................................67
Section 11.1 Term of Agreement.....................................................................67
Section 11.2 Notices...............................................................................67
Section 11.3 Survival of Representations...........................................................69
Section 11.4 Amendments............................................................................69
Section 11.5 Costs, Expenses, Taxes and Indemnification............................................69
Section 11.6 Language..............................................................................70
Section 11.7 Binding Effect; Assignment............................................................70
Section 11.8 Governing Law; Jurisdiction and Venue.................................................70
Section 11.9 WAIVER OF JURY TRIAL..................................................................71
Section 11.10 Waivers...............................................................................71
Section 11.11 Interpretation and Proof of Loan Documents............................................71
Section 11.12 Integration of Schedules and Exhibits.................................................71
Section 11.13 Headings..............................................................................71
Section 11.14 Counterparts..........................................................................71
Section 11.15 Severability..........................................................................72
Section 11.16 One General Obligation................................................................72
</TABLE>
<PAGE>
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 12,
1998 ("Credit Agreement") is by and among CLEARVIEW CINEMA GROUP, INC., a
Delaware corporation, (hereinafter, together with its successors in title and
assigns called "Borrower"), the banks and lending institutions set forth on
Schedule 1 hereto (the "Lenders") and THE PROVIDENT BANK, an Ohio banking
corporation, ("Provident") executing this Agreement in its capacity of Agent for
the Lenders under this Agreement (hereinafter called "Provident" or "Agent").
BACKGROUND
This Second Amended and Restated Agreement amends and restates in its
entirety the Amended and Restated Credit Agreement dated as of September 12,
1997, as amended by the First Amendment to the Amended and Restated Credit
Agreement dated December 12, 1997, by the Second Amendment to the Amended and
Restated Credit agreement and by the Third Amendment to the Amended and Restated
Credit Agreement dated April 20, 1998 ("Original Credit Agreement"), which
amended and restated in its entirety the Credit Agreement dated as of May 29,
1996 as amended, by and among the borrowers thereto, the banks and lending
institutions set forth on Schedule 1 thereto and Agent.
Certain Subsidiaries of Borrower which were co-borrowers under the
Amended and Restated Credit Agreement are consenting to this Second Amended and
Restated Credit Agreement solely for the purpose of withdrawing as co-borrowers.
Borrower and Lender now wish to amend and restate the Original Credit
Agreement and some of the related documents in accordance with the terms and
provisions hereof.
NOW, THEREFORE, the parties hereto agree to amend and restate the
Original Credit Agreement as follows:
ARTICLE 1.
INTERPRETATION
Section 1.1 Provisions Pertaining to Definitions. For all purposes of
this Credit Agreement (except where such interpretations would be inconsistent
with the context or the subject matter):
(a) The expression "this Agreement" shall mean this Second Amended and
Restated Credit Agreement (including all of the Schedules and Exhibits annexed
hereto) as originally executed, or, if supplemented, amended or restated from
time to time, as so supplemented, amended or restated;
(b) Where appropriate, words importing the singular only shall include
the plural and vice versa, and all references to dollars shall be United States
Dollars; and
<PAGE>
(c) Accounting terms not otherwise defined herein shall have the
meanings customarily given in accordance with Generally Accepted Accounting
Principles (as hereinafter defined) and all financial computations or
determinations to be made under this Agreement shall, unless otherwise
specifically provided herein, be made in accordance with the financial
statements delivered pursuant to Section 5.5 and shall be made on a Consolidated
basis.
Section 1.2 Definitions. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the following meanings in this
Agreement:
"Accountants" mean Price Waterhouse, LLP, or any nationally recognized
firm of certified public accountants selected by Borrower and acceptable to
Agent and Lenders.
"Account Debtor" means any Person obligated for the payment of an
Account.
"Accounts" mean, with respect to any person, such Person's accounts,
rental agreements and other contract rights, rights to payment and other forms
of obligation for the payment of money, whether now existing or existing in the
future, including, without limitation, all (i) accounts receivable (whether or
not specifically listed on schedules furnished to the Agent), all accounts
created by or arising from all of such Person's sales of goods, financial
instruments, documents, permits or other items, or rendition of services,
including funds transfer services, made under any of such Person's trade names
or styles, or through any of such Person's Subsidiaries or divisions, and all
accounts acquired by assignment in the ordinary course of business; (ii) unpaid
seller's rights (including rescission, replevin, reclamation and stopping in
transit) relating to the foregoing or arising therefrom; (iii) rights to any
goods represented by any of the foregoing, including returned or repossessed
goods; (iv) reserves and credit balances held by such Person with respect to any
such accounts receivable or account debtors; (v) guarantees or collateral for
any of the foregoing; and (vi) insurance policies or rights relating to any of
the foregoing.
"Affiliate" means, in relation to any Person (in this definition called
"Affiliated Person"), any Person (i) which (directly or indirectly) controls or
is controlled by or is under common control with such Affiliated Person; or (ii)
which (directly or indirectly) owns or holds five percent (5%) or more of any
equity interest in Borrower; or (iii) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by such
Borrower. For the purposes of this definition, the term "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession (directly
or indirectly) of the power to direct or to cause the direction of the
management or the policies of such Person, whether through the ownership of
shares of any class in the capital or any other voting securities of such Person
or by contract or otherwise.
"Agent" means Provident acting in the capacity as Agent for the Lenders
under the Loan Documents and includes (where the context so admits) any other
Person or Persons succeeding to the functions of Agent under such documents.
<PAGE>
-3-
"Agent Deposit Account" has the meaning set forth in Section 2.3(c)
hereof.
"Agent Disbursement Account" has the meaning set forth in Section
2.3(a) hereof.
"Agreement" or "Credit Agreement" or "Second Amended and Restated
Credit Agreement" means this Agreement and any amendments, extensions, riders,
supplements, schedules, or modifications to or in connection with this
Agreement.
"Assignments of Option and Operating Agreements" means the (i)
Assignment of Option and Operating Agreement from Borrower, CCC Grand Avenue
Cinema Corp. and CCC Port Washington Cinema Corp. to Agent relating to a certain
Agreement among Borrower, CCC Grand Avenue Cinema Corp. and CCC Port Washington
Cinema Corp. and Cinema Grand Avenue, Inc. and Triplex Movies at Port
Washington, Inc. in connection with the operation of and option to purchase
certain theaters located in Long Island, New York and known as the Grand Avenue
Theater and the Post Washington Theater, and (ii) the Assignment of Option and
Operating Agreement from Borrower and CCC Herricks Cinema Corp. to Agent
relating to a certain Agreement among Borrower and CCC Herricks Cinema Corp. and
Cinema Herricks, Inc. in connection with the operation of and option to purchase
a certain theater located in Long Island, New York and known as the Herricks
Theater, each in the form of Exhibit A hereto.
"Assignment of Trademarks" means the Assignment of Trademarks from
Borrower to Agent in the form of Exhibit C hereto.
"Average Daily Loan Balance" means the sum of the unpaid balances of
the Revolving Credit Loan owing by Borrower to Lenders at the end of each day
for the immediately preceding four (4) fiscal quarters ending on the relevant
Computation Date, divided by 365 or 366, as applicable; provided, however, that
during the first Loan Year, such amount shall be calculated from the Closing
Date through the date of such calculation as the sum of the unpaid balances of
the Revolving Credit Loans owing by Borrower to Lender for each day since the
Closing Date divided by the actual number of days elapsed since the Closing
Date.
"Blocked Account Agreement" shall mean the Blocked Account Agreement
between Borrower and Agent, acknowledged by each depository institution,
pursuant to which such financial institutions shall agree not to permit funds in
such bank accounts to be disbursed except to the Agent Disbursement Account, or
any other account maintained at or controlled by the Agent, in the form of
Exhibit D hereto.
"Business Day" means any day other than a Saturday or Sunday on which
commercial banking institutions are open for business in Cincinnati, Ohio.
"Capital Lease" means any lease of Property which has been or is
required to be classified and accounted for as a capital lease obligation on
Borrower's Consolidated financial statements in accordance with GAAP.
<PAGE>
-4-
"Capital Lease Obligation" means any obligation to pay rent or other
amounts under a Capital Lease and, for the purpose of this Agreement, the amount
of such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) or corporate stock, whether
common or preferred, including, without limitation, partnership interests.
"Cash Equivalents" means: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within three (3) months from the date of acquisition thereof;
(ii) investments in certificates of deposit or bankers' acceptances maturing
within three (3) months from the date of acquisition issued by any Lender or any
other commercial bank organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at least Two
Hundred Fifty Million Dollars ($250,000,000); (iii) investments in commercial
paper of any Lender or of any other Person which, at the time of issuance, have
a rating of at least A-1 from Standard & Poor's Corporation or at least P-1 from
Moody's Investors Service, Inc. and maturing not more than six (6) months from
the date of acquisition thereof; (iv) obligations of the type described in (i),
(ii) or (iii) above purchased pursuant to a repurchase agreement obligating the
counterparty to repurchase such obligations not later than thirty (30) days
after the purchase thereof, secured by a fully perfected security interest in
any such obligation, and having a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase obligation of
the issuing bank; and (v) time deposits or Eurodollar time deposits maturing no
more than thirty (30) days from the date of creation with commercial banks
having membership in the Federal Deposit Insurance Corporation in amounts not
exceeding the lesser of One Hundred Thousand Dollars ($100,000) or the maximum
insurance applicable to the aggregate amount of such Person's deposits in such
institution.
"Casualty Loss" means any occurrence or event pursuant to which any
asset or property owned or used by Borrower is (i) damaged or destroyed, or
suffers any other loss, or (ii) condemned, confiscated or otherwise taken, in
whole or in part, or the use thereof is otherwise diminished so as to render
impracticable or unreasonable the use of such asset or property for the purposes
to which such asset or property were used immediately prior to such
condemnation, confiscation or taking, by exercise of the powers of condemnation
or eminent domain or otherwise, and in either case the amount of the damage,
destruction, loss or diminution in value is in excess of One Hundred Thousand
Dollars ($100,000).
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Borrower and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principal (as defined below) or a Related Party (as defined
below) or the Principal, (ii) the adoption of a plan relating to the liquidation
or dissolution of the Borrower, (iii)
<PAGE>
-5-
the consummation of any transaction (including, without limitation, any merger
or consolidation) the result of which is that (A) any "person" (as defined
above), other than the Principal and its Related Parties, becomes the
"beneficial owner" (as such terms is defined in Rule 13d-3 and Rule 13d-5) under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition), directly or indirectly, of more than 40% of the
Voting Stock of the Borrower (measured by voting power rather than number of
shares) and (B) the Principal and its Related Parties "beneficially own" (as
defined above), directly or indirectly, in the aggregate a lesser percentage of
the Voting Stock of the Borrower (measured by voting power rather than number of
shares) than any such "person" (as defined above), (iv) the first day on which a
majority of the members of the Board of Directors of the Borrower are not
Continuing Directors (as defined below) or (v) the Borrower consolidates with,
or merges with or into, any Person, or any Person consolidates with, or merges
with or into, the Borrower, in any such event pursuant to a transaction in which
any of the outstanding Voting Stock of the Borrower is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the Voting Stock of the Borrower outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such issuance).
"Chattel Paper" means any "chattel paper" as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired.
"Closing Date" means the date the loans are made pursuant to the
Amended and Restated Credit Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor federal tax code, and any reference
to any statutory provision shall be deemed to be a reference to any successor
provision or provisions.
"Collateral" means all Accounts, Inventory, Equipment, General
Intangibles, fixtures, goods, motor vehicles, leasehold improvements, Documents,
Instruments, Chattel Paper, Intellectual Property, inventory subject to leases
and rights under lease agreements for the leasing of inventory, money, deposit
accounts, rights to draw on letters of credit, permits, licenses and the cash or
noncash Proceeds (including insurance or other rights to receive payment with
respect thereto) of any of the foregoing and all accessions and additions to and
replacements of the foregoing, and all books and records (including, without
limitation, customer lists, credit files, computer programs, printouts and other
computer materials and records of Borrower and its Subsidiaries) pertaining to
any of the foregoing or any of the Premises (herein, together with the real
property, buildings and fixtures described in the Mortgages, and all other
property and rights assigned by Borrower or any Subsidiary to Agent, on behalf
of the Lenders, to secure Borrower's obligations under the Loan Documents).
<PAGE>
-6-
"Compliance Certificate" means a certificate, substantially in the form
of Exhibit E hereto, pursuant to which Borrower shall certify its compliance
with the covenants of this Agreement.
"Computation Date" means the last day of each March, June, September
and December.
"Consolidated" means, with respect to any accounting matter or amount,
such matter or amount computed on a consolidated basis for Borrower, as the case
may be, and any Subsidiaries in accordance with GAAP.
"Consolidated Cash Interest Expense" means, for any period, the total
amount of all charges for the use of funds (whether characterized as interest or
otherwise) payable in cash during such period with respect to all Consolidated
Credit Agreement Indebtedness for Borrowed Money of Borrower and its
Subsidiaries for such period.
"Consolidated Credit Agreement Indebtedness for Borrowed Money" means
the aggregate amount of Indebtedness for Borrowed Money outstanding under the
Credit Agreement.
"Contingent Obligation" means any direct or indirect liability,
contingent or otherwise, with respect to any Indebtedness, lease, dividend,
letter of credit, banker's acceptance or other obligation of another Person if
the primary purpose or intent thereof in incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another Person that
such obligation of another Person will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof. Contingent Obligations shall include, without limitation, (i) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another
Person; (ii) any liability for the obligations of another Person through any
agreement (contingent or otherwise) (A) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), (B) to maintain the
solvency of any balance sheet item, level of income or financial condition of
another, or (C) to make take-or-pay, pay-or-play or similar payments if required
regardless of nonperformance by any other party or parties to an agreement, if
in the case of any agreement described under subclauses (A), (B) or (C) of this
sentence the primary purpose or intent thereof is as described in the preceding
sentence. The dollar amount of any Contingent Obligation shall be equal to the
lesser of the dollar amount of the obligation or portion of the obligation so
guaranteed or otherwise supported.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Borrower who (i) was a member of such
Board of Directors on the Closing Date, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) is a designee of the Principal or was nominated
by the Principal.
<PAGE>
-7-
"Credit Commitment" means, in relation to any particular Lender, the
maximum amount with respect to the Revolving Credit Loan to be loaned by such
Lender to Borrower as set forth on Schedule 1 hereto.
"Current Assets" and "Current Liabilities" mean at any time, all assets
or liabilities, respectively, that, in accordance with GAAP should be classified
as current assets or current liabilities, respectively, on Borrower's
Consolidated balance sheet.
"Default" means any event or occurrence which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
"Default Interest Rate" means an annual rate of interest which shall
(to the extent permitted by applicable law) at all times be equal to two percent
(2%) above the applicable Interest Rate for a Loan.
"Disqualified Stock" shall have the meaning set forth in the Indenture.
"Documents" mean any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or existing or hereafter arising or acquired.
"Draw Date" means in relation to any Revolving Credit Loan, the day on
which such Loan is made or to be made to Borrower pursuant to this Agreement.
"EBITDA" for any period shall mean, on a Consolidated basis and without
duplication, (i) Net Income; plus (ii) for such period any Interest Expense
deducted in the determination of Net Income; plus (iii) any income and franchise
taxes paid in cash and included in the determination of Net Income; plus (iv)
amortization and depreciation and other non-cash charges deducted in determining
Net Income for such period; plus (v) extraordinary losses, losses on sales of
assets (other than sales of inventory in the ordinary course of business) and
unrealized gains from changes in currency; minus (vi) the sum for such period of
interest income, extraordinary gains, gains from sales of assets (other than
sales of inventory in the ordinary course of business) and unrealized losses
from changes in currency; plus (vii) premiums on life insurance purchased
pursuant to Section 6.3 of this Agreement; plus (viii) options payments approved
by Agent made with respect to acquisitions of theater locations; plus (ix)
advisory fees paid to MidMark not in violation of this Agreement; provided, that
in calculating EBITDA with respect to newly-acquired or developed theaters,
actual historical financial data of newly-acquired theaters prior to their
acquisition by Borrower shall be included in the determination of EBITDA and pro
forma financial projections for developed theaters, determined in a manner
approved by Agent, shall be included in the determination of EBITDA for periods
in which calculations of actual financial data are not available.
"Employee Benefit Plan" means an "employee benefit plan" as defined in
Section 3(3) of ERISA.
<PAGE>
-8-
"Environmental Indemnity Agreement" means the Environmental Indemnity
Agreement among Agent and Borrower relating to the Premises, substantially in
the form of Exhibit F hereto, and any amendments, modifications, supplements or
restatements thereto.
"Environmental Laws" means individually or collectively any local,
state or federal law, statute, rule, regulation, order, ordinance, common law,
permit or license term or condition, or state superlien or environmental
clean-up or disclosure statutes pertaining to the environment or to
environmental contamination, regulation, management, control, treatment,
storage, disposal, containment, removal, clean-up, reporting, or disclosure,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as now or hereafter amended
(including, but not limited to, the Superfund Amendments and Reauthorization Act
("SARA")); the Resource Conservation and Recovery Act ("RCRA"), as now or
hereafter amended (including, but not limited to, the Hazardous and Solid Waste
Amendments of 1984); the Toxic Substances Control Act ("TSCA"), as now or
hereafter amended; the Clean Water Act, as now or hereafter amended; the Safe
Drinking Water Act, as now or hereafter amended; or the Clean Air Act, as now or
hereafter amended.
"Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the UCC, now owned or hereafter acquired and shall include, without
limitation, any and all additions, substitutions, and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts
and accessories installed thereon or affixed thereto.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock or that are measured by the value of
Capital Stock (but excluding any debt security that is convertible into, or
exchangeable for Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974 and
regulations issued thereunder, as amended from time to time and any successor
statute.
"ERISA Affiliate" means, in relation to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is considered under common control within the
meaning of the regulations promulgated under Section 414 of the Code.
"ERISA Liabilities" means the aggregate of all unfunded vested benefits
under any employee pension benefit plan, within the meaning of Section 3(2) of
ERISA, of Borrower or any ERISA Affiliate of Borrower under any Plan covered by
ERISA that is not a Multiemployer Plan and all potential withdrawal liabilities
of any thereof under all Multiemployer Plans.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event of Default" means any event or condition described in Section
9.1 of this Agreement.
<PAGE>
-9-
"Extraordinary Disposition" means, with respect to Borrower and any
Subsidiary, the sale, lease, transfer or other disposition of assets, other than
assets transferred or disposed in the ordinary course of business, whether by
way of the sale of assets or the sale of stock or other rights in which Borrower
or such Subsidiary has any ownership interest, and whether in one transaction or
a series of related or unrelated transactions.
"General Intangibles" means any "general intangibles" as such term is
defined in Section 9-106 of the UCC, now owned or hereafter acquired and, in any
event, shall include, without limitation, all right, title and interest now in
existence or hereafter arising in or to all customer lists, trademarks, patents,
rights in intellectual property, trade names, copyrights, trade secrets,
proprietary or confidential information, inventions and technical information,
procedures, designs, knowledge, know-how, software, data bases, data, processes,
models, drawings, materials, and records now owned or hereafter acquired, and
any and all goodwill and rights of indemnification.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States of America in effect from
time to time, consistently applied.
"Guaranteed Pension Plan" means any pension plan maintained by Borrower
or an ERISA Affiliate of Borrower, or to which Borrower or an ERISA Affiliate
contributes, some or all of the benefits, under which benefits are guaranteed by
the United States Pension Benefit Guaranty Corporation ("PBGC").
"Hazardous Substances" means any and all hazardous and toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including, but not limited to, polychlorinated biphenyls, friable
asbestos, volatile and semi-volatile organic compounds, oils, petroleum products
and fractions, and any materials which include hazardous constituents or become
hazardous, toxic, or dangerous when their composition or state is changed), or
any other similar substances or materials which are included under or regulated
by any Environmental Law.
"Head Office" means, in relation to the Agent, the head office of The
Provident Bank located at One East Fourth Street, Cincinnati, Ohio 45202 or such
office designated in writing to Borrower and Lenders by The Provident Bank or
any successor Agent.
"Indebtedness" means, subject to the provisions stated hereinafter, in
relation to any Person, at any particular time, all of the obligations of such
Person which, in accordance with GAAP, would be classified as indebtedness on a
Consolidated balance sheet including any footnote thereto of such Person
prepared at such time, and in any event shall include, without limitation, and
without duplication:
(i) all indebtedness of such Person arising or
incurred under or in respect of (A) any guaranties (whether direct or
indirect) by such Person of the indebtedness, obligations or
liabilities of any other Person, or (B) any endorsement by such Person
of any of the indebtedness, obligations or liabilities of any other
Person (otherwise than as an endorser of negotiable instruments
received in the ordinary course of business and presented to commercial
banks for collection of deposit), or (C) the discount by such Person,
with recourse to such Person, of any of the indebtedness, obligations
or liabilities of any other Person;
<PAGE>
-10-
(ii) all indebtedness of such Person arising or
incurred under or in respect of any agreement, contingent or otherwise
made by such Person (A) to purchase any indebtedness of any other
Person or to advance or supply funds to the payment or purchase of any
indebtedness of any other Person, or (B) to purchase, sell or lease (as
lessee or lessor) Property, products, materials or supplies or to
purchase or sell transportation or services, primarily for the purpose
of enabling any other Person to make payment of any indebtedness of
such other Person or to assure the owner of such other Person's
indebtedness against loss, regardless of the delivery or non-delivery
of the Property, products, materials or supplies or the furnishing or
non-furnishing of the transportation or services, or (C) to make any
loan, advance, capital contribution or other investment in any other
Person for the purpose of assuring a minimum equity, asset base,
working capital or other balance sheet condition for or as at any date,
or to provide funds for the payment of any liability, dividend or stock
liquidation payment, or otherwise to supply funds to or in any manner
invest in any other Person;
(iii) all indebtedness, obligations and liabilities
secured by or arising under or in respect of any Lien, upon or in
Property owned by such Person, even though such Person has not assumed
or become liable for the payment of such indebtedness, obligations and
liabilities;
(iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to
Property acquired by such Person, even though the rights and remedies
of the seller or lender (or lessor) under such agreement in the event
of default are limited to repossession or sale of such Property; and
(v) all indebtedness arising or incurred under or in
respect of any Contingent Obligation.
provided, however, that the foregoing definition of
Indebtedness shall not include any guaranties by Borrower with respect
to obligations of a Subsidiary Guarantor.
Notwithstanding anything herein to the contrary, the definition of
"Indebtedness" shall exclude any and all amounts payable with respect to Class B
Nonvoting Cumulative Redeemable Preferred Stock issued by Borrower (as described
in Exhibit N hereto) (the "Class B Stock") or the Class C Convertible Preferred
Stock issued by Borrower (as described in Exhibit O hereto) (the "Class C
Stock"), whether by way of dividend, redemption or repurchase obligations or
payments or other obligations or payments related to Class B Stock or Class C
Stock or contracts and agreements related to the issuance of such stock.
<PAGE>
-11-
"Indebtedness for Borrowed Money" means at any particular time, all
Indebtedness (i) in respect of any money borrowed; (ii) under or in respect of
any Contingent Obligation (whether direct or indirect) of any money borrowed;
(iii) evidenced by any loan or credit agreement, promissory note, debenture,
bond, guaranty or other similar written obligation to pay money; or (iv) Capital
Lease Obligations.
"Indenture" means that certain Indenture between Borrower, certain
Subsidiaries of Borrower and the Bank of New York, as trustee, with respect to
those certain 10.875% Senior Notes due 2008 in the aggregate principal amount of
$80,000,000.
"Instruments" mean any "instrument," as such term is defined in Section
9-105(1)(i) of the UCC, now owned or hereafter acquired.
"Intellectual Property" shall mean all Patents and all Trademarks,
together with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b) all licenses or user or other
agreements granted to any obligor with respect to any of the foregoing, in each
case whether now or thereafter owned or used including, without limitation, the
licenses or other agreements with respect to the Trademarks, set forth on
Schedule 5.8 hereto; (c) all information, customer lists, identification of
suppliers, data, plans, blueprints, specifications, designs, drawings, recorded
knowledge, surveys, engineering reports, test reports, manuals, materials
standards, processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data, sales data
and other information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media on which or in which
any information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of governmental agencies now or hereafter held by
Borrower; and (g) all causes of action, claims and warranties now or hereafter
owned or acquired by Borrower in respect of any of the items listed above.
"Interest Expense" means, for any period, the total amount of all
charges for the use of funds (whether characterized as interest or otherwise)
payable during such period with respect to all Indebtedness for Borrowed Money
of Borrower for such period, including the amortization of debt discounts and
the amortization of all fees payable in connection with the incurrence of such
Indebtedness.
"Interest Rate" means the rate of interest per annum equal to the Prime
Rate.
"Inventory" means, with respect to any Person, such Person's inventory,
including without limitation: (i) all raw materials, work in process, parts,
components, assemblies, supplies and materials used or consumed in such Person's
business, wherever located and whether in the possession of such Person or any
other Person; (ii) all goods, wares and merchandise, finished or unfinished,
held for sale or lease or leased or furnished or to be furnished under contracts
of service, wherever located and whether in the possession of such Person or any
other Person; and (iii) all goods returned to or repossessed by such Person.
<PAGE>
-12-
"Investment" means all investments in any other Person by stock
purchase, capital contribution, loan, advance, guaranty of any Indebtedness or
creation or assumption of any other liability in respect of any Indebtedness of
such other Person (including, without limitation, any liability of any kind
described in clause (i) or (ii) of the definition of the term "Indebtedness" set
forth in this Section), or the transfer or sale of Property (otherwise than in
the ordinary course of the business) to any other Person for less than payment
in full in cash of the transfer or sale price or the fair value thereof
(whichever of such price or value is higher).
"Issuing Bank" means Provident or such other Lender as shall issue any
Letter of Credit hereunder.
"Leasehold Mortgages" means the Leasehold Mortgages existing on the
date of this Agreement granted by Borrower or any Subsidiary to Agent to secure
the Loans in the form of Exhibit H hereto and as they may be amended or
supplemented from time to time.
"Legal Requirements" means all applicable laws, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, arbitral awards, permits,
licenses, authorizations, directions and requirements of all governments,
departments, commissions, boards, courts, authorities, agencies, and officials
and officers thereof, that are now or at any time in the future in effect.
"Lenders" mean collectively each of the banks or lending institutions
set forth on Schedule 1 hereto and their respective successors and assigns; and
"Lender" means any one of the Lenders.
"Liabilities" means all indebtedness, obligations and other liabilities
of Borrower and its Subsidiaries on a Consolidated basis whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, secured or unsecured arising by contract,
operation of law or otherwise, classified as liabilities in accordance with GAAP
on a Consolidated balance sheet of Borrower.
"Licenses and Permits" means all licenses, permits, registrations and
recordings thereof and all applications incorporated into for such licenses,
permits and registrations now owned or hereafter acquired by Borrower and
required from time to time for the business operations of Borrower.
"Lien" means any lien, mortgage, pledge, security interest, charge or
other encumbrance of any kind including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest.
"Litigation" has the meaning set forth in Section 5.10 hereof.
<PAGE>
-13-
"Letter of Credit Fee" means the fee charged by the Lender for the
issuance of a Letter of Credit pursuant to Section 2.12(g) hereof.
"Letters of Credit" means the letters of credit issued by Lender at any
time pursuant to Section 2.4 hereof.
"Loan Documents" mean this Agreement, the Notes, the Letters of Credit,
the Security Documents, and any other agreement, instrument, certificate or
document executed in connection with or pursuant to this Credit Agreement, as
amended whether concurrently herewith or subsequent hereto, and as they may
hereafter from time to time be amended, modified, supplemented, restated, and/or
renewed.
"Loans" mean, collectively, the Revolving Credit Loan, each singly a
"Loan" made or to be made to Borrower by the Lenders pursuant to this Agreement.
"Loan Year" means each period of twelve (12) consecutive months,
commencing on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means any event which will, or is reasonably
likely to, have a material adverse effect upon the Collateral or upon the
financial condition, operations, assets or prospects in the aggregate of the
Borrower and its Subsidiaries taken as a whole.
"Material Lease" means any lease under which Borrower shall lease (as
lessee) or acquire the right to possess and/or use any Real Estate or other
Property or any other similar agreement (whether written or oral) pursuant to
which Borrower pays an annual lease payment or rental payment equal to or
greater than One Hundred Thousand Dollars ($100,000) or which otherwise is
material to the operation of the business of Borrower.
"Maximum Revolving Commitment" means Fifteen Million and 00/100 Dollars
($15,000,000.00).
"MidMark" means MidMark Capital, L.P., a Delaware limited partnership,
whose general partner is MidMark Associates, Inc., a New Jersey corporation.
"Mortgages" means the real estate mortgages or deeds of trust granted
from time to time by Borrower and any Subsidiary to Agent to secure the Loans,
substantially in the form of Exhibit I hereto, and as they may be amended or
supplemented from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of Borrower, or any ERISA
Affiliate of Borrower.
"Net Income" means, for any period, the aggregate of the net income (or
net loss) of Borrower and is Subsidiaries on a Consolidated basis for such
period, determined in accordance with
<PAGE>
-14-
GAAP, but excluding, without duplication: (i) the income of any Person in which
Borrower has an ownership interest (other than a Subsidiary), unless received by
such Borrower in a cash distribution; (ii) any net after-tax gains or losses
attributable to dispositions of assets; (iii) the income of any Subsidiary of
Borrower to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at that time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary; and (iv) any after-tax extraordinary non-cash gains or extraordinary
non-cash losses.
"Net Proceeds" means the aggregate proceeds paid in cash or Cash
Equivalents received by Borrower in excess of One Hundred Thousand Dollars
($100,000) in respect of any Extraordinary Disposition, net of direct costs
relating to such Extraordinary Disposition (including without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred or existing as a result thereof, taxes paid or
payable as a result thereof (after taking into account any available tax credits
or deductions in any tax sharing arrangements), amounts required to be applied
in payment of Indebtedness secured by a Lien incurred in accordance with this
Agreement on the assets or assets that are subject of such Extraordinary
Disposition and which Indebtedness is required pursuant to the terms of the
instrument governing such Indebtedness or Lien or in order to obtain the
necessary consent to such sale to be repaid in connection with such
Extraordinary Disposition and any reserve for adjustment in respect of the sale
price of or other liability in respect of such asset or assets.
"Notes" mean, collectively, the Revolving Credit Notes. "Note" shall
mean any one of the Notes, unless specifically identified.
"Obligations" means, collectively, all of the indebtedness,
obligations, covenants, promises, agreements, and liabilities existing on the
date hereof or arising from time to time hereafter, whether direct, indirect,
absolute, contingent, joint or several, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, of Borrower or any of its Subsidiaries to the Agent or any Lenders
(i) in respect of the Loans made pursuant to this Agreement; or (ii) under or in
respect of any one or more of the Loan Documents. Obligations shall also include
all interest, charges and other fees chargeable hereunder to Borrower or due
hereunder from Borrower to Lenders from time to time and all costs and expenses
referred to in Section 11.5 hereof.
"Original Closing Date" means the day on which the original Loan were
made pursuant to the Original Credit Agreement.
"Participation Percentage" means, in relation to each Lender, the
percentage set forth with respect to such Lender set forth on Schedule 1 hereto
with respect to each Loan.
"Permitted First Liens" means those Liens identified in Sections
8.8(a), 8.8(d), and those Liens set forth on Schedule 8.8(g).
<PAGE>
-15-
"Permitted Liens" means those Liens and encumbrances permitted
hereunder pursuant to Section 8.8.
"Person" shall include an individual, a company, a corporation, an
association, a partnership, a joint venture, an unincorporated trade or business
enterprise, a trust, an estate, or other legal entity or a government (national,
regional or local), court, arbitrator or any agency, instrumentality or official
of the foregoing.
"Pledge Agreement" means a stock pledge agreement or agreements
substantially in the form of Exhibit J hereto.
"Pledged Stock" means all of the Capital Stock of each Subsidiary of
Borrower whether now existing or hereafter formed or acquired.
"Premises" means collectively, all real property and leasehold
interests now or hereafter acquired by Borrower or any Subsidiary or Borrower,
including, without limitation, all the Premises as defined in the Mortgages and
the Leasehold Mortgages.
"Prime Rate" means the rate of interest announced from time to time by
Agent as its prime rate at its Head Office, whether or not Agent shall at times
lend to other borrowers at lower rates of interest, or, if there is no such
prime rate, then such other rate as may be substituted by Agent for its Prime
Rate.
"Principal" means A. Dale Mayo.
"Proceeds" means "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty, or guaranty payable
from time to time with respect to any of the Collateral, and (ii) any and all
payments (in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure, or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau, or agency (or any Person acting under color of governmental
authority).
"Projections" means Borrower's forecasted Consolidated and
consolidating: (a) balance sheets, (b) profit and loss statements, and (c) cash
flow statements, all prepared on a division by division and Subsidiary by
Subsidiary basis and otherwise consistent with Borrower's historical financial
statements, together with, if requested by Agent, appropriate supporting details
and statements of underlying assumptions.
"Property" means all types of real, personal, tangible, intangible or
mixed property whether owned or leased by Borrower or a Subsidiary of Borrower.
<PAGE>
-16-
"Pro Rata Share" means, in relation to any particular item, the share
of any Lender in such item, which shall be in the same proportion which the
aggregate amount of all of the obligations owing to such Lender with respect to
such item at such time shall bear to the aggregate amount of all of the
obligations owing to all of the Lenders with respect to such item at such time
net of any and all charges or fees due and payable to Agent under the Loan
Documents.
"Real Estate" means all real property owned or leased by Borrower or
any Subsidiary and all real property hereafter acquired or leased by Borrower or
any Subsidiary of Borrower, together with all fixtures, rights of way,
privileges, liberties, tenements, hereditaments, and appurtenances belonging or
in any way appertaining thereto, all easements now or hereafter benefiting such
real property and all royalties and rights appertaining to the use and enjoyment
of such real property, together with all of the buildings, structures, and other
improvements thereto.
"Reference Period" means, with respect to a particular Computation
Date, the period of twelve (12) calendar months ending on such Computation Date.
"Reimbursement Obligations" means any amounts owing by Borrower to the
Lender on account of draws or disbursements under or with respect to the Letters
of Credit.
"Related Party" with respect to the Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"Requisite Lenders" means at such times as there are any Loans
outstanding, the Lenders whose aggregate Pro Rata Shares of the outstanding
Loans are greater than or equal to sixty-six and two-thirds percent (66 2/3%) of
the aggregate amount of the outstanding Loans, and at all other times, the
Lenders whose aggregate Credit Commitments are greater than or equal to
sixty-six and two-thirds percent (66 2/3%) of the aggregate Credit Commitments
of all the Lenders; provided, however, that so long as there are less than three
Lenders, Requisite Lenders shall mean all of the Lenders.
"Restricted Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that class;
(b) any redemption, conversion, exchange, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Borrower or any of its Subsidiaries now or
hereafter outstanding; (c) any payment or prepayment of principal of, premium,
if any, or interest on, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any subordinated
indebtedness; and (d) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other
<PAGE>
-17-
rights to acquire shares of any class of stock of Borrower or any of its
Subsidiaries now or hereafter outstanding. Notwithstanding anything herein to
the contrary, the definition of "Restricted Payment" shall exclude any amounts
paid or payable with respect to the Class B Stock (including amounts escrowed
with respect to contingent issuance of 750 shares of Class B Stock) or the Class
C Stock, whether by way of dividends, redemption or repurchase obligations or
payments or other obligations or payments related to Class B Stock or Class C
Stock or contracts and agreements related to the issuance of such stock.
"Revolving Credit Loan" means all Loans outstanding from time to time
made pursuant to Sections 2.2 and 2.3 hereof and any amounts added to the
principal balance of the Revolving Credit Loan pursuant to this Agreement.
"Revolving Credit Notes" means, collectively, with respect to the
Revolving Credit Loan the promissory notes of Borrower, in the face amounts of
the Revolving Credit Commitment of the respective Lenders in or substantially in
the form of Exhibit K hereto. "Revolving Credit Note" shall mean any one of the
Revolving Credit Notes.
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Senior Notes" means the 10.875% Senior Notes due June 1, 2008, in
original principal amount of $80,000,000 issued pursuant to the Indenture."
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participation
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Security Documents" shall mean, collectively, this Agreement, the
Subsidiary Guaranty Agreements, the Subsidiary Security Agreements, the
Subsidiary Guaranty Agreements, the Leasehold Mortgages, the Mortgages, the
Environmental Indemnity Agreement, the Assignments of Option and Operating
Agreements, the Pledge Agreements, the Assignments of Trademarks, each other
agreement, assignment or instrument creating or purporting to create a lien in
favor of Agent for the ratable benefit of the Lenders, and each individually a
"Security Document."
"Subordinated Debt" or "Subordinated Indebtedness" means Indebtedness
of the Borrower the payment of which is subordinate to Borrower's Obligations to
the Agent and the Lenders.
"Subordination Agreement" shall mean an agreement among Agent on behalf
of Lenders, the Borrower, and the holder of Subordinated Indebtedness pursuant
to which such holder subordinates such Indebtedness to the Obligations under
terms and conditions reasonably acceptable to the Agent.
<PAGE>
-18-
"Subsidiary" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of Borrower (including Borrower).
"Subsidiary Guaranty Agreements" means each of the Guaranty Agreements,
substantially in the form of Exhibit P hereto, executed by each of the
Subsidiaries of Borrower including, without limitation, those Subsidiaries
listed on Schedule 5.1(c) attached hereto, as the same may be amended, modified,
supplemented as restated from time to time.
"Subsidiary Security Agreements" mean each of the Security Agreements
in the form of Exhibit Q hereto, executed by each of the Subsidiaries of
Borrower including, without limitation, those Subsidiaries listed on Schedule
5.1(c) attached hereto, as the same may be amended, modified, supplemented as
restated from time to time.
"Termination Date" means the earlier of (i) June 30, 2003; (ii) the
date upon which the entire principal of and accrued and unpaid interest on the
Notes shall become due pursuant to the provisions hereof (whether as a result of
acceleration by Agent or the Requisite Lenders or otherwise); or (iii) the date
upon which the Credit Commitments terminate pursuant to Section 9.2 hereof.
"Termination Event" means (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, but not including any such
event for which the 30 day notice requirement has been waived by applicable PBGC
regulation; or (ii) the withdrawal of Borrower or an ERISA Affiliate of Borrower
from a Guaranteed Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; or (iii) the filing of a
notice of intent to terminate a Guaranteed Pension Plan or the treatment of a
Guaranteed Pension Plan amendment as a termination under Section 4041 of ERISA;
or (iv) the institution of proceedings to terminate a Guaranteed Pension Plan by
the Pension Benefit Guaranty Corporation; or (v) the withdrawal or partial
withdrawal of Borrower or an ERISA Affiliate of Borrower from a Multiemployer
Plan; or (vi) any other event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Guaranteed Pension Plan.
"Trademarks" shall mean all of the following in which Borrower now
holds or hereafter acquires any interest: (i) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof or any other country, and (ii) all
reissues, extensions or renewals thereof.
<PAGE>
-19-
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of Ohio; provided, however, that in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, or priority of Lender's security interest in any of the Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Ohio, the term "UCC" shall mean the Uniform Commercial Code as
in effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection, or priority and for purposes of
definitions related to such provisions.
"UCC Financing Statements" mean the UCC financing statements naming the
Borrower, as debtor, and Agent, for the ratable benefit of Lenders, as creditor,
which UCC financing statements describe all or some portion of the Collateral
and which together perfect Agent's security interest in the Collateral, which
security interests can be perfected by the filing of such financing statement.
"Voting Stock" means of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
ARTICLE 20
THE LOANS
Section 2.1 Commitments. Each Lender, severally and not jointly,
agrees, upon the terms and subject to the conditions contained in this
Agreement, to make the Revolving Credit Loans to Borrower 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 Borrower on each occasion upon satisfaction of the conditions
contained in Article 4 of this Agreement.
Section 2.2 Revolving Credit Loan. Each Lender will, subject to all of
the applicable terms and conditions of this Agreement, make an amount equal to
its Participation Percentage in each Revolving Credit Loan available to Borrower
at such times and in such amount as shall be requested by Borrower in compliance
with Section 2.3, and Borrower may borrow on a revolving basis from Lenders on
the Closing Date and from time to time thereafter, sums not to exceed the
Maximum Revolving Commitment. Borrower may borrow, repay and reborrow hereunder
on and after the date hereof until the Termination Date, subject to the terms,
provisions and limitations set forth herein. Amounts repaid hereunder after the
Termination Date may not be reborrowed.
<PAGE>
-20-
Section 2.3 Draws, Advances and Settlement of Payments and Advances.
(a) All advances or disbursements of the Revolving Credit Loan proceeds
shall be effectuated at Borrower's request either through wire transfer or by
receipt by Agent of a check drawn on a central disbursement account (the "Agent
Disbursement Account") of Borrower maintained with Agent. Any request for
advance by wire transfer may be transmitted to Agent at its Head Office via
facsimile provided Borrower immediately notifies Agent by telephone of such
transmission. All such requests for wire transfer advances shall be made to and
received by Agent not later than 10:00 a.m. Cincinnati, Ohio time on the Draw
Date specified on such request and each such check or wire transfer request
shall be deemed to be a request for an advance on the Revolving Credit Loan on
the date when received and processed by Agent. Borrower hereby designates its
President, Treasurer or Chief Financial Officer (or any other officer authorized
by Borrower and designated as such to Agent) acting individually or jointly to
make all requests for draws and advances.
(b) The Agent shall promptly notify each Lender of its Participation
Percentage of each requested Revolving Credit Loan and the date of such
borrowing. On the borrowing date specified in such notice, each Lender shall
make its share of the borrowing available at the Head Office of the Agent for
deposit to such account as the Agent shall designate, no later than 1:00 p.m.
Cincinnati time in Federal or other immediately available funds. Upon receipt of
the funds to be made available by Lenders to fund any Revolving Credit Loan
hereunder, the Agent shall disburse such funds by depositing them into the Agent
Disbursement Account.
(c) Each bank or other financial institution, other than Provident,
with which Borrower maintains an account for the deposit of funds shall execute
a Blocked Account Agreement pursuant to which such bank or other financial
institution shall agree to direct all funds to an account at Agent's Head Office
(the "Agent Deposit Account"). All deposits to the Agent Deposit Account shall
be the property of Agent for the benefit of Lenders and shall not be commingled
with Borrower's other funds or be deposited in any bank account of Borrower, or
used in any manner except to pay the Obligations. Agent shall, at the close of
business on each Business Day, automatically debit the Agent Deposit Account and
apply the proceeds against the Loans and other Obligations pursuant to the
provisions of Section 2.7(b). So long as no Event of Default shall have occurred
and be continuing, if funds remain in the Agent Deposit Account following the
application provided for in the preceding sentence, the balance will be promptly
transferred to the Agent Disbursement Account. The crediting of items deposited
in the Agent Deposit Account to the reduction of the Loans shall be conditioned
upon final payment of the item and if any item is not so paid, the amount of any
credit given for it may be charged to the Loans or to any other deposit account
of Borrower, whether or not the item is returned.
Section 2.4 The Notes. The absolute and unconditional obligation of
Borrower to repay to each Lender its respective Pro Rata Share of the principal
of each Loan and the interest thereon shall be evidenced by a separate Revolving
Credit Note for each Lender in the amount of its respective Credit Commitment
for each Loan.
<PAGE>
-21-
All payments under the Notes shall be made to Agent at its Head Office,
for the account of Lenders, and Agent shall allocate all payments on each Loan
received from Borrower among all Lenders in accordance with each Lender's Pro
Rata Share of such Loan in accordance with Section 2.7(b).
Section 2.5 Interest Payable on the Loans.
(a) Determination of Interest Rate. Agent shall determine the Interest
Rate in effect from time to time in accordance with the terms of this Agreement.
Any change in the Interest Rate shall, for all purposes of this Agreement and
any of the other Loan Documents, become effective on the effective date of such
change as announced by Agent in accordance with Agent's customary practices.
(b) Monthly Installments. Borrower shall pay to Agent, for the account
of Lenders in accordance with their respective Pro Rata Share of such Loan,
monthly in arrears on the first Business Day of each month commencing with the
month following the month in which the Closing Date falls, interest on the
outstanding principal amount of the Loans at the annual rate equal to the
Interest Rate applicable to each such Loan.
(c) Interest on Overdue Payments; Default Interest Rate. Upon the
occurrence and during the continuance of any Event of Default, or if the Agent
exercises its rights hereunder to accelerate any of the Notes pursuant to
Section 9.2(b), the outstanding principal and all accrued and unpaid interest,
as well as any other Obligations due Lenders or Agent hereunder or under any
Loan Document, shall bear interest at the Default Interest Rate, from the date
on which such amount shall have first become due and payable to Lenders or Agent
or the date on which such Event of Default shall have occurred, to the date on
which such amount shall be paid to Lenders or Agent (whether before or after
judgment) or such Event of Default shall have been otherwise waived or cured.
Interest will continue to accrue until the Obligations in respect of the payment
are discharged (whether before or after judgment).
Section 2.6 Repayments and Prepayments of Principal.
(a) Commitment Reduction. Borrower may, upon written notice to Agent,
reduce in part or in whole the Credit Commitment hereunder (and the Unused Fee
with respect to such reductions for periods following the effective date of such
reductions), provided, however, that (a) each such reduction shall be not less
than $500,000 and integral multiples of $100,000 in excess thereof, (b) if the
effective date of any such reduction is prior to the first anniversary of the
Closing Date, Borrower shall pay a Credit Commitment reduction fee to Agent
equal to One percent (1%) of the amount of such Credit Commitment reduction, and
(c) if the effective date of any such reduction is on or after the first
anniversary of the Closing Date and prior to the second anniversary of the
Closing Date, Borrower shall pay a Credit Commitment reduction fee to Agent
equal to one-half of one percent (0.5%) of the amount of such Credit Commitment
reduction. No Credit Commitment reduction fee shall be payable with respect to
Credit Commitment reductions where the effective date of such reduction is on or
after the second anniversary of the Closing Date.
<PAGE>
-22-
(b) Revolving Credit Loan Overadvance. If at any time the aggregate
amount of the Revolving Credit Loan outstanding to Borrower exceeds the Maximum
Revolving Commitment, Borrower shall be obligated to immediately prepay the
amount that exceeds the Maximum Revolving Commitment.
(c) Prepayments from Extraordinary Dispositions. Immediately upon
receipt by Borrower of Net Proceeds, resulting from an Extraordinary Disposition
other than the issuance of Equity Interests, Borrower shall prepay the Loans in
an amount equal to the total Net Proceeds then subject to this subsection in
accordance with subsection 2.6(k). Notwithstanding the foregoing, in the event
that Borrower (1) has an accrued tax liability with respect to such an
Extraordinary Disposition or (2) reasonably expects the proceeds of such
Extraordinary Disposition to be (i0 reinvested within 270 days of the receipt
thereof in productive assets of a kind then used or useable in the business of
Borrower and its Subsidiaries, or (ii) in the case of insurance and condemnation
proceeds, utilized within 270 days of the receipt thereof (or such longer period
as the Agent may agree to, such agreement not to be unreasonably withheld if
Borrower has timely begun and is diligently pursuing the rebuilding or repair in
question but reasonably expects that such rebuilding or repair will not be
completed within such 270 day period) to repair the loss or damage to or
otherwise rebuild the assets in respect of which the proceeds were paid, then
Borrower shall deliver such proceeds or portion thereof to Agent to be held by
Agent in a cash collateral account. Upon Borrower's request, Agent and Lenders
shall release such proceeds to Borrower for payment of the accrued tax liability
or for reinvestment, repair or rebuilding. In the event Borrower (1) is not
required to pay all or any portion of the accrued tax liability or (2) fails to
reinvest such proceeds or utilize them for repair or rebuilding within 270 days
of the receipt thereof (or such longer period that may be agreed to pursuant to
this subsection 2.6(c)). Any such proceeds of Extraordinary Dispositions which
are not disbursed by the Agent for the purpose of purchasing replacement
properties shall reduce the Credit Commitment on a dollar for dollar basis.
(d) Prepayment from Key Man Insurance. In the event that Borrower or
any of its subsidiaries receives proceeds from payment of the key man life
insurance maintained pursuant to Section 6.3, Borrower shall prepay the Loans in
an amount equal to the lesser of such insurance proceeds or the amount of the
Obligations then outstanding.
(e) Maturity. Subject to the terms and conditions of this Agreement,
Borrower 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 shall, if not sooner paid, be in any event absolutely and
unconditionally due and payable in full by Borrower on June 30, 2003, the date
of the final maturity of such Notes.
<PAGE>
-23-
Section 2.7 Payments and Computations.
(a) Time and Place of Payments. Notwithstanding anything in this
Agreement or any of the other Loan Documents to the contrary, each payment
payable by Borrower to the Agent or any Lender under this Agreement or any of
the other Loan Documents other than payments pursuant to Section 2.3(c) made as
a result of the application of funds in the Agent Deposit Account, shall be made
directly to the Agent, at Agent's Head Office, not later than 12:00 noon Eastern
Standard or Eastern Daylight Time, as applicable in Cincinnati, Ohio, on the due
date of each such payment in immediately available and freely transferrable
funds. The Agent will promptly cause to be distributed to each Lender in
immediately available and freely transferrable funds such Lender's Pro Rata
Share of each such payment received by the Agent. In order to cause timely
payment to be made to Agent of all Obligations as and when due, Borrower hereby
authorizes and directs Agent, at Agent's option to debit the Agent's
Disbursement Account (by increasing the principal balance of the Revolving
Credit Loan) when such Obligations become due.
(b) Application of Funds. Notwithstanding anything herein to the
contrary, the funds received by Agent with respect to the Obligations shall be
applied as follows:
(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 principal of the Revolving Credit Loan Notes
in accordance with each Lender's Pro Rata Share; and (d) fourth, to Borrower.
(ii) Default. If the Notes have been accelerated pursuant to Section
9.2(b), or if a Default or Event of Default hereunder shall have occurred and be
continuing hereunder or under the Notes or any of the other Loan Documents at
the time Agent receives such funds, in the following manner: (a) first, to the
payment or reimbursement of Lenders and Agent for all costs, expenses,
disbursements and losses which shall have been incurred or sustained by Lenders
or Agent in or incidental to the collection of the Obligations owed by Borrower
hereunder or the exercise, protection, or enforcement by Lenders and Agent of
all or any of the rights, remedies, powers and privileges of Lenders and Agent
under this Agreement, the Notes, or any of the other Loan Documents and in and
towards the provision of adequate indemnity to the Agent and any of the Lenders
against all taxes or Liens which by law shall have, or may have priority over
the rights of the Agent or Lenders in and to such funds and (b) second, to the
payment of all of the Obligations in accordance with Section 2.7(b)(i) above.
<PAGE>
-24-
(c) Payments on Business Days. If any sum would (but for the provisions
of this paragraph (c)) become due and payable to Agent or any Lender by Borrower
under any of the Loan Documents on any day which is not a Business Day, then
such sum shall become due and payable on the Business Day next succeeding the
day on which such sum would otherwise have become due and payable hereunder or
thereunder, and interest payable to Agent or any Lender under this Agreement or
any of the other Loan Documents shall continue to accrue and shall be adjusted
by the Agent accordingly.
(d) Computation of Interest. All computations of interest payable under
this Agreement, the Notes, or any of the other Loan Documents shall be computed
by Agent on the basis of the actual principal amount outstanding on each day
during the payment period and shall be calculated on the basis of the actual
number of days elapsed during such period for which interest is being charged,
predicated on a year consisting of three hundred and sixty (360) days. The daily
interest charge shall be one three-hundred-sixtieth (1/360th) of the annual
interest amount. Each determination of any interest rate by Agent pursuant to
this Agreement, any Note, or any of the other Loan Documents shall be conclusive
and binding on Borrower in the absence of demonstrable error. Absent
demonstrable error, a certificate or statement signed by an authorized officer
of Agent shall be conclusive evidence of the amount of the Obligations due and
unpaid as of the date of such certificate or statement.
Section 2.8 Payments to be Free of Deductions. Each payment payable by
Borrower to Agent or any Lender under this Agreement, any Note, or any of the
other Loan Documents shall be made in accordance with Section 2.7 hereof,
without set-off or counterclaim and free and clear of and without any deduction
of any kind for any taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any political subdivision or any taxing or other
authority therein, unless Borrower is compelled by law to make any such
deduction or withholding. In the event that any such obligation to deduct or
withhold is imposed upon Borrower with respect to any such payment payable by
Borrower to Agent or any Lender, (a) Borrower shall be permitted to make the
deduction or withholding required by law in respect of the said payment, and (b)
there shall become and be absolutely due and payable by Borrower to Agent or
such Lender on the date on which the said payment shall become due and payable
and Borrower hereby promises to pay to Agent or such Lender on such date, such
additional amount as shall be necessary to enable Agent or such Lender to
receive the same net amount which Agent or such Lender would have received on
such due date had no such obligation been imposed by law. Anything in this
Section 2.8 to the contrary notwithstanding, the foregoing provisions of this
Section 2.8 shall not apply in the case of any deductions or withholdings made
in respect of taxes charged upon or by reference to the overall net income,
profits or gains of Agent or any Lender. Borrower shall have no obligation to
make any payment pursuant to this Section 2.8 with respect to any Lender who is
not a party hereto on the Closing Date unless (i) no such payments would be
payable to any such Lender on the date it becomes a party hereto and no such
payments could be reasonably expected to be payable to such Lender and (ii) if
such Lender is organized under the laws of a foreign jurisdiction, such
jurisdiction is exempt from United States withholding tax and such Lender has
provided Borrower with an Internal Revenue Form 4224 or Form 1001 or other
certificate of document required under United States law to establish
entitlement to such exemption.
<PAGE>
-25-
Section 2.9 Use of Proceeds.
(a) Permitted Uses of Loan Proceeds. Borrower represents, warrants and
covenants to Agent and each Lender that all proceeds of the Loans shall be used
by Borrower solely for the purpose of financing working capital, acquisitions
and for general corporate purposes.
(b) Prohibited Uses. Borrower represents, warrants and covenants to
Agent and each Lender that no part of the proceeds of the Loans will be used
(directly or indirectly) so as to result in a violation under Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System or for any other
purpose violative of any rule or regulation of such Board.
Section 2.10 Additional Costs, Etc. If any Lender shall reasonably
determine that any future applicable law, rule or regulation, or any change in
any present law or in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital, as a
consequence of its obligations hereunder, to a level below that which such
Lender could have achieved but for such adoption, change or compliance by any
amount deemed by such Lender to be material and is not otherwise reflected in
the interest and other charges payable by Borrower hereunder, then Borrower
shall pay to such Lender upon demand such amount or amounts, in addition to the
amounts payable under the other provisions of this Agreement, or the Notes, as
will compensate such Lender for such reduction. Determinations by any Lender of
the additional amount or amounts required to compensate such Lender in respect
of the foregoing shall be conclusive in the absence of demonstrable error. In
determining such amount or amounts, Lender may use any reasonable averaging and
attribution methods.
Section 2.11 Agent and Lender Statements. A statement signed by an
officer of any Lender (as the case may be) setting forth any additional amount
required to be paid by Borrower to Agent or such Lender under Sections 2.8 and
2.10 hereof, and the computations made by Agent or such Lender to determine such
additional amount or amounts, shall be submitted by Agent or such Lender to
Borrower in connection with each demand made at any time by Agent (and copies
thereof delivered to each other Lender) or such Lender under either of such
Sections. A claim by Agent or any Lender for all or any part of any additional
amounts required to be paid by Borrower under Sections 2.8 and 2.10 hereof may
be made before or after any payment to which such claim relates. Each such
statement shall, in the absence of demonstrable error, constitute conclusive
evidence of the additional amount required to be paid to Agent or such Lender,
provided it sets out in reasonable detail the reasons for such notice and the
averaging and attribution methods used by Agent or such Lender to determine the
amounts set forth in such notice.
<PAGE>
-26-
Section 2.12 Letters of Credit.
(a) Obligation to Issue Letters of Credit. Subject to the terms and
conditions of this Agreement, prior to the maturity of the Loans (whether by
acceleration or otherwise) and so long as no Default has occurred and is
continuing, Issuing Bank agrees to issue, in accordance with Issuing Bank's
usual and customary business practices, one or more Letters of Credit at the
request of Borrower for the benefit of Borrower or any of its Subsidiaries,
provided that Issuing Bank shall not issue any Letter of Credit if: (i) any
order, judgment or decree of any governmental authority or arbitrator shall
purport by its terms to enjoin or restrain Issuing Bank from issuing such Letter
of Credit or any rule, regulation or law applicable to Issuing Bank or any
request or directive from any governmental authority with jurisdiction over
Issuing Bank shall prohibit or request that Issuing Bank refrain from the
issuance of letters of credit generally or such Letters of Credit in particular
or shall impose upon Issuing Bank with respect to such Letters of Credit any
restriction or reserve or capital requirement (for which Issuing Bank is not
otherwise compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to Issuing
Bank as of the date hereof in which Issuing Bank in good faith deems material to
it; or (ii0 any of the conditions precedent for the issuance of such Letter of
Credit or other terms and provisions of this Loan or any subsequent loans hereof
are not satisfied.
(b) Expiration Date of Letters of Credit. The expiration date of any
Letter of Credit shall not be later than the earlier of thirty (30) days after
the date of the issuance thereof or the Termination Date.
(c) Letters of Credit Deemed to be Loans. All Letters of Credit issued
by Issuing Bank shall be issued in connection with this Agreement and Borrower's
obligation to pay any amount drawn under any Letter of Credit shall constitute
an Obligation hereunder and shall be bound by and shall benefit from all the
terms, provisions and conditions hereunder, including without limitation,
Issuing Bank's rights to recover costs and expenses relating thereto as provided
in this Agreement and Issuing Bank's remedies upon the occurrence of an Event of
Default. Each Letter of Credit issued hereunder shall reduce the amount of
Maximum Revolving Commitment an amount equal to the face amount of each such
Letter of Credit. No interest shall accrue on the amount of undisbursed Loan
proceeds representing the aggregate amount of the Letters of Credit until such
time as such Letters of Credit are drawn upon.
(d) Procedure for Issuance of Letters of Credit. Borrower shall give
Issuing Bank two (2) business days' prior written notice, or telephonic or
electronically transmitted notice confirmed promptly thereafter in writing, of
any requested issuance of a Letter of Credit under this Agreement. Such notice
shall specify the stated amount of the Letter of Credit requested, the effective
date (which day shall be a business day) of issuance of such requested Letter of
Credit, the date on which such requested Letter of Credit is to expire (which
date shall be a business day and shall in no event be later than the third
anniversary of the Closing Date), the proposed beneficiaries of such Letter of
Credit, the conditions for draws under such Letter of Credit, and any other
information relevant thereto as Issuing Bank may request. Unless there is a
Default or Event of Default hereunder, or unless the amount of the Letter of
Credit exceeds the limitations set forth by Section 2.12(f) hereof, then,
subject to the terms and conditions of this Agreement, Issuing Bank shall issue,
on the requested date, a Letter of Credit for the account of Borrower in
accordance with Issuing Bank's usual and customary business practices.
<PAGE>
-27-
(e) Reimbursement Obligations. Borrower agrees that all Reimbursement
Obligations owing to Issuing Bank under or with respect to each such Letter of
Credit issued by Issuing Bank shall be deemed to be a request for a draw or
advance hereunder and shall be deemed to have been disbursed to Borrower as a
Revolving Credit Loan under Maximum Revolving Commitment. Borrower hereby
promises to pay to Agent any and all Reimbursement Obligations hereunder.
Interest shall begin to accrue on the Reimbursement Obligations on the day such
Reimbursement Obligations are incurred by Borrower as a result of disbursement
under the Letter of Credit.
(f) Amount of Letters of Credit. At no time shall the aggregate amount
of all of the issued and outstanding Letters of Credit exceed the Maximum
Revolving Commitment.
(g) Fees. A fee in the amount of two percent (2.0%) per annum (computed
on the basis of a 360-day year for the days elapsed) of the daily average
undrawn face amount of each of the Letters of Credit shall be payable by
Borrower ("Letter of Credit Fee") together with a fronting fee in an amount
equal to one-quarter percent (0.25%) of the face amount of each of the Letters
of Credit. The Letter of Credit fee shall be paid in arrears on the last day of
each month and on the Termination Date or if such day is not a Business Day on
the next succeeding Business Day commencing on the first such date following the
issuance of any Letter of Credit.
(h) Letter of Credit Participations. By issuance of a Letter of Credit
and without any further action on the part of Issuing Bank or Lenders in respect
thereof, Issuing Bank hereby grants to each Lender, and each Lender hereby
agrees to acquire from Issuing Bank, a participation in such Letter of Credit
equal to such Lender's Pro Rata Share of the face amount of such Letter of
Credit, effective upon the issuance of such Letter of Credit. In consideration
and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to Agent on behalf of Issuing Bank, such Lender's
Pro Rata Share of any Reimbursement Obligation. Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this Section
2.12(h) in respect of Letters of Credit is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including without limitation the
occurrence and continuance of a default or an event of default hereunder, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
<PAGE>
-28-
. ARTICLE 3.
SECURITY AGREEMENT
Section 3.1 Security Interest. To secure the prompt repayment of the
Notes and the Obligations, Borrower hereby grants, and hereby pledges and
collaterally assigns, to Agent, on behalf of the Lenders, a lien and security
interest in and to all of Borrower's personal property and fixtures, wherever
located, whether now or hereafter owned, existing or acquired or hereafter
arising, including, without limitation, the Collateral of Borrower; further,
Borrower has executed and delivered to Agent, on behalf of the Lenders,
certificates of title and the like as necessary from time to time to secure the
Obligations hereunder; and shall deliver to Agent, on behalf of the Lenders, to
the extent required herein or upon Agent's request in accordance with the terms
of this Agreement, all instruments, documents and chattel paper in which
Borrower from time to time has an interest and such other documents as Agent may
request to perfect a security interest in the Collateral.
Section 3.2 Mortgages and Liens on Real Property. To secure further
such liabilities and obligations, each of the Subsidiaries have granted or
Borrower shall cause such Subsidiaries to grant to Agent, on behalf of the
Lenders, a first lien, subject to the Permitted First Liens, upon all real
property owned by such Subsidiary and a first lien, subject to the Permitted
First Liens, on all leasehold interests of Subsidiary existing on the date of
this Agreement, each of which are identified on Schedule 3.2, and such
Subsidiary has executed or Borrower shall cause such Subsidiary to execute and
deliver to Agent, on behalf of the Lenders, the Mortgages on newly acquired fee
properties and valid assignments of all other property rights (including,
without limitation, rights to receive rents and rights with respect to operating
agreements, options, judgments and claims) which now exist or which may exist or
arise hereafter from time to time including without limitation, the Assignments
of Option and Operating Agreements and any consents relating thereto reasonably
required by Agent.
Section 3.3 Pledge of Stock. As additional collateral for the Loans to
be made hereunder, Borrower and each Subsidiary that has Subsidiaries shall
execute and deliver to Agent, for the ratable benefit of the Lenders, a Pledge
Agreement with respect to all Capital Stock of all Subsidiaries now owned or
hereafter acquired by Borrower or a Subsidiary.
Section 3.4 Financing Statements; Additional Documents. Borrower shall
take all necessary action or as requested by Agent or any Lender to continue as
perfected the first lien (subject only to the Permitted First Liens) and
security interest in the Collateral of Lenders and Agent, except for such
Collateral in which a first lien can be perfected only by possession and such
possession is not required by Agent at such time. Such filings shall be in form
and substance required by Agent, and Borrower shall pay all costs of recording
and filing the financing statements (and any continuation or termination
statements with respect thereto), the Mortgages, Leasehold Mortgages, the
Assignment of Trademarks, and any other documents, titles, statements,
assignments or the like reasonably required to create, maintain, preserve or
perfect the liens or security interests granted under the Loan Documents,
together with costs and expenses of any lien or UCC searches
<PAGE>
-29-
required by Agent in connection with the making of the Loans. At Agent's
request, Borrower shall execute and deliver to Agent, on behalf of the Lenders,
at any time and from time to time hereafter, all supplemental documentation that
Agent may reasonably request to perfect, maintain, preserve or continue the
security interest and liens granted Lenders and Agent hereby and under any of
the other Loan Documents, in form and substance acceptable to Agent, and pay the
costs of preparing and recording or filing of the same. Borrower agrees that a
carbon, photographic, or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. Except as otherwise provided
in this Agreement, Borrower, immediately on acquiring fee title to Real Estate,
Inventory, or Accounts or Proceeds thereof for which separate perfection is
necessary or reasonably considered desirable by Agent, shall deliver to Agent,
on behalf of the Lenders, any and all evidence of ownership of any such property
and shall take all such action as may be reasonably necessary to perfect Agent's
security interest in such Property, including without limitation, the execution
and recording or filing of additional Mortgages, Leasehold Mortgages and UCC
financing statements. Each Lender (by any of its officers, employees or agents,
but only upon authorization of an officer of such Lender) shall have the right,
at any time or times during Borrower's usual business hours, to inspect the
Collateral, all records related thereto (and to make extracts from such records)
and the premises upon which any of the Collateral is located, to discuss
Borrower's affairs and finances with any accountant, account debtor or creditor
of Borrower and to verify the amount, quality, quantity, value and condition of,
or any other matter relating to, the Collateral. Borrower shall perform all
reasonable acts and execute or cause to be executed all documents, including,
without limitation, the Assignments of Option and Operating Agreements, and the
Assignment of Trademarks for filing with the United States Patent and Trademark
Office, state offices and corresponding foreign registries as Agent reasonably
deems necessary or desirable, to establish, perfect, record and maintain the
security interest in the Intellectual Property and the goodwill symbolized
thereby (whether now existing or hereafter acquired).
Section 3.5 Accounts; Chattel Paper; Lease Agreements. After the
occurrence of an Event of Default and during the continuance thereof, Agent
shall have the right at any time to notify any Person obligated to make payments
to Borrower with respect to Accounts, Chattel Paper and lease agreements to make
such payments directly to Agent, on behalf of the Lenders.
Section 3.6 Release of Collateral. Upon Borrower's full performance of
its Obligations in respect of the Loans, including, without limitation, payment
in full of the Notes, and termination of Borrower's right to borrow under this
Agreement, Agent and Lenders shall release their interest in all Collateral.
Upon any sale of Collateral permitted pursuant to Section 8.5, Agent shall
release its interest in the portion of the Collateral being sold, without
prejudice to the continuation of its lien on any other Collateral.
<PAGE>
-30-
ARTICLE 4.
CONDITIONS PRECEDENT TO DISBURSEMENTS
Section 4.1 Conditions Precedent to Initial Closing. On or prior to the
Closing Date, each of the following conditions precedent shall have been
satisfied:
(a) Certified Copies of Charter Documents and Bylaws. Agent and each
Lender shall have received from Borrower and each Subsidiary: (i) a copy,
certified by the Secretary or an Assistant Secretary of Borrower to be true and
complete on and as of the Closing Date, of the charter or other organization
documents and by-laws of Borrower as in effect on the Closing Date (together
with all, if any, amendments thereto); and (ii) the charter or other
organization documents of Borrower certified by the applicable Secretary of
State.
(b) Proof of Corporate Authority. Agent and each Lender shall have
received from Borrower and each Subsidiary copies, certified by the Secretary or
an Assistant Secretary of Borrower to be true and complete on and as of the
Closing Date, of records of all action taken by Borrower and each Subsidiary to
authorize (i) the execution and delivery of this Agreement and the other Loan
Documents to which such Person is or is to become a party as contemplated or
required by this Agreement; (ii) such Person's performance of all of its
obligations under each of such documents; and (iii) the making by Borrower of
the borrowings contemplated hereby. Agent shall have received from the
applicable Secretary of State a Certificate of Good Standing of recent date
certifying the existence and good standing of Borrower and each Subsidiary under
the laws of the state where such Person is incorporated and certificates
evidencing such Person's good standing in each state where such Person is
required to qualify to conduct business.
(c) Incumbency Certificate. Agent and each Lender shall have received
from Borrower and each Subsidiary, an incumbency certificate, dated as of the
Closing Date, signed by the Secretary or an Assistant Secretary of such Person
and giving the name and bearing a specimen signature of each individual who
shall be authorized (i) to sign, in the name and on behalf of such Person, each
of the Loan Documents to which such Person is or is to become a party on the
Closing Date; and (ii) to give notices and to take other action on behalf of
such Person under the Loan Documents.
(d) Officers' Certificates. Agent and each Lender shall have received
from Borrower a certificate dated as of the Closing Date, signed by a duly
authorized officer of Borrower and certifying that each of the representations
and warranties made by and on behalf of Borrower to Agent and each Lender in
this Agreement and in the other Loan Documents was true and correct when made,
and is true and correct on and as of the Closing Date.
(e) Loan Documents, etc. (i) Each of the Loan Documents shall have been
duly and properly authorized, executed and delivered by Borrower or Subsidiary,
as case may be, and shall be in full force and effect on and as of the Closing
Date; (ii) executed originals of each of the Notes shall have been delivered to
each Lender in accordance with their respective Credit Commitments, and (iii)
executed originals or (as the case may be) executed counterparts of each of the
other Loan Documents shall have been delivered to Agent and/or each Lender.
<PAGE>
-31-
(f) Actions to Perfect Liens. Agent shall have received from each
Subsidiary, including, without limitation, those Subsidiaries listed on Schedule
5.1(c) hereto:
(i) a Subsidiary Guaranty Agreement, substantially in the form of
Exhibit P hereto;
(ii) a Subsidiary Security Agreement, substantially in the form of
Exhibit Q hereto; and
(iii) UCC Financing Statements, Mortgages, Leasehold Mortgages, or
amendments to any of the foregoing, as Agent in its sole discretion may
require.
(g) Actions to Perfect Liens. Agent shall have received evidence in
form and substance satisfactory to it that all filings, recordings,
registrations and other actions, including without limitation, the filing of
duly executed financing statements on Form UCC-1, necessary or, in the opinion
of Agent, desirable to perfect the Liens created by the Security Documents shall
have been completed.
(h) Insurance. Agent shall have received copies of certificates of
insurance executed by each insurer or its authorized agent evidencing the
insurance required to be maintained by Borrower pursuant to Section 6.2(b), and
a certificate of a nationally recognized insurance broker reasonably
satisfactory to Agent certifying that insurance complying with such Section has
been obtained and is in full force and effect.
(i) 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 or any Lender to perform any of its agreements or
obligations under any of the Loan Documents to which it is a party on the
Original Closing Date or the Closing Date; or (ii) for Borrower to perform any
of its agreements or obligations under any of the Loan Documents to which it is
a party on the Original Closing Date or the Closing Date.
(j) Performance, Etc. Borrower shall have duly and properly performed,
complied with and observed each of its covenants, agreements and obligations
contained in each of the Loan Documents to which Borrower is a party or by which
Borrower is bound on the Original Closing Date or the Closing Date. No event
shall have occurred on or prior to the Closing Date, and no condition shall
exist on the Closing Date, which constitutes a Default or an Event of Default.
<PAGE>
-32-
(k) Proceedings and Documents. All corporate, governmental and other
proceedings and consents in connection with the transactions contemplated by
this Agreement, each of the other Loan Documents and all instruments and
documents incidental thereto shall be in form and substance satisfactory to
Agent and Lenders, and Agent and each Lender shall have received all such
counterpart originals or certified or other copies of all such instruments and
documents as Agent and each Lender shall have requested.
(l) Compliance with Laws. The borrowings made under this Agreement are
and shall be in compliance with the requirements of all applicable laws,
regulations, rules and orders, including without limitation, the Environmental
Laws and the requirements imposed by the Board of Governors of the Federal
Reserve System under Regulations U, G and X, and by the SEC.
(m) Legal Opinion. Agent and Lenders shall have received a written
legal opinion or opinions, addressed to Agent and each Lender and dated as of
the Closing Date, from legal counsel for Borrower, which shall be substantially
in the form of attached Exhibit M hereto and which legal opinions shall
otherwise be acceptable to Agent and each Lender.
(n) Legal Fees. Borrower shall have reimbursed Agent for all fees and
disbursements of legal counsel to Agent (in its capacity as Agent and a Lender)
which shall have been incurred by Agent through the Closing Date in connection
with the preparation, negotiation, review, execution and delivery of the Loan
Documents and the handling of any other matters incidental thereto.
(o) Post-Closing Availability. After giving effect to the consummation
of the transactions contemplated hereby, the sum of (i0 Borrower's cash on hand,
and (ii) unborrowed amounts of the Revolving Credit Loan, shall be at least
Fifteen Million Dollars ($15,000,000.00) and Borrower shall have delivered to
Agent a certificate as of the Closing Date demonstrating such excess
availability.
(p) Key Man Life Insurance. Borrower shall have secured and assigned to
Agent the key man life insurance policy required to be maintained pursuant to
Section 6.3 hereof.
(q) Changes; None Adverse. From the date of the Current Financial
Statements referred to in Section 5.5 of this Agreement to the Closing Date, no
changes shall have occurred in the assets, liabilities, financial condition,
business, operations or prospects of Borrower and its Subsidiaries which,
individually or in the aggregate, are materially adverse to Borrower and its
Subsidiaries taken as a whole
(r) Financial Statements. Each Lender shall have received the financial
statements referred to in Section 5.5, certified by an officer of Borrower and
each Lender shall have been satisfied that such financial statements accurately
reflect the financial status and condition of Borrower and its Subsidiaries in
all material respects.
<PAGE>
-33-
Section 4.2 Conditions Precedent to Subsequent Loans. The obligation of
the Lenders to make any Revolving Credit Loan shall be subject to the
satisfaction, prior thereto or concurrently therewith, of each of the following
conditions precedent:
(a) Legality of Transactions. It shall not be unlawful (i) for any
Lender or the Agent to perform any of its agreements or obligations under any of
the Loan Documents to which such Person is a party on the Draw Date of such Loan
or (ii) for Borrower to perform any of its material agreements or obligations
under any of the Loan Documents.
(b) Representations and Warranties. Each of the representations and
warranties made by or on behalf of Borrower to the Lenders or the Agent in this
Agreement or any other Loan Document (a) shall be true and correct in all
material respects when made and (b) shall, for all purposes of this Agreement,
be deemed to be repeated on and as of the date of Borrower's request for such
Loan, as the case may be, and shall be true and correct in all material respects
as of each of such dates (unless specifically stated to relate only to an
earlier date, in which case such representation or warranty shall be true and
correct in all material respects as of such earlier date), except, as affected
by the transactions contemplated by the Loan Documents.
(c) No Default. No event shall have occurred on or prior to such date
and be continuing on such date, and no condition shall exist on such date which
constitutes a Default or Event of Default.
(d) Maximum Credit. The making of such Revolving Credit Loan shall not
result in the sum of all outstanding Revolving Credit Loans exceeding the
Maximum Revolving Credit Commitment.
ARTICLE 5.
GENERAL REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Agent and each Lender as follows:
Section 5.1 Existence, Etc.
(a) Borrower (i) is duly organized, validly existing and in good
standing under the laws of the State of Delaware; and (ii) has full corporate
power and authority and full legal right to own or to hold under lease its
Property and to carry on its business. Borrower is qualified and licensed in
each jurisdiction wherein the character of the Property owned or held under
lease by it, or the nature of its business makes such qualification necessary or
advisable. Borrower is currently qualified in good standing as a foreign
corporation in each jurisdiction set forth on Schedule 5.1(a).
<PAGE>
-34-
(b) The authorized Capital Stock of Borrower and each of its
Subsidiaries is as set forth on Schedule 5.1(b). All issued and outstanding
shares of Capital Stock of Borrower and each of its Subsidiaries are duly
authorized and validly issued, fully paid and nonassessable and such shares were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities. Except as set forth on Schedule 5.1(b) and except for
the Lien of the Pledge Agreements, there are no outstanding options, rights or
warrants issued by Borrower for the acquisition of shares of the Capital Stock
of Borrower, nor any outstanding securities or obligations convertible into such
shares, nor any agreements by Borrower to issue or sell such shares. Except as
set forth on Schedule 5.1(b) there are no options, sale agreements, pledges
(other than the Pledge Agreements in favor of the Agent), proxies, voting
trusts, powers of attorney or any other agreements or instruments binding upon
Borrower's shareholders with respect to beneficial or record ownership of or
voting rights with respect to shares of the Capital Stock of Borrower.
(c) Borrower has no Subsidiaries except as set forth on Schedule
5.1(c). All the Capital Stock of each Subsidiary are free and clear of all Liens
other than those in favor of Agent. Each Subsidiary: (i) is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and (ii) has full corporate power and authority and full legal
right to own or to hold under lease its Property and to carry on its business.
Each Subsidiary is qualified and licensed in each jurisdiction wherein the
character of the Property owned or held under lease by it, or the nature of its
business makes such qualification necessary or advisable. Each Subsidiary is
currently qualified in good standing as a foreign corporation in each
jurisdiction set forth on Schedule 5.1(c).
(d) Except for stock of Subsidiaries, Borrower owns or holds of record
(whether directly or indirectly) no shares of any class in the capital of any
corporation, nor does Borrower own or hold (whether directly or indirectly) any
legal and/or beneficial equity interest in any partnership, business trust or
joint venture or in any other unincorporated trade or business enterprise.
Section 5.2 Authority, Etc.
(a) Borrower and each of its Subsidiaries has adequate power and
authority and has full legal right to enter into this Agreement and each of the
other Loan Documents, and to perform, observe and comply with all of its
agreements and obligations under each of such documents, including, without
limitation the borrowings contemplated hereby.
(b) The execution and delivery by Borrower and each of its Subsidiaries
of each of the Loan Documents, the performance by Borrower of all of their
respective agreements and obligations under such documents, and the making by
Borrower of the borrowings contemplated by this Agreement, have been duly
authorized by all necessary corporate action on the part of Borrower and each of
its Subsidiaries and do not and will not (i) contravene any provision of
Borrower's or its Subsidiaries charter documents or by-laws (each as in effect
from time to time); (ii) conflict with, or result in a material breach of the
terms, conditions or provisions of, or constitute a default under, under any
agreement, trust deed, indenture, mortgage or other material instrument to which
Borrower
<PAGE>
-35-
or its Subsidiaries is a party or by which Borrower or any other Property of
Borrower or its Subsidiaries is bound or affected; (iii) violate or contravene
any provision of any law, rule or regulation (including, without limitation,
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System) or any order, ruling or interpretation thereunder or any decree, order
or judgment of any court or governmental or regulatory authority, bureau, agency
or official (all as from time to time in effect and applicable to Borrower or
its Subsidiaries) in any manner that, individually or in the aggregate (i) would
have an adverse effect on the ability of Borrower or its Subsidiaries to perform
their respective obligations under any Loan Document to which it is a party or
(ii) would have a Material Adverse Effect; (iv) require any waivers, consents or
approvals by any of the creditors or trustees for creditors of Borrower or its
Subsidiaries or any other Person; or (v) result in the certain or imposition of
any Lien on any of the property of Borrower or its Subsidiaries, except for
Liens arising under the Loan Documents.
(c) Other than filings required to perfect the security interests
granted hereunder, no approval, consent, order, authorization or license by, or
giving notice to, or taking any other action with respect to, any governmental
or regulatory authority or agency is required, under any provision of any
applicable law:
(i) for the execution and delivery by Borrower of this Agreement,
each Note, and the other Loan Documents, for the performance by
Borrower and its Subsidiaries, of any of the agreements and obligations
thereunder or for the making by Borrower and its Subsidiaries of the
borrowing contemplated by this Agreement or for the conduct by Borrower
and its Subsidiaries of their respective businesses; or
(ii) to ensure the continuing legality, validity, binding effect,
enforceability or admissibility in evidence of this Agreement, the
Notes and the other Loan Documents.
Section 5.3 Binding Effect of Documents, Etc. Each of the Loan
Documents which Borrower and its Subsidiaries has or is to have executed and
delivered as contemplated and required to be executed and delivered as of the
Closing Date has been so executed and delivered by Borrower and its
Subsidiaries, as applicable, and each such Loan Document is or will be in full
force and effect. The agreements and obligations of Borrower and its
Subsidiaries contained in each such Loan Document constitute or shall constitute
legal, valid and binding obligations of Borrower and its Subsidiaries,
enforceable against Borrower in accordance with their respective terms, except
as may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent
transfer, preference and other laws and equitable principles affecting the scope
and enforcement of creditors' rights generally, and are also limited by the
Lenders' and Agent's implied covenants of good faith, fair dealing and
commercially reasonable conduct, and by the effect of judicial discretion on the
availability of remedies and realization of benefits under and enforceability of
the Loan Document in all respects as written.
<PAGE>
-36-
Section 5.4 No Events of Default, Etc.
(a) No event has occurred and is continuing, and no condition exists,
which constitutes a Default or an Event of Default.
(b) No default by Borrower and no accrued right of rescission,
cancellation or termination on the part of Borrower or any Subsidiary, exists
under this Agreement or any of the other Loan Documents.
Section 5.5 Financial Statements. The Consolidated and consolidating
balance sheets and other financial statements of Borrower dated March 31, 1998
previously delivered to Agent ("Current Financial Statements") have been
prepared in accordance with GAAP and subject in the case of unaudited statements
to changes resulting from year-end adjustments. The balance sheets contained in
the Current Financial Statements present fairly the financial condition of
Borrower and its Subsidiaries as of the dates thereof in accordance with GAAP.
The statements of income contained in the Current Financial Statements present
fairly the results of operations of Borrower and its Subsidiaries for the fiscal
periods then ended in accordance with GAAP. There are no material liabilities or
obligations, secured or unsecured (whether accrued, absolute or actual,
contingent or otherwise), which were not reflected in the audited balance sheets
of Borrower or that as at such date or in the footnotes thereto, and which
should, in accordance with GAAP, have been reflected in such balance sheets.
Section 5.6 Changes; None Adverse. Except as set forth on Schedule 5.6
attached hereto, as of the Closing Date, no changes have occurred in the assets,
liabilities or financial condition of Borrower and its Subsidiaries, taken as a
whole, from those reflected in the Current Financial Statements, which,
individually or in the aggregate, would have a Material Adverse Effect.
Section 5.7 Title to Assets; Material Leases. Borrower has good,
sufficient and legal title to, or leasehold interest in, all of its respective
Property and assets reflected in the Current Financial Statements. Borrower and
its Subsidiaries enjoy peaceful and undisturbed possession of all of their
respective Property subject to Material Leases and all such Material Leases are
valid and in full force and effect. All Material Leases are set forth on
Schedule 5.7.
Section 5.8 Intellectual Property.
(a) Schedule 5.8 hereto sets forth a complete and correct list of all
Patents and Trademarks owned by Borrower on the date hereof which are material
to Borrower's and its Subsidiaries, as applicable, business or financial
condition. Borrower and its Subsidiaries, as applicable, owns and possesses the
right to use, and has done nothing to authorize or enable any other Person to
use, any Patent or Trademark set forth on said Schedule 5.8 and all
registrations set forth on Schedule 5.8 are valid and in full force and effect.
Borrower and its Subsidiaries, as applicable, owns and possesses the right to
use the respective Patents and Trademarks.
<PAGE>
-37-
(b) Schedule 5.8 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on the
date hereof.
(c) (i) There is no violation by others of any right of Borrower or its
Subsidiaries with respect to any Patent or Trademark set forth on Schedule 5.8
hereto; (ii) Borrower is not infringing in any respect upon any Patent or
Trademark of any other Person; (iii) no proceedings have been instituted or are
pending against Borrower or, to Borrower's knowledge, threatened, and no claim
against Borrower has been received by Borrower, alleging any such violation.
Section 5.9 Indebtedness for Borrowed Money. Except as set forth on
Schedule 5.9 and except for the Indebtedness incurred under this Agreement,
Borrower has no obligation with respect to Indebtedness for Borrowed Money and
no Indebtedness of Borrower is secured by or otherwise benefits from any Lien on
or with respect to the whole or any part of Borrower's properties or assets,
present or future, except for Permitted Liens. There exists no default or event
or condition which, with the giving of notice or passage of time, or both, would
constitute a default under the provisions of any instrument evidencing such
Indebtedness or of any agreement relating thereto which would interfere with the
priority of Agent's lien on the Collateral.
Section 5.10 Litigation. Except as set forth on Schedule 5.10, there is
no pending or to Borrower's knowledge threatened action, suit, proceeding or
investigation before any court, governmental or regulatory authority, agency,
commission or official, board of arbitration or arbitrator against Borrower or
any of its Subsidiaries or in which Borrower or any of its Subsidiaries is a
participant ("Litigation"). There are no proceedings pending or threatened
against Borrower or any of its Subsidiaries which call into question the
validity or enforceability of any of the Loan Documents.
Section 5.11 No Materially Adverse Contracts. None of Borrower or any
of its Subsidiaries is a party to or bound by any forward purchase contract,
futures contract, covenant not to compete, unconditional purchase, take or pay
or other contracts, agreements or instruments (whether written or oral) which
materially restricts its ability to conduct its business or, either individually
or in the aggregate has or could reasonably be expected to have a Material
Adverse Effect.
Section 5.12 Taxes and Tax Returns, Etc.
(a) Borrower and each of its Subsidiaries has timely filed (inclusive
of any permitted extensions) or had filed on its behalf with the appropriate
taxing authorities all material returns (including without limitation, material
information returns and other material information) in respect of taxes required
to be filed through the date hereof. The information filed was complete and
accurate in all material respects at the time of filing. Neither Borrower nor
any group of which Borrower is or was the common parent has requested any
extension of time within which to file returns (including without limitation
information returns) in respect of any taxes other than routine extensions of
time for filing returns which have not involved the payment of material taxes
(other than taxes immaterial in amount) beyond the due date thereof.
<PAGE>
-38-
(b) All taxes and assessments in respect of periods beginning prior to
the date hereof have been timely paid, or will be timely paid, or an adequate
reserve has been established therefor, as reflected in the most recent financial
statements of Borrower. Neither Borrower nor any of its Subsidiaries has any
liability for taxes in excess of the amounts so paid or reserves so established.
(c) No deficiencies for taxes have been claimed, proposed or assessed
by any taxing authority or other governmental authority against Borrower nor any
of its Subsidiaries and no tax liens have been filed. There are no pending or
threatened audits, investigations or claims for or relating to any liability in
respect to taxes, and there are no matters under discussion with any taxing
authorities or other governmental authorities with respect to taxes which are
likely to result in an additional liability for taxes. No extension of a statute
of limitations relating to taxes or assessments is in effect with respect to
Borrower or any of its Subsidiaries.
(d) Neither Borrower nor any of its Subsidiaries has any obligation
under any tax sharing agreement or agreement regarding payments in lieu of
taxes.
Section 5.13 Contracts with Affiliates, Etc.
(a) Except as set forth on Schedule 5.13(a) and except as permitted by
Section 8.13 hereof, none of Borrower or any of its Subsidiaries is a party to
or otherwise bound by any written agreements, instruments or contracts (whether
written or oral) with any Affiliate.
(b) Except as set forth on Schedule 5.13(b), there is no Indebtedness
for Borrowed Money owing by Borrower to any Affiliate nor is there Indebtedness
for Borrowed Money owing by any Affiliate to Borrower.
Section 5.14 Employee Benefit Plans.
(a) Borrower and its ERISA Affiliates are in compliance in all material
respects with any applicable provisions of ERISA and the regulations thereunder
and of the Internal Revenue Code of 1986, as amended, with respect to all
Employee Benefit Plans.
(b) No Termination Event has occurred or is reasonably expected to
occur with respect to any Guaranteed Pension Plan.
(c) The actuarial present value of all benefit commitments under each
Guaranteed Pension Plan does not exceed the assets of that Plan.
<PAGE>
-39-
(d) Neither Borrower nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any withdrawal liability under ERISA to
Multiemployer Plans.
As used in this Section, the terms "actuarial present value" and
"benefit commitments" shall have the meanings specified in Section 4001 of
ERISA.
Section 5.15 Governmental Regulation. None of Borrower or any of its
Subsidiaries is a "public utility company", a "holding company" or a
"subsidiary" or an "affiliate" of a "holding company," as such terms are defined
in the federal Public Utility Holding Company Act of 1935, as amended. None of
Borrower or any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company," as such terms are defined in the
Federal Investment Company Act of 1940, as amended. Borrower or any of its
Subsidiaries is not subject to regulation under the Public Utility Holding
Company Act 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or to any federal or state statute or regulation
limiting its ability to incur Indebtedness for Borrowed Money.
Section 5.16 Securities Activities. None of Borrower or any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such terms are
used in Regulation G, T, U and X of the Board of Governors of the Federal
Reserve System.
Section 5.17 Disclosure. Neither this Agreement, any other Loan
Document, nor any other document, certificate or written statement furnished to
Agent or any Lender by or on behalf of Borrower for use in connection with the
transactions contemplated by this Agreement, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading as of the date of such document,
certificate or other statement. The assumptions upon which all projected
financial statements which have been delivered to Agent and each Lender are
based as stated therein and provide reasonable estimations of future
performance. There is no fact known to Borrower which has or which could
reasonably be expected in the future to have a Material Adverse Effect.
Section 5.18 No Material Default. None of Borrower or any of its
Subsidiaries is in default under any material order, writ, judgment, injunction,
decree, statute or governmental rule, indenture, agreement, contract, lease or
other instrument or contract applicable to it, which default would have a
Material Adverse Effect or adversely effect Borrower's performance of any
covenants or conditions respecting any of its Indebtedness, and no holder of any
Indebtedness of Borrower has given notice of any asserted default thereunder,
and no liquidation or dissolution of Borrower and no receivership, insolvency,
bankruptcy, reorganization or other similar proceedings relative to Borrower or
its Property is pending or is to Borrower's knowledge threatened.
<PAGE>
-40-
Section 5.19 Environmental Conditions.
(a) Borrower and its Subsidiaries have obtained all material necessary
permits, licenses, variances, clearances and all other material necessary
approvals (collectively the "EPA Permits") for use of the Real Estate and the
operation and conduct of its business from all applicable federal, state, and
local governmental authorities, utility companies or development-related
entities including, but not limited to, any and all appropriate Federal or State
environmental protection agencies and other County or City departments, public
water works and public utilities in regard to the use of the Real Estate and the
operation and conduct of its business, and the handling, transporting, treating,
storage, disposal, discharge, or Release of Hazardous Substances, if any, into,
on or from the environment (including, but not limited to, any air, water, or
soil).
Each issued EPA Permit is in full force and effect, has not expired or
been suspended, denied or revoked, and is not under challenge by any Person.
Borrower and each of its Subsidiaries is in compliance with each issued EPA
Permit.
(b) Neither Borrower, the Real Estate, nor any other Property owned or
leased by Borrower or its Subsidiaries is subject to any material private or
governmental litigation, threatened litigation, Lien or judicial or
administrative notice, order or action relating to Hazardous Substances or
environmental problems, impairments or liabilities with respect to the Real
Estate or such other Property.
(c) There has been no "Release" (as defined in Section 101(22) of
CERCLA) into, on or from any Real Estate and no Hazardous Substances (except
"Household Waste" as that term is defined at 40 C.F.R. 261.4(b)(1) (1990)) are
located on or have been treated, stored, processed, disposed of, handled,
transported to or from, disposed of upon the Real Estate during Borrower's or
its Subsidiaries ownership or into, upon or from the environment including, but
not limited to, any air, water, or soil. Borrower and each of its Subsidiaries
has not allowed any Hazardous Substance to exist or be treated, stored,
disposed, Released, located, discharged, possessed, managed, processed, or
otherwise handled on the Real Estate or in the operation or conduct of its
respective businesses in material violation of Environmental Laws, and complied
with all Environmental Laws affecting the Real Estate.
(d) Borrower and its Subsidiaries do not transport, in any manner, any
Hazardous Substances except in the ordinary course of business in material
compliance with Environmental laws.
(e) Neither Borrower nor any of its Subsidiaries have received written
notice of any circumstances which would result in any material obligation under
any Environmental Law to investigate or remediate any Hazardous Substances in,
on or under the Real Estate.
Section 5.20 Licenses and Permits. Other than Licenses and Permits, the
lack of which individually or in the aggregate would not have a Material Adverse
Effect, Borrower and each of its Subsidiaries owns or possesses all material
Licenses and Permits and rights with respect thereto, necessary for the conduct
of its business as presently conducted and proposed to be conducted,
<PAGE>
-41-
without any known conflict with the rights of others and, in each case, free of
any Lien not permitted by Section 8.8 of this Agreement. All of the foregoing
Licenses and Permits are in full force and effect, and Borrower and each of its
Subsidiaries is in material compliance with the foregoing without any known
conflict with the valid rights of others except where the failure so to comply
would not have a Material Adverse Effect. No event has occurred which permits,
or after notice or lapse of time or both would permit, the revocation or
termination of any such License or Permit, or affect the rights of Borrower or
any of its Subsidiaries thereunder, except where such revocation, termination or
effect upon Borrower would not individually or in the aggregate have a Material
Adverse Effect.
Section 5.21 General Collateral Representation.
(a) Borrower or the respective Subsidiary, as applicable, is the sole
owner of and has good and marketable title to the Collateral, free from all
Liens, in favor of any Person other than the Agent and except Permitted Liens,
and has full right and power to grant the Agent a security interest therein. All
information furnished to the Agent concerning the Collateral is and will be
complete, accurate and correct in all respects when furnished.
(b) No security agreement, UCC Financing Statement, equivalent security
or Lien instrument or continuation statement covering all or any part of the
Collateral is on file or of record in any public office, except such as may have
been filed (i) by Borrower and its Subsidiaries in favor of Agent pursuant to
this Agreement or the Security Documents, or (ii) in respect of the items of
Collateral subject to the Permitted Liens.
(c) The provisions of this Agreement and the Subsidiary Security
Agreements are sufficient to create in favor of the Agent, a valid and
continuing lien on, and first security interest in (subject to the Permitted
Liens), the types of the Collateral hereunder in which a security interest may
be created under Article 9 of the UCC. UCC Financing Statements have been duly
executed on behalf of Borrower and its Subsidiaries and the description of such
Collateral set forth therein is sufficient to perfect first priority security
interests in such Collateral in which a security interest may be perfected by
the filing of UCC Financing Statements. When such UCC Financing Statements are
duly filed in the filing offices set forth on Schedule 5.21 hereto, and the
requisite filing fees are paid, such filings will be sufficient to perfect
security interests in such of the Collateral described in the UCC Financing
Statements as can be perfected by filing (other than Equipment affixed to real
property so as to become fixtures), which perfected security interests will be
prior to all other Liens in favor of others and rights of others, enforceable as
such as against creditors of and purchasers from Borrower and its Subsidiaries
(other than purchasers of Inventory in the ordinary course) and as against any
owner of the Real Estate where any of the Equipment is located and as against
any purchaser of such Real Estate and any present or future creditor obtaining a
Lien on such real property.
<PAGE>
-42-
(d) Upon delivery to and possession by Agent of the Pledged Stock
pursuant to the terms of the Pledge Agreement, Agent shall possess a valid,
first priority security interest in such Pledged Stock in accordance with
Article 9 of the UCC; and
(e) No person now having possession or control of any of the Collateral
consisting of Inventory or Equipment has issued, in receipt therefor, a
negotiable bill of lading, warehouse receipt or other document of title.
ARTICLE 6.
AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants with and warrants to Agent and each Lender that,
from and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders (unless the context otherwise requires):
Section 6.1 Reports and Other Information.
(a) Borrower shall provide to the Agent as soon as available, and in
any event within forty-five (45) Business Days after the close of each quarter
of each fiscal year of Borrower, balance sheets of Borrower as of the end of
such quarter and consolidated and consolidating statements of income and
statements of cash flow of Borrower and its divisions and Subsidiaries for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, certified by the chief financial officer,
principal accounting officer or chief executive officer of Borrower to the
effect that such financial statements, while not examined by independent public
accountants, reflect in his opinion and in the opinion of senior management of
Borrower, all adjustments necessary to present fairly the financial position of
Borrower (except for the absence of footnotes) as at the end of such quarter and
the results of its operations for the quarter then ended in conformity with GAAP
consistently applied, subject only to year-end and audit adjustments, together
with a certificate of such officer stating that as of the date of such
certificate that, to the best of his knowledge, after reasonable inquiry, no
event has occurred which constitutes a Default or an Event of Default or would
constitute a Default or an Event of Default with the giving of notice or the
lapse of time or both, or, if a Default or an Event of Default or such an event
has occurred and is continuing, a statement as to the nature thereof and the
action which Borrower has taken or proposes to take with respect thereto, and
further setting out in such detail as is reasonably required by the Lenders
Borrower's compliance with the requirements of Article 7 and Sections 8.8 and
8.11 hereof; provided, however, that delivery of Form 10-Q to Agent shall
satisfy the requirements of this Section, so long as Borrower is a reporting
company under the Securities Exchange Act of 1934, as amended. Together with the
delivery of such financial statements of Borrower, Borrower will deliver to the
Agent a Compliance Certificate and statements of income and attendance prepared
on a theater by theater basis for such period, together with a statement of
Capital Expenditures (reasonably identified by theater and project) and
corporate overhead expenses for the period then ending for which such reports
are being delivered.
<PAGE>
-43-
(b) Borrower shall provide to the Agent as soon as available and in any
event within one hundred twenty (120) calendar days after the end of each fiscal
year of Borrower a copy of the annual financial statements for such year for
Borrower, including therein a copy of the balance sheets of Borrower as of the
end of such fiscal year and consolidated and consolidating statements of income
and statements of cash flow and statements of shareholders' equity of Borrower
and its divisions and Subsidiaries, certified without qualification by the
Accountants, together with a certificate of the chief financial officer,
principal accounting officer or chief executive officer of Borrower stating
that, as of the date of such certificate, to the best of his knowledge and after
reasonable inquiry, no event has occurred which constitutes a Default or an
Event of Default or, if a Default or an Event of Default or such an event has
occurred and is continuing, a statement as to the nature thereof and the action
which Borrower has taken or proposes to take with respect thereto and further
setting out in such detail as is reasonably required by the Lenders Borrower's
compliance with the requirements of Article 7 and Sections 8.8 and 8.11 hereof;
provided, however, that delivery of Form 10-K to Agent shall satisfy the
requirements of this Section, so long as Borrower is a reporting company under
the Securities Exchange Act of 1934, as amended. Together with the delivery of
such financial statements of Borrower, Borrower will deliver to the Agent a
Compliance Certificate and statements of income and attendance prepared on a
theater by theater basis for such period, together with a statement of Capital
Expenditures (reasonably identified by theater and project) and corporate
overhead expenses for the period then ending for which such reports are being
delivered.
(c) Together with each delivery of financial statements of Borrower
pursuant to paragraphs 6.1(a), or 6.1(b), Borrower will deliver a management
report: (1) describing the operations and financial condition of Borrower for
the period then ended and the portion of the current fiscal year then elapsed
(or for the fiscal year then ended in the case of year-end financials); (2)
setting forth in comparative form the corresponding figures for the
corresponding periods of the previous fiscal year and the corresponding figures
from the most recent Projections for the current fiscal year delivered to the
Agent pursuant to Section 6.1(d); and (3) discussing the reasons for any
significant variations. The information above shall be presented in reasonable
detail and shall be certified by the chief financial officer or controller of
Borrower to the effect that such information fairly presents the results of
operations and financial condition of Borrower as at the dates and for the
periods indicated.
(d) As soon as available and in any event not later than thirty (30)
days prior to the end of each fiscal year, Borrower will deliver Projections of
Borrower for the forthcoming three (3) fiscal years, year by year, and for the
forthcoming fiscal year, month by month on a consolidated and theater by theater
basis.
(e) Borrower shall provide to the Agent, promptly after sending or
filing thereof, copies of all reports and communications which Borrower or its
Subsidiaries sends to its security holders, and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission.
<PAGE>
-44-
(f) Borrower shall provide to the Agent as soon as possible, and in any
event within fifteen (15) days after Borrower knows or has reason to know that
any Termination Event with respect to any Plan has occurred, a statement of the
chief financial officer or treasurer of each entity comprising Borrower
describing such Termination Event and the action which Borrower propose to take
with respect thereto.
(g) Borrower shall provide to the Agent as soon as possible, and in any
event within five (5) days after the occurrence of a Default or an Event of
Default, continuing on the date of such statement, a statement of the chief
financial officer or treasurer of Borrower setting forth the details of such
Default or Event of Default, and the action which Borrower proposes to take with
respect thereto.
(h) If (and on each occasion that) any of the following events shall
occur:
(i) any Loan Document shall at any time be terminated, canceled or
rescinded for any reason whatever; or
(ii) any action at law, suit in equity or other legal proceeding
shall at any time be commenced or threatened in writing by any person
(1) to terminate, cancel or rescind any Loan Document, or (2) to
enforce any other Person's performance or observance of or compliance
with any covenants, agreements or obligations under any Loan Document;
or
(iii) any Person which is a party to or otherwise bound by any
Loan Document shall fail or refuse to perform, comply with or observe
or shall otherwise breach any one or more of the material covenants,
agreements or obligations under such Loan Document;
then Borrower will promptly (and, in any event, within five (5) Business Days)
after Borrower shall have first become aware of the occurrence of any such
event, furnish to Agent written notice setting forth brief particulars thereof.
(i) Borrower shall provide the Agent with the following additional
reports:
(i) as soon as available and in any event within a reasonable time
after the close of each fiscal year of Borrower copies of the portions
of any and all management letters from the Accountants, if any, to the
board of directors of Borrower or to any other entity comprising
Borrower regarding the various accounting practices and control
procedures used by Borrower;
<PAGE>
-45-
(ii) promptly after Borrower becomes aware of the commencement
thereof, notice of all actions, suits and proceedings before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which may adversely affect
Borrower or a Subsidiary of Borrower and which are not fully covered by
insurance without the applicability of any co-insurance provisions or
which have not been bonded and in which either (A) the amount in
controversy exceeds One Hundred Thousand Dollars ($100,000) for any
single proceeding or Five Hundred Thousand Dollars ($500,000) in the
aggregate or (B) would cause a Material Adverse Effect;
(iii) as soon as practicable after becoming aware of a claim by
any Person that Borrower or a Subsidiary of Borrower is in default
under any agreement entered into in connection with Indebtedness for
Borrowed Money in excess of Five Hundred Thousand Dollars ($500,000),
notice of any such claim or default;
(iv) notice of any change in the conduct of the business or
financial condition of Borrower promptly upon Borrower becoming aware
of any such change which would have a Material Adverse Effect;
(v) notice of any release of Hazardous Substances on the Real
Estate that is in material violation of Environmental Laws which would
have a Material Adverse Effect or would require remediation pursuant to
applicable federal or state law or of any notification having been
filed with regard to a release of Hazardous Substances on or into Real
Estate under the Federal Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., or the
Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
et seq., or any other applicable environmental law. Such notice shall
indicate the steps Borrower has or will take to remediate all hazardous
environmental conditions if any such steps are required of it by
applicable Environmental Law and the estimated costs of such
remediation; and
(vi) if (and on each occasion that) any event shall at any time
occur or any condition shall at any time develop which constitutes a
Default or an Event of Default, then, promptly (and, in any event,
within five (5) Business Days) after Borrower shall have first become
aware of the occurrence or development of any such event or condition,
Borrower will furnish or cause to be furnished to Agent a written
notice specifying the nature and the date of the occurrence of such
event or (as the case may be), the nature and the period of existence
of such condition and what action Borrower is taking or proposes to
take with respect thereto.
(j) Borrower shall also provide the Agent with such other information
relating to Borrower or any of its Subsidiaries (including, without limitation,
any Employee Benefit Plan) as the Agent may from time to time reasonably
request. To the extent the Agent is obligated to do so by applicable law, rule
or regulation, it may deliver to any regulatory body having jurisdiction over
it, copies of the reports and other information provided by Borrower to the
Agent pursuant to this Section 6.1.
<PAGE>
-46-
(k) Borrower shall provide the Agent reasonable prior notice of each
meeting of its board of directors (and in any event not less than ten (10) days
prior to such meetings) and Agent shall attend any such meetings as it may, in
its discretion desire.
Section 6.2 Maintenance of Property; Authorization; Insurance.
(a) Borrower covenants to, and cause each of its Subsidiaries to, keep
and maintain all of their respective Property in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time to make, or
use all reasonable legal remedies to cause to be made, all proper repairs,
renewals or replacements, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
(b) At its own cost and expense, Borrower shall, and shall cause each
of its Subsidiaries to, obtain and maintain during the term of this Agreement
(i) insurance against loss, destruction or damage to its properties as Agent may
require from time to time to fully protect the Agent's and Lenders' interests in
the Collateral, (ii) insurance against public liability and third party property
damage, with such insurance companies, in such amounts and covering such risks
as are at all times satisfactory to Agent and naming Agent for the benefit of
Lenders as mortgagee, loss payee and additional insured as its interests may
appear, and (iii) insurance as required by the terms of the Mortgages and
Leasehold Mortgages. Borrower agrees to deliver to Agent upon request insurance
certificates or policies evidencing compliance with the above requirements.
Borrower covenants, warrants and represents that it will not, and will not cause
any of its Subsidiaries to, do any act or voluntarily suffer or permit any act
to be done whereby any insurance required hereunder shall or may be suspended,
impaired or defeated. In the event that any item of Collateral shall be lost,
destroyed or irreparably damaged from any cause whatsoever during the term
hereof, Borrower agrees to proceed diligently and cooperate fully with Agent and
Lenders in the recovery of any and all proceeds of insurance applicable thereto,
and the carriers named therein are hereby directed by Borrower to make payment
for such loss to Agent, on behalf of the Lenders, and not to Borrower, or its
Subsidiaries, and Lenders jointly. If any insurance losses are paid by check,
draft or other instrument payable to Borrower, or its Subsidiaries, and Agent
and Lenders jointly, Agent may endorse the name of Borrower, or its
Subsidiaries, thereon and do such other things as it may deem advisable to
reduce the same to cash. Subject to the terms of the Mortgages and Leasehold
Mortgages and provided Borrower is not in Default in any of their Obligations
under any of the Loan Documents, all loss recoveries received by Agent and
Lenders upon any such insurance shall be paid by Agent and Lenders to Borrower
so long as such proceeds promptly are reinvested in Borrower's business. Should
Borrower then be in default in any of its Obligations to Agent or Lenders under
any of the Loan Documents, such cash resources may be applied and credited by
Agent and Lenders to any obligation, subject to Section 2.7(b). Borrower further
covenants that it shall, and shall cause each of its Subsidiaries to, require
that the insurer with respect to each such insurance policy provide for thirty
(30) days' advance written notice to Agent of any cancellation or termination
of, or other change of any nature whatsoever in, the coverage provided under any
such policy.
<PAGE>
-47-
Section 6.3 Key Man Life Insurance. Borrower shall obtain and maintain
a key man life insurance policy covering A. Dale Mayo in an amount not less than
$2,500,000 and Borrower shall maintain such insurance in full force and effect
until the Loans have been paid in full and all financing agreements among
Borrower, Agent and the Lenders related thereto have been terminated. Borrower
shall assign such policy to the Agent for the benefit of itself and the Lenders
pursuant to an assignment in form and substance satisfactory to the Agent with
respect to such policy.
Section 6.4 Corporate Existence. Borrower shall preserve and maintain
its existence in the state of its incorporation as of the Closing Date and all
of its rights, franchises and privileges as a corporation.
Section 6.5 Inspection Rights. At any reasonable time, upon reasonable
notice, and from time to time Borrower shall permit the Agent or any Lender, or
any of their agents, representatives or current or prospective participants in
the Loans, to inspect the Collateral, to examine and make copies of and
abstracts from the records and books of account of, to visit the properties of,
Borrower and its Subsidiaries and to discuss the affairs, finances and accounts
of Borrower and its Subsidiaries with any of their officers, employees, agents
or the Accountants.
Section 6.6 Payment of Taxes and Claims. Borrower shall pay or cause to
be paid all taxes, assessments and other governmental charges imposed upon its
properties or assets or the property or assets of its Subsidiaries or in respect
of any of its franchises, business, income or profits before any penalty or
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and
payable and which by law have or might become due and payable and which by law
have or might become a lien or charge upon any of its properties or assets,
provided that (unless any material item of property would be lost, forfeited or
materially damaged as a result thereof) no such charge or claim need be paid if
the amount, applicability or validity thereof is currently being contested in
good faith and if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor.
Section 6.7 Compliance with Laws.
(a) Borrower will, and shall cause its Subsidiaries to, comply in all
material respects with all applicable federal, state and local laws, rules,
regulations and orders pertaining to the operation of its business, paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or its
properties, and paying all lawful claims which if unpaid might become a Lien
upon any of its properties, except to the extent contested in good faith by
proper proceedings which stay the imposition of any penalty, fine or Lien
resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
<PAGE>
-48-
(b) Borrower will promptly notify each Lender in the event that
Borrower or any of its Subsidiaries receive any notice, claim or demand from any
governmental agency which alleges that Borrower or any of its Subsidiaries is in
material violation of any of the terms of, or has materially failed to comply
with any applicable order issued pursuant to any federal, state or local statute
regulating its operation and business, including, but not limited to, the
Occupational Safety and Health Act, the Federal Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act and the Federal Water Pollution Control Act, in each case where such event
would have a Material Adverse Effect.
Section 6.8 Notice of Other Events. Immediately upon Borrower first
becoming aware of any of the following occurrences, Borrower will furnish or
cause to be furnished to Agent written notice with full particulars of (i) the
business failure, insolvency or bankruptcy of Borrower or any of its
Subsidiaries; (ii) the rescission, cancellation or termination, or the creation
or adoption, of any material agreement or contract to which Borrower or any of
its Subsidiaries is a party; (iii) any labor dispute, any attempt by any labor
union or organization representatives to organize or represent employees of
Borrower or any of its Subsidiaries, or any unfair labor practices or
proceedings of the National Labor Relations Board with respect to Borrower or
any of its Subsidiaries; or (iv) any defaults or events of default under any
material agreement of Borrower or any of its Subsidiaries or any violations of
any laws, regulations, rules or ordinances of any governmental or regulatory
body which individually or in the aggregate would reasonably cause a Material
Adverse Effect.
Section 6.9 Communication with Accountants. Borrower authorizes Agent
or any Lender to communicate directly with the Accountants and authorizes the
Accountants to disclose to Agent or such Lender any and all financial statements
and other information of any kind, including copies of any management letter or
the substance of any oral information or conversation that such Accountants may
have with respect to the business, financial condition and other affairs of
Borrower or any of its Subsidiaries.
Section 6.10 Payment of Indebtedness. Borrower will duly and punctually
pay or cause to be paid principal and interest on the Loans and all fees and
other amounts payable hereunder or under the Loan Documents in accordance with
the terms hereunder. Borrower shall pay all other Indebtedness (whether existing
on the date hereof or arising at any time thereafter) punctually in accordance
with trade practices or within any applicable period of grace except to the
extent that any such obligation is contested in good faith by proper proceedings
or Borrower has provided Agent evidence that any Lien resulting from the
non-payment thereof has been bonded or with respect to which adequate reserves
have been set aside for the payment thereof.
Section 6.11 Performance of Obligations Under Certain Documents.
Borrower will duly and properly perform, observe and comply with all of its
agreements, covenants and obligations under this Agreement and each of the other
Loan Documents.
<PAGE>
-49-
Section 6.12 Governmental Consents and Approvals.
(a) Borrower will, and will cause each of its Subsidiaries to, obtain
or cause to be obtained all such approvals, consents, orders, authorizations and
licenses from, give all such notices promptly to, register, enroll or file all
such agreements, instruments or documents promptly with, and promptly take all
such other action with respect to, any governmental or regulatory authority,
agency or official, or any central bank or other fiscal or monetary authority,
agency or official, as may be required from time to time under any provision of
any applicable law:
(i) for the performance by Borrower of any of its agreements or
obligations under the Notes, this Agreement or any of the other Loan
Documents or for the payment by Borrower to the Agent at its Head
Office of any sums which shall become due and payable by Borrower to
Agent or any Lender thereunder;
(ii) to ensure the continuing legality, validity, binding effect
or enforceability of the Notes or any of the other Loan Documents or of
any of the agreements or obligations thereunder of Borrower; or
(iii) to continue the proper operation of the business and
operations of Borrower.
(b) Borrower shall, and shall cause each of its Subsidiaries to, duly
perform and comply with the terms and conditions of all such approvals,
consents, orders, authorizations and Licenses and Permits from time to time
granted to or made upon Borrower or any of its Subsidiaries.
Section 6.13 Employee Benefit Plans and Guaranteed Pension Plans.
Borrower will and will cause each of its ERISA Affiliates to (a) comply with all
requirements imposed by ERISA and the Internal Revenue Code of 1986, as amended,
applicable from time to time to any of its Guaranteed Pension Plans or Employee
Benefit Plans, (b) make full payment when due of all amounts which, under the
provisions of Employee Benefit Plans or under applicable law, are required to be
paid as contributions thereto, (c) not permit to exist any accumulated funding
deficiency, whether or not waived, (d) file on a timely basis all reports,
notices and other filings required by any governmental agency with respect to
any of its Employee Benefit Plans, (e) make any payments to Multiemployer Plans
required to be made under any agreement relating to such Multiemployer Plans, or
under any law pertaining thereto, (f) not amend or otherwise alter any
Guaranteed Pension Plan if the effect would be to cause the actuarial present
value of all benefit commitments under each Guaranteed Pension Plan to be less
than the current value of the assets of such Guaranteed Pension Plan allocable
to such benefit commitments, (g) furnish to all participants, beneficiaries and
employees under any of the Employee Benefit Plans, within the periods prescribed
by law, all reports, notices and other information to which they are entitled
under applicable law, and (h) take no action which would cause any of the
Employee Benefit Plans to fail to meet any qualification requirement imposed by
the Internal Revenue Code of 1986, as amended. As used in this Section 6.13, the
term "accumulated funding deficiency" has the meaning specified in Section 302
of ERISA and Section 412 of the Internal Revenue Code, and the terms "actuarial
present value", "benefit commitments" and "current value" have the meaning
specified in Section 4001 of ERISA.
<PAGE>
-50-
Section 6.14 Further Assurances. Borrower will execute, acknowledge and
deliver and, in the case of third party consents or third party agreements,
diligently seek to obtain the execution, acknowledgment and delivery or
completion, any and all such further assurances and other agreements or
instruments, and take or cause to be taken all such other action, as shall be
reasonably requested by the Agent from time to time in order to give full effect
to any of the Loan Documents.
Section 6.15 Borrower's Depository Accounts. Borrower and its
Subsidiaries shall concentrate all of their bank and depository accounts with
Agent, including without limitation, all demand deposit, time deposit,
concentration and zero balance accounts except that Borrower may maintain
operating accounts with any local financial institution, provided Borrower and
its Subsidiaries shall use their best efforts to maintain such accounts with one
or more of the Lenders.
Section 6.16 Use of Proceeds. Borrower shall use all Loan proceeds
disbursed only in accordance with the purposes set forth in Section 2.9 of this
Agreement.
Section 6.17 Subsidiaries. For any Subsidiary hereafter acquired or
created, Borrower or the respective Subsidiary, as applicable, shall: (i) pledge
to the Agent for the ratable benefit of the Lenders, the shares of Capital Stock
of such Subsidiary; and (ii) cause such Subsidiary to grant a Mortgage or
Leasehold Mortgage to Agent, as Agent may in its sole discretion require, for
the ratable benefit of Lenders, on all Real Estate hereafter owned or acquired
by such a Subsidiary.
Section 6.18 Acquired Real Property Interests. For all Real Estate
hereafter acquired by Borrower or any of its Subsidiaries, and as required by
Agent in its sole discretion, such Person shall grant a Mortgage or Leasehold
Mortgage, to Agent, the ratable benefit of Lenders, for such Real Estate.
<PAGE>
-51-
ARTICLE 7.
FINANCIAL COVENANTS
Borrower covenants with and warrants to Agent and each Lender that,
from and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders (unless the context otherwise requires), provided, however,
that for the purposes of financial calculations under this Article 7,
calculations for any Reference Period shall be made using actual historical
financial data of any property acquired during said Reference Period to the
extent applicable for such period:
Section 7.1 Interest Coverage Ratio. Borrower shall not permit the
ratio of EBITDA to Consolidated Cash Interest Expense for the Reference Period
ending on each Computation Date set forth below to be less than 2.0 to 1.0.
Section 7.2 Credit Agreement Debt to EBITDA. As of the last day of each
fiscal quarter of Borrower, the ratio of Consolidated Credit Agreement
Indebtedness for Borrowed Money outstanding as of such date to EBITDA for the
twelve (12) months ending on each Computation Date shall not exceed 3.5 to 1.0.
ARTICLE 8.
NEGATIVE COVENANTS OF BORROWER
Borrower covenants with and warrants to Agent and each Lender that from
and after the Closing Date and until all of the Obligations are paid and
satisfied in full except as otherwise expressly consented to in writing by the
Requisite Lenders:
Section 8.1 Limitation on Nature of Business. Borrower will not, and
will cause its Subsidiaries not to, at any time make any material change in the
nature of its business as carried on at the date hereto or undertake, conduct or
transact any business in a manner prohibited by applicable law. Borrower shall
not create, capitalize or acquire any Subsidiary after the Closing Date without
the prior written consent of Lender. Lender's consent to the creation or
capitalization of a Subsidiary shall be conditioned upon such New Subsidiary
executing (a) a Subsidiary Guaranty Agreement, (b) a Subsidiary Security
Agreement, and (c) such additional Security Documents as Agent shall require.
Section 8.2 Limitation on Fundamental Changes. Neither Borrower nor any
of its Subsidiaries shall at any time consolidate with or merge into or with any
Person or Persons or enter into or undertake any plan or agreement of
consolidation or merger with any Person, except that any Subsidiary may be
merged with and into Borrower or another Subsidiary. Neither Borrower nor any of
its Subsidiaries shall liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or series of transactions, all or substantially all of such
Borrower's or any such Subsidiary's business or property whether now or
hereafter acquired except to Borrower. Neither Borrower nor any Subsidiary shall
make or permit any amendment or modification to its charter documents or by-laws
without ten days prior notice to Agent.
<PAGE>
-52-
Section 8.3 Restricted Payments. Borrower will not, and will not
permit any of its Subsidiaries to directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Payments except that:
(a) Subsidiaries may make Restricted Payments with respect to their
common stock to Borrower or to other Subsidiaries of Borrower;
(b) Borrower may make interest payments to the holders of Subordinated
Debt but only to the extent set forth in and permitted by the terms of the
respective Subordination Agreement of such debt;
(c) Borrower or any Subsidiary may make any such payments not
prohibited by the Indenture as in effect on the date hereof.
Section 8.4 Management Compensation. Neither Borrower nor any
Subsidiary shall pay or enter into an agreement to pay any Management
Shareholder yearly Compensation in excess of the amounts set forth in the
Employment Agreement dated as of May 29, 1996 between A. Dale Mayo and Borrower
(as such Employment Agreement is in effect on the Closing Date) and the Managing
and Monitoring Fee Agreement dated as of May 29, 1996 between Borrower and
MidMark (as such Managing and Monitoring Fee Agreement is in effect on the
Closing Date); provided, however, that upon a Default or Event of Default
hereunder or under any other Loan Document, Borrower shall not be permitted to
make any payments under the Managing and Monitoring Fee Agreement until such
time as such Default or Event of Default has either been waived by Agent or
cured by Borrower. As used herein, "Compensation" shall mean all forms of direct
and indirect remuneration and include, without limitation, salaries,
commissions, bonuses, securities, property, insurance benefits, personal
benefits and contingent forms of remuneration.
Section 8.5 Limitation on Disposition of Assets.
(a) Neither Borrower nor any of its Subsidiaries will sell, lease,
transfer or otherwise dispose of any of its property, business or assets ("Asset
Dispositions"), or grant any Person an option to acquire any such property,
business or assets except for:
(i) bona fide sales of Inventory to customers in the ordinary
course of business and dispositions of obsolete equipment not used or
useful in the business;
<PAGE>
-53-
(ii) transfers of assets among Subsidiaries who have executed a
Subsidiary Guaranty and a Subsidiary Security Agreement and transfers
of assets between Borrower and any of such Subsidiaries;
(iii) Asset Dispositions which satisfy the following conditions:
(1) Borrower shall promptly notify Agent in writing of the
terms of such Asset Disposition, including within such notice the
assets sold and the consideration received;
(2) the consideration received is at least equal to the fair
market value of such assets;
(3) if the consideration received is not solely in cash, all
non-cash consideration is pledged to the Agent pursuant to documents
satisfactory to the Agent so that the Agent has received a first
priority perfected security interest in such non-cash consideration to
secure the Obligations;
(4) the Net Proceeds of such Asset Disposition are applied as
required by subsection 2.6(c);
(5) no Default or Event of Default shall result from such
sale or other disposition.
(b) Except as permitted elsewhere in this Agreement and except for
agreements or contracts in existence as of the date of this Agreement and
disclosed to Lenders in the schedules hereto, Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock or other equity
securities in Borrower or any such Subsidiary including warrants, rights or
options to acquire shares or other equity securities of any of its Subsidiaries,
except to Borrower or another Subsidiary of Borrower.
Section 8.6 Limitation on Investments. Borrower shall not, and shall
not allow any of its Subsidiaries to, at any time make any Investments of any
kind whatever in any Person or Persons; excluding, however, from the operation
of the foregoing provisions of this Section:
(a) Property to be used in the ordinary course of business of Borrower;
(b) Assets arising from the sale of goods and services in the ordinary
course of business of Borrower;
(c) Investments in cash and Cash Equivalents; and
<PAGE>
-54-
(d) Investments in any wholly-owned Subsidiary as long as its Capital
Interest is pledged to the Agent and all of the assets of such Subsidiary are
pledged to Agent upon terms and conditions satisfactory to Agent.
Section 8.7 Acquisition of Margin Securities. Borrower shall not, and
shall not allow any of its Subsidiaries to, own, purchase or acquire (or enter
into any contract to purchase or acquire) any "margin security" as defined by
any regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Agent and each Lender shall have received an
opinion of counsel satisfactory to Agent and each Lender to the effect that such
purchase or acquisition will not cause this Agreement or the Notes to be in
violation of Regulation G, T, U, X or any other regulation of the Federal
Reserve Board then in effect.
Section 8.8 Limitation on Mortgages, Liens and Encumbrances. Borrower
shall not, and shall not allow any of its Subsidiaries to, at any time create,
assume, incur or permit to exist, any mortgage, Lien or other encumbrance in
respect of any of their respective Property, assets, income or revenues of any
character, whether heretofore or hereafter acquired by it; excluding, however,
from the operation of the foregoing provisions of this Section (each a
"Permitted Lien"):
(a) Any Liens for taxes, assessments or governmental charges or claims
the payment of which is not at the time required by Section 6.6 of this
Agreement;
(b) Any statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent;
(c) Any Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security;
(d) Any easements, rights-of-way, encroachments, leases, royalties,
restrictions and other similar title exceptions or encumbrances provided such do
not, in the aggregate, materially interfere with the ordinary conduct of the
business of Borrower or any of Subsidiary or materially reduce or impair the
value of the Real Estate so encumbered;
(e) Any interest or title of a lessor under any Material Lease set
forth on Schedule 5.7 annexed to this Agreement;
(f) Liens created in connection with the incurrence of purchase money
Indebtedness not prohibited hereby, so long as such Lien encumbers only the
asset purchased, is in favor only of the Seller thereof, and does not secure any
other Indebtedness of Borrower or any Subsidiary
(g) Liens granted to Agent for the benefit of Lenders;
<PAGE>
-55-
(h) The additional existing mortgages, Liens and encumbrances of
Borrower and its Subsidiaries, listed and described, but only to the extent
indicated on Schedule 8.8(h) annexed to this Agreement; and
(i) The Liens with respect to Indebtedness of Borrower under or in
respect to any conditional sales agreements, security agreements, equipment
leases in the nature of title retention agreements or security agreements or
other similar title retention agreements entered into by Borrower or any
Subsidiary on, prior to or after the date of this Agreement in order to secure
the payment of the purchase price of any equipment purchased, leased or
otherwise acquired by Borrower or any Subsidiary for use in the ordinary course
of its business; provided, however, that Borrower or any Subsidiary is, by the
terms of each of Sections 8.12 or 8.13 hereof, expressly permitted to enter into
such agreement or lease.
Section 8.9 No Additional Negative Pledges. Borrower will not create or
otherwise cause or suffer to exist or become effective, directly or indirectly,
any contractual obligation which may restrict or inhibit the Agent's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof after
the occurrence of an Event of Default unless such contract fully recognizes the
rights of Agent and Lenders under this Agreement.
Section 8.10 No Restrictions on Subsidiary Distributions to Borrower.
Except as provided herein or in Section 4.7 of the Indenture, Borrower will not
and will not permit any of their Subsidiaries directly or indirectly to create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to:
(1) pay dividends or make any other distribution on any of such Subsidiary's
Capital Stock owned by Borrower or any Subsidiary of Borrower; (2) subject to
subordination provisions, pay any indebtedness owed to Borrower or any other
Subsidiary; or (3) make loans or advances to Borrower or any other Subsidiary
prohibited by the Indenture as in effect on the date hereof.
Section 8.11 Limitation on Indebtedness. Borrower shall not at any time
create, incur or assume, or become or be liable (directly or indirectly) in
respect of, any Indebtedness for Borrowed Money, other than:
(a) Indebtedness arising under this Agreement and the other Loan
Documents;
(b) Indebtedness described on Schedule 5.9;
(c) Additional Indebtedness so long as after giving effect to such
Indebtedness (and the proforma application of the proceeds thereof) the Borrower
would not on a proforma basis be in violation of the covenants set forth in
Sections 7.1 or 7.2 hereof, treating such Indebtedness and the application of
the proceeds thereof as if they had been incurred at the start of the four
quarter period prior to the incurrence of such Indebtedness; and
<PAGE>
-56-
(d) Indebtedness evidenced by Subordinated Debt;
(e) Indebtedness representing the refinancing of Subordinated Debt or
any part thereof ("Refinanced Subordinated Debt") provided such Refinanced
Subordinated Debt is on terms that are in Agent's discretion, at least as
favorable to Borrower, Agent and Lenders as the Subordinated Debt to be redeemed
or refinanced thereby, provided (i) that no covenant contained in this Agreement
or any other Loan Document would be violated on the proposed issue date of the
Refinanced Subordinated Debt after giving effect to (1) the issuance of notes
and or debentures in connection therewith, (2) the payment of all insurance
costs, commissions, discounts, redemption premiums, and other fees and charges
associated therewith, (3) the use of proceeds thereof and (4) the redemption,
repayment, or retirement of all Indebtedness of the Borrower to be redeemed,
repaid, or retired in connection therewith; and (ii) Borrower, Agent and the
holders of the Refinanced Subordinated Debt execute a subordination agreement
upon terms reasonably satisfactory to Agent.
Section 8.12 Limitation on Sales and Leasebacks. Borrower shall not at
any time, directly or indirectly, sell and thereafter lease back any of its
respective assets or Property unless the terms of such transaction provide
commercially reasonable sale prices and lease rates.
Section 8.13 Transactions with Affiliates. Borrower shall not at any
time enter into or participate in any agreements or transactions of any kind
with any Affiliates of Borrower, except agreements or transactions entered into
in the ordinary course of business upon fair and terms determined by Agent to be
no less favorable to Borrower than could be obtained in a comparable arms-length
transaction with an unaffiliated Person.
Section 8.14 No Additional Bank Accounts. Except as provided in Section
6.15, Borrower shall not open, maintain or otherwise have any bank accounts.
ARTICLE 9.
EVENTS OF DEFAULT AND REMEDIES
Section 9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) Principal and Interest. Any principal shall not be paid when due,
or any interest or any other sum payable under this Agreement or the Notes shall
not be paid within three (3) days after the same is due and payable;
(b) Representation and Warranties. Any representation or warranty at
any time made by or on behalf of Borrower in this Agreement, any Loan Document
or in any certificate, written report or statement furnished to Agent or any
Lender pursuant hereto or thereto shall prove to have been untrue, incorrect or
breached in any material respect on or as of the date on which such
representation or warranty was made or deemed to have been made or repeated;
<PAGE>
-57-
(c) Certain Covenants. Borrower shall fail to comply with the covenants
set forth in Sections 6.2(b), 6.4, 6.8, 6.10 or 2.9, Article 7 or Article 8 and
such failure or breach shall continue for more than thirty (30) days from the
date Borrower learns of such failure to comply;
(d) Other Covenants. Borrower shall fail to perform, comply with or
observe or shall otherwise breach any other covenant or agreement contained in
this Agreement and such failure or breach shall continue for more than thirty
(30) days after the earlier of the date on which Borrower shall have first
become aware of such failure or breach or Agent or any Lender shall have first
notified Borrower of such failure or breach unless Borrower is continuing to
undertake reasonable efforts to cure such default or breach and for a period of
sixty (60) days thereafter, it such default is capable of cure within such
additional period.
(e) Loan Documents. The breach or a failure of Borrower to perform,
comply with or observe any Loan Document or any other agreement, document,
instrument or certificate executed or delivered in connection with this
Agreement and if such failure shall continue for more than fifteen (15) days
after the earlier of the date on which Borrower shall have first become aware of
such failure or breach or Agent or any Lender shall have first notified Borrower
of such failure or breach, or any Loan Document shall cease to be legal, valid,
binding or enforceable in accordance with the terms thereof;
(f) Litigation. Any action at law, suit in equity or other legal
proceeding to amend, cancel, revoke or rescind any Loan Document shall be
commenced by or on behalf of Borrower or any other Person bound thereby, or by
any court or any other governmental or regulatory authority or agency of
competent jurisdiction; or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or shall issue a judgment, order, decree or ruling to the effect that, any one
or more of the covenants, agreements or obligations of Borrower under any one or
more of the Loan Documents are illegal, invalid or unenforceable in accordance
with the terms thereof;
(g) Default by Borrower under other Agreements. Any default by Borrower
or any event of default shall occur under any agreement, instrument or contract
relating to Indebtedness individually or in the aggregate in excess of Five
Million Dollars ($5,000,000) to which Borrower is at any time a party or by
which Borrower is at any time bound or affected, or Borrower shall fail to
perform or observe any of its agreements or covenants thereunder, and such
default, event of default or failure shall continue for such period of time as
would permit, or as would have permitted (assuming the giving of appropriate
notice), holders of Indebtedness of Borrower to accelerate the maturity of all
or any part of such Indebtedness under any such document;
(h) Insolvency. Any action shall be taken by or on behalf of Borrower
or any of its Subsidiaries for the termination, winding up, liquidation or
dissolution of Borrower or any of its Subsidiaries; or Borrower or any of its
<PAGE>
-58-
Subsidiaries shall make an assignment for the benefit of creditors, become
insolvent or be unable to pay its debts as they mature; or Borrower or any of
its Subsidiaries shall file a petition in voluntary liquidation or bankruptcy;
or Borrower shall file a petition or answer or consent seeking the
reorganization of Borrower or any of its Subsidiaries, or the readjustment of
any of the Indebtedness of Borrower; or Borrower or any of its Subsidiaries
shall commence any case or proceeding under applicable insolvency or bankruptcy
laws now or hereafter existing; or Borrower or any of its Subsidiaries shall
consent to the appointment of any receiver, administrator, custodian, liquidator
or trustee of all or any part of the Property or assets of Borrower or any of
its Subsidiaries; or any corporate action shall be taken by Borrower or any of
its Subsidiaries for the purpose of effecting any of the foregoing; or by order
or decree of any court of competent jurisdiction, Borrower or any of its
Subsidiaries shall be adjudicated as bankrupt or insolvent; or any petition for
any proceedings in bankruptcy or liquidation or for the reorganization or
readjustment of Indebtedness of Borrower or any of its Subsidiaries shall be
filed, or any case or proceeding shall be commenced, under any applicable
bankruptcy or insolvency laws now or hereafter existing, against Borrower or any
of its Subsidiaries, or any receiver, administrator, custodian, liquidator or
trustee shall be appointed for Borrower or any of its Subsidiaries or for all or
any part of the Property of Borrower or any of its Subsidiaries and such case or
proceeding shall remain undismissed for a period of sixty (60) days, or any
order for relief shall be entered in a proceeding with respect to Borrower or
any of its Subsidiaries under the provisions of the United States Bankruptcy
Code, as amended;
(i) Judgment. Any judgment, order or decree for the payment of money in
excess of Five Hundred Thousand Dollars ($500,000) shall be rendered against
Borrower or any of its Subsidiaries, and Borrower or its Subsidiaries shall not
discharge the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereof, within Thirty (30) days after the date of
the entry thereof;
(j) ERISA. Any Termination Event shall occur and as of the date thereof
or any subsequent date, the sum of the various liabilities of Borrower and their
ERISA Affiliates (such liabilities to include, without limitation, any liability
to the Pension Benefit Guaranty Corporation (or any successor thereto) or to any
other party under Sections 4062, 4063, or 4064 of ERISA or any other provision
of law and to be calculated after giving effect to the tax consequences thereof)
resulting from or otherwise associated with such event exceeds Five Hundred
Thousand Dollars ($500,000) or Borrower of any of its ERISA Affiliates as an
employer under any Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plans and the plan sponsors of such
Multiemployer Plans shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability requiring a payment in an amount
exceeding Five Hundred Thousand Dollars ($500,000).
(k) Change of Control. Any Change of Control shall occur; or
(l) Material Adverse Change. Any event or occurrence which has a
Material Adverse Effect.
<PAGE>
-59-
Section 9.2 Termination of Commitments and Acceleration of Obligations.
If any one or more of the Events of Default shall at any time occur:
(a) The Agent may, and upon the request of the Requisite Lenders,
shall, by giving notice to Borrower, immediately terminate the Credit
Commitments of all of the Lenders in full and each Lender shall thereupon be
relieved of all of its obligations to make any Loans thereunder; except that if
there shall be an Event of Default under Section 9.1(h) hereof, the Credit
Commitments of all of the Lenders shall automatically terminate in full, and
each Lender shall thereupon be relieved of all of its obligations to make any
Loans hereunder.
(b) The Agent may, and upon the request of the Requisite Lenders,
shall, by giving notice to Borrower (in this Agreement and in the other Loan
Documents called a "Notice of Acceleration"), declare all of the Obligations,
including the entire unpaid principal of the Notes, all of the unpaid interest
accrued thereon, and all other sums (if any) payable by Borrower under this
Agreement, the Notes, or any of the other Loan Documents, to be immediately due
and payable; except that if there shall be an Event of Default under Section
9.1(h), all of the Obligations, including the entire unpaid balance of all of
the Notes, all of the unpaid interest accrued thereon and all other sums (if
any) payable by Borrower under this Agreement, the Notes or any of the other
Loan Documents shall automatically and immediately be due and payable without
notice to Borrower. Thereupon, all of such Obligations which are not already due
and payable shall forthwith become and be absolutely and unconditionally due and
payable, without any further notice or any other formalities of any kind, all of
which are hereby expressly and irrevocably waived.
Section 9.3 Remedies. From and after the occurrence of an Event of
Default which is continuing and which has not been waived by the Agent at the
direction of the Requisite Lenders, the Agent may, and upon the request of the
Requisite Lenders, shall:
(a) subject always to the provisions of Section 10.9 hereof, proceed to
protect and enforce all or any of its or the Lenders' rights, remedies, powers
and privileges under this Agreement, the Notes or any of the other Loan
Documents by action at law, suit in equity or other appropriate proceedings,
whether for specific performance of any covenant contained in this Agreement,
any Note or any of the other Loan Documents, or in aid of the exercise of any
power granted to Agent herein or therein. In the event the Agent shall fail or
refuse to so proceed, the Requisite Lenders shall be entitled to take such
action as they shall deem appropriate to enforce their rights hereunder and
under the other Loan Documents;
(b) remove from any premises where same may be located any and all
Inventory or any and all documents, instruments, files and records (including
the copying of any computer records), and any receptacles or cabinets containing
same, relating to the Accounts of Borrower, or the Agent may use (at the expense
of Borrower) such of the supplies or space of Borrower, at Borrower's place or
places of business or otherwise, as may be necessary to properly administer and
control the Accounts of Borrower or the handling of collections and realizations
thereon;
<PAGE>
-60-
(c) bring suit, in the name of Borrower or the Lenders, and generally
shall have all other rights respecting said Accounts, including without
limitation the right to accelerate or extend the time of payment, settle,
compromise, release in whole or in part any amounts owing on any such Accounts
and issue credits in the name of Borrower or the Lenders;
(d) sell, assign and deliver such Inventory and Accounts and any
returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at the Agent's sole
discretion, and any Lender may bid-or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by
Borrower;
(e) (i) notify the Account Debtor on any Account or chattel paper of
Lenders' security interest therein; (ii) demand that monies due or to become due
be paid directly to Agent for the account of Lenders; (iii) open Borrower's mail
and collect any and all amounts due Borrower from account debtors; (iv) enforce
payment of the accounts receivable or chattel paper by legal proceedings or
otherwise; (v) exercise all of Borrower's rights and remedies with respect to
the collection of the accounts receivable or chattel paper; (vi) settle, adjust,
compromise, modify, extend or renew the accounts receivable or chattel paper;
(vii) settle, adjust or compromise any legal proceedings brought to collect the
accounts receivable or chattel paper; (viii) to the extent permitted by
applicable law, sell or assign the accounts receivable or chattel paper upon
such terms, for such amounts and at such time or times as Agent deems advisable;
(ix) grant waivers or indulgences with respect to, accept partial payments from,
discharge, release, surrender, substitute any customer security for, make
compromise with or release, any other party liable on, any account receivable or
chattel paper; (x) take control, in any manner, of any item of payment or
proceeds from any account debtor; (xi) prepare, file, and sign Borrower's name
on any proof of claim in Bankruptcy or similar document against any account
debtor; (xii) prepare, file, and sign Borrower's name on any notice of lien,
assignment or satisfaction of lien or similar document in connection with the
accounts receivable or chattel paper; (xiii) endorse the name of Borrower upon
any chattel paper, document, instrument, invoice, freight bill, bill of lading
or similar document or agreement relating to the accounts receivable or chattel
paper or inventory; (xiv) use Borrower's stationery and sign Borrower's name to
verifications of the accounts receivable or chattel paper and notices thereof to
account debtors; and (xv) use the information recorded on or contained in any
data processing equipment or computer hardware or software relating to the
accounts receivable, chattel paper, inventory, or proceeds thereof to which
Borrower has access; and
(f) foreclose the security interests created pursuant to the Loan
Documents by any available judicial procedure, or take possession of any or all
of the Inventory and equipment of Borrower without judicial process and enter
any premises where any such Inventory and equipment may be located for the
purpose of taking possession of or removing the same.
<PAGE>
-61-
The Agent shall have the right, without notice of advertisement, to
sell, lease, or otherwise dispose of all or any part of the Inventory and
Equipment of Borrower, whether in its then condition or after further
preparation or processing, in the name of Borrower, or the Lenders, or in the
name of such other party as the Agent may designate, either at public or private
sale or at any broker's board, in lots or in bulk, for cash or for credit, with
or without warranties or representations, and upon such other terms and
conditions as the Agent in its sole discretion may deem advisable, and the Agent
or any other Lender shall have the right to purchase at any such sale. If any
such Inventory and Equipment shall require rebuilding, repairing, maintenance or
preparation, the Agent shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting such Inventory and
Equipment in such saleable form as the Agent shall deem appropriate. Borrower
agrees, at the request of the Agent, to assemble such Inventory and Equipment
and to make it available to the Agent at places which the Agent shall reasonably
select, whether at the premises of Borrower or elsewhere, and to make available
to the Agent the premises and facilities of Borrower for the purpose of the
Agent's taking possession of, removing or putting such Inventory and Equipment
in saleable form. However, if notice of intended disposition of any Collateral
is required by law, it is agreed that five (5) Business Days notice shall
constitute reasonable notification and full compliance with the law. The Agent
shall be entitled to use all intangibles and computer software programs and data
bases used by Borrower in connection with its business or in connection with the
Collateral. The net cash proceeds resulting from the Agent's exercise of any of
the foregoing rights (after deducting all charges, costs and expenses including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Obligations, whether due or to become due, in such order as the Agent may elect.
Borrower shall remain liable to the Lenders for any deficiencies, and the
Lenders in turn agree to remit to Borrower or its successors or assigns, any
surplus resulting therefrom. The enumeration of the foregoing rights is not
intended to be exhaustive and the exercise of any right shall not preclude the
exercise of any other rights, all of which shall be cumulative.
Section 9.4 No Implied Waiver; Rights Cumulative. No delay on the part
of the Agent or any Lender in exercising any right, remedy, power or privilege
under any of the Loan Documents or provided by statute or at law or in equity or
otherwise shall impair, prejudice or constitute a waiver of any such right,
remedy, power or privilege or be construed as a waiver of any Default or Event
of Default or as an acquiescence therein. No right, remedy, power or privilege
conferred on or reserved to Agent or any Lender under any of the Loan Documents
or otherwise is intended to be exclusive of any other right, remedy, power or
privilege. Each and every right, remedy, power and privilege conferred on or
reserved to Agent or any Lender under any of the Loan Documents or otherwise
shall be cumulative and in addition to each and every other right, remedy, power
or privilege so conferred on or reserved to Agent or any such Lender and may be
exercised at such time or times and in such order and manner as Agent or any
such Lender shall (in its sole and complete discretion) deem expedient.
Section 9.5 Set-Off; Pro Rata Sharing. Borrower hereby confirms to
Agent and each Lender the continuing and immediate rights of set-off of Agent
and each Lender with respect to all deposits, balances and other sums credited
by or due from Agent or such Lender or any of the offices or branches of Agent
or such Lender to Borrower, which rights are in addition to any other rights
<PAGE>
-62-
which Agent or such Lender may have under applicable law. If any principal,
interest or other sum payable by Borrower to Agent or any Lender under the Notes
or any of the Loan Documents is not paid to Agent or such Lender punctually when
the same shall first become due and payable, or if any Event of Default shall at
any time occur, any deposits, balances or other sums credited by or due from
Agent or such Lender or any of the offices or branches of Agent or any Lender to
Borrower, may, without any prior notice of any kind to Borrower, or compliance
with any other conditions precedent now or hereafter imposed by statute, rule or
law or otherwise (all of which are hereby expressly and irrevocably waived by
Borrower), be immediately set off, appropriated and applied by Agent or such
Lender toward the payment and satisfaction of the Obligations (but not to any
other obligations of Borrower to Agent or such Lender until all of the
Obligations have been paid in full) in such order and manner as Agent or such
Lender (in its sole and complete discretion) may determine, subject, however, to
the provisions of Section 10.13.
ARTICLE 10.
CONCERNING THE AGENT AND THE LENDERS
The Agent and the Lenders agree as follows:
Section 10.1 Appointment of the Agent. Each of the Lenders hereby
appoints Provident to serve as Agent, under this Agreement and the other Loan
Documents, and in such capacity, to administer this Agreement, and the other
Loan Documents.
Section 10.2 Authority. Each of the Lenders hereby irrevocably
authorizes the Agent (i) to take such action on such Lender's behalf under this
Agreement and the other Loan Documents and to exercise such powers and to
perform such duties hereunder and thereunder as are delegated to or required of
the Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (ii) to take such action on such Lender's
behalf as the Agent shall consider necessary or advisable for the protection,
collection or enforcement of any of the Obligations. The Agent will promptly
notify each of the Lenders as soon as it becomes aware of any Default or Event
of Default or any failure by Borrower to make any payment in respect of any of
the Notes, provided, however, that Agent shall not be deemed to have knowledge
of any item until such time as Agent's officers responsible for administration
of the Loans shall receive written notice thereof or have actual knowledge of
such event. If any Lender becomes aware of any Default or Event of Default by
Borrower, it shall promptly notify Agent thereof provided, however, that Lenders
shall not be deemed to have knowledge of any item until such time as Lenders'
officers responsible for administration of the Loans shall receive written
notice thereof or have actual knowledge of such event.
Section 10.3 Acceptance of Appointment. The Agent hereby accepts its
appointment as Agent for each of the Lenders under this Agreement and the other
Loan Documents, but only on the terms set forth in this Agreement, including the
following:
<PAGE>
-63-
(a) Agent makes no representation as to the value, validity or
enforceability of this Agreement or of any of the other Loan Documents or as to
the correctness of any statement contained in this Agreement or in any of the
other Loan Documents;
(b) Agent may exercise its powers and perform its duties under this
Agreement and the other Loan Documents either directly or through its agents or
attorneys;
(c) Agent shall be entitled to obtain from counsel selected by it with
reasonable care advice with respect to legal matters pertaining to this
Agreement, or any of the other Loan Documents and shall not be liable for any
action taken, omitted to be taken or suffered in good faith in accordance with
the advice of such counsel;
(d) Agent shall not be required to use its own funds in the performance
of any of its duties or in the exercise of any of its rights or powers, and
Agent shall not be obligated to take any action which, in its reasonable
judgment, would involve it in any expense or liability unless it shall have been
furnished security or indemnity in an amount and in form and substance
satisfactory to it; and
(e) Agent, in performing its duties and functions under this Agreement
and the other Loan Documents on behalf of the Lenders, will exercise the same
care which it normally exercises in making and handling loans in which it alone
is interested, but does not assume further responsibility.
Section 10.4 Collateral Matters.
(a) Release of Collateral. Lenders hereby irrevocably authorize Agent,
at its option and in its discretion, to release any Lien granted to or held by
Agent upon any property covered by the Security Documents (i) upon termination
of the Credit Commitments and payment and satisfaction of all Obligations; or
(ii) constituting property being sold or disposed of if Borrower certifies to
Agent that the sale or disposition is made in compliance with the provisions of
this Agreement (and Agent may rely in good faith conclusively on any such
certificate, without further inquiry); or (iii) constituting property leased to
Borrower under a lease which has expired or been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by such Borrower to be, renewed or extended. Upon request by
Agent at any time, any Lender will confirm in writing Agent's authority to
release particular types or items of property covered by the Security Documents
pursuant to this subsection 10.4(a).
(b) Confirmation of Authority; Execution of Releases. Without in any
manner limiting Agent's authority to act without any specific or further
authorization or consent by Requisite Lenders (as set forth in subsection
10.4(a)), each Lender agrees to confirm in writing, upon request by Borrower,
the authority to release any property covered by the Security Documents
conferred upon Agent under clauses (i) through (iii) of subsection 10.4(a). So
long as no Event of Default is
<PAGE>
-64-
then continuing, upon receipt by Agent of confirmation from the Requisite
Lenders of its authority to release any particular item or types of property
covered by the Security Documents, and upon at least five (5) Business Days
prior written request by Borrower, Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the Liens granted to Agent for the benefit of Lenders herein or
pursuant hereto upon such Collateral; provided, however, that (i) Agent shall
not be required to execute any such document on terms which, in Agent's opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of Borrower, in respect of), all
interests retained by Borrower, including (without limitation) the proceeds of
any sale, all of which shall continue to constitute part of the property covered
by the Security Documents.
(c) Absence of Duty. Agent shall have no obligation whatsoever to any
Lender or any other Person to assure that the property covered by the Security
Documents exists or is owned by Borrower or is cared for, protected or insured
or has been encumbered or that the Liens granted to Agent herein or pursuant
hereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Section 10.4 or in any of the Loan
Documents, it being understood and agreed that in respect of the property
covered by the Security Documents or any act, omission or event related thereto,
Agent may act in any manner it may deem appropriate, it its discretion, given
Agent's own interest in property covered by the Security Documents as one of the
Lenders and that Agent shall have no duty or liability whatsoever to any of the
other Lenders for so acting; provided that Agent shall exercise the same care
which it would in dealing with loans for its own account.
Section 10.5 Agency for Perfection. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting Lenders' security interest
in assets which, in accordance with Article 9 of the Uniform Commercial Code in
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
Each Lender agrees that it will not have any right individually to enforce or
seek to enforce any Security Document or to realize upon any collateral security
for the Loans, it being understood and agreed that such rights and remedies may
be exercised only by Agent.
Section 10.6 Application of Moneys. All moneys realized by the Agent
under the Loan Documents shall be held by Agent to apply in accordance with
Section 2.7(b) hereof.
Section 10.7 Reliance by the Agent. Agent shall be entitled to rely on
any notice, consent, certificate, affidavit, letter, telegram, telecopy,
facsimile or teletype message, statement, order, instrument or other document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons. Agent shall deem and treat the payee of any Note as
the absolute owner thereof for all purposes hereof until such time as it
receives actual notice of an assignment permitted hereunder of such payee's
interest, together with the written agreement of the assignee in form and
substance satisfactory to Agent that such assignee is bound by this Agreement as
a "Lender" hereunder.
<PAGE>
-65-
Section 10.8 Exculpatory Provisions. Neither Agent nor any of its
shareholders, directors, officers, employees or agents shall be liable in any
manner to any of the Lenders for any action taken, omitted to be taken or
suffered in good faith by it or them under any of the Loan Documents or in
connection therewith, or be responsible for the consequences of any oversight or
error of judgment, except for losses due to gross negligence or willful
misconduct of such Agent, shareholder, director, officer, employee or agent.
Without limiting the generality of the foregoing sentence of this Section 10.8,
under no circumstances shall the Agent be subject to any liability to any Lender
on account of any action taken or omitted to be taken by such Agent in
compliance with the direction of the Requisite Lenders or all of the Lenders, as
the case may be as provided for hereunder.
Agent shall not be responsible in any manner to any of the Lenders for
the due execution, effectiveness, genuineness, validity or enforceability,
perfection or recording of this Agreement, any of the Notes, any of the other
Loan Documents or for any certificate, report or other document used under or in
connection with this Agreement or any of the other Loan Documents, or for the
truth or accuracy of any recitals, statements, warranties or representations
contained herein or in any certificate, report or other document at any time
hereafter furnished or purporting to have been furnished to it by or on behalf
of Borrower, or any other Person, or be under any obligation to any of the
Lenders to ascertain or inquire as to the performance or observance by Borrower,
or any other Person of any of the covenants, agreements or conditions set forth
in this Agreement, the Notes or any of the other Loan Documents or as to the use
of any moneys lent hereunder or thereunder.
Agent shall not be obligated to take any action or refrain from taking
any action under any Loan Document that might, in its judgment, involve it in
any expense or liability until it shall have been indemnified to its
satisfaction by or received an agreement to indemnify from each Person which
such Agent reasonably believes may be an intended recipient of such
distribution. If a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Agent is to be repaid, each Person to whom any
such distribution shall have been made shall either repay to the Agent its
proportionate share of the amount so adjudged to be repaid or shall pay over the
same in such manner and to such Persons as shall be determined by such court.
Section 10.9 Action by the Agent. Except as otherwise expressly
provided under this Agreement or in any other of the Loan Documents, Agent will
take such action, assert such rights and pursue such remedies under this
Agreement and the other Loan Documents as the Requisite Lenders or all of the
Lenders, as the case may be as provided for hereunder shall direct. Except as
otherwise expressly provided in any of the Loan Documents, Agent will not (and
will not be obligated to) take any action, assert any rights or pursue any
remedies under this Agreement or any of the other Loan Documents in violation or
contravention of any express direction or instruction of the Requisite Lenders
or all of the Lenders, as the case may be as provided for hereunder. Agent
<PAGE>
-66-
may refuse (and will not be obligated) to take any action, assert any rights or
pursue any remedies under this Agreement or any of the other Loan Documents
without the express written direction and instruction of the Requisite Lenders
or all of the Lenders, as the case may be as provided for hereunder. In the
event Agent fails, within a commercially reasonable time, to take such action,
assert such rights, or pursue such remedies as the Requisite Lenders or all of
the Lenders, as the case may be as provided for hereunder, direct, the Requisite
Lenders or all of the Lenders, as the case may be as provided for hereunder,
shall have the right to take such action, to assert such rights, or pursue such
remedies on behalf of all of the Lenders unless the terms hereof otherwise
require the consent of all the Lenders to the taking of such actions. All
notices and other material information required to be delivered by Borrower to
Agent hereunder shall be delivered within a reasonable time (and in any event
not more than five (5) days) after Agent's receipt of same by Agent to each
Lender. No Lender (other than the Agent, acting in its capacity as Agent) shall
be entitled to take any enforcement action of any kind under any of the Loan
Documents, except as expressly provided in this Agreement. Action that may be
taken by Requisite Lenders or all of the Lenders, as the case may be as provided
for hereunder may be taken pursuant to a vote at a meeting (which may be held by
telephone conference call) of all of the Lenders, or pursuant to the written
consent of such Lenders.
Section 10.10 Amendments, Waivers and Consents. Any provision of this
Agreement, the Notes or the other Loan Documents may be amended or waived upon
the consent of the Requisite Lenders, and after such consent, Agent, on behalf
of the Lenders, may execute and deliver to Borrower a written instrument waiving
or amending such provision; provided, however, that neither this Agreement, the
Notes, nor any of the other Loan Documents may be amended, waived or a variation
therefrom or forbearance with respect to such variation consented to without the
written consent of the Agent and all of Lenders which effect (i) a change in the
Maximum Revolving Commitment; (ii) a change in any Lender's Credit Commitment;
(iii) a reduction in the interest rates or reduction of the principal set forth
in the Notes; (iv) the extension of the maturity date on the Notes; (v) a change
in the payment schedule or scheduled date for the payment of or amount of any
interest or principal; (vi) any change in Article 7; (vii) a change in this
paragraph, the definition of Requisite Lender or any provision of this Agreement
which requires consent or action of all the Lenders for action thereunder;
(viii) a change in the obligations and liabilities of Agent; (ix) a change which
increases the obligations of any Lender; or (x) a change in any fees or charges
hereunder or in Sections 2.10 or 11.5 hereof.
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, interest, actions, judgments or suits
resulting from Agent's own gross negligence or willful misconduct.
<PAGE>
-67-
Section 10.12 Reimbursement of the Agent. Each Lender further agrees to
reimburse Agent, in accordance with its Participation Percentage, for any
reasonable out-of-pocket costs or expenses incurred by Agent in connection with
its duties under this Agreement (including, but not limited to, reasonable fees
and disbursements of counsel, travel and living expenses away from home of
employees or agents of the Agent and compensation of agents or of experts
employed by the Agent to render services for the Lenders hereunder), but only to
the extent such fees, disbursements, expenses and compensation have not been
promptly reimbursed to the Agent by Borrower. If any such sums are reimbursed to
the Agent by Borrower after one or more of the Lenders have reimbursed the Agent
for such sums, the Agent will refund such sums ratably to the Lenders who
contributed such sums.
Section 10.13 Sharing of Funds Received. Each Lender and Agent agrees
with Agent and each of the other Lenders that if such Lender shall receive from
Borrower or any other Person or Persons, whether by payment received otherwise
than in accordance with the terms of the Loan Documents, exercise of the right
of set-off, counterclaim, cross-claim, enforcement of any claim, or proceedings
against Borrower or any other Person or Persons, proof of claim in bankruptcy,
reorganization, liquidation, receivership or other similar proceedings, or
otherwise, and shall retain and apply to the payment of any of the Obligations
owing to such Lender any amount in excess of its Pro Rata Share of the payments
received by all of the Lenders and the Agent in respect of all of the
Obligations, such Lender will promptly make such dispositions and arrangements
with the other Lenders and the Agent with respect to such excess, either by way
of distribution, pro tanto assignment of claim, subrogation or otherwise, as
shall result in each of the Lenders receiving in respect of the Obligations
owing to it, its Pro Rata Share of such payments.
Section 10.14 Dealing with Lenders. Agent may at all times deal solely
with the several Lenders for all purposes of this Agreement and the protection,
enforcement and collection of the Notes, including without limitation the
acceptance and reliance upon any certificate, consent or other document executed
on behalf of one or more of the Lenders and the division of payments pursuant to
Sections 2.5, 2.6, 2.7, 10.6, and 10.13 hereof. The Agent shall not have a
fiduciary relationship in respect of any Lender by reason of this Agreement. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action hereunder except any action specifically provided by
this Agreement to be taken by the Agent.
Section 10.15 Agent as Lender. Provident shall have, in its capacity as
a Lender under the Loan Documents, the same obligations and the same rights,
remedies, powers and privileges under this Agreement and the other Loan
Documents as it would have were it not also an Agent.
Section 10.16 Duties Not to be Increased. The duties and liabilities of
Agent under this Agreement and the other Loan Documents shall not be increased
or otherwise changed without its express prior written consent. The Agent shall
have no duty to provide information to the Lenders except as expressly set forth
herein.
<PAGE>
-68-
Section 10.17 Lender Credit Decisions. Each Lender acknowledges that it
has, independently of and without reliance upon Agent or any of the other
Lenders, made its own credit analysis and decision to enter into this Agreement
and the other Loan Documents to which it is a party. Each Lender also
acknowledges that it will, independently of and without reliance upon Agent or
any of the other Lenders, continue to make its own credit decisions in taking or
not taking action under this Agreement or any of the other Loan Documents and in
determining the compliance or lack thereof by Borrower and any other Person with
any provision of any Loan Document or other document or agreement.
Section 10.18 Resignation of Agent. Provident and any successor Agent
may resign as such at any time by giving thirty (30) days' prior written notice
of resignation to each Lender and Borrower, such resignation to be effective on
the date which is specified in such notice. Upon any such resignation by
Provident as Agent, or in the event the office of Agent shall thereafter become
vacant for any other reason, the Requisite Lenders shall appoint a successor
Agent, by an instrument in writing signed by such Lenders and delivered to such
successor Agent and Borrower whereupon, such successor Agent shall succeed to
all of the rights and obligations of the retiring Agent as if originally named.
The retiring Agent shall duly assign, transfer and deliver to such successor
Agent all moneys at the time held by the retiring Agent hereunder after
deducting therefrom its expenses for which it is entitled to be reimbursed. Upon
such succession of any such successor Agent, the retiring Agent shall be
discharged from its duties and obligations hereunder, except for its gross
negligence or willful misconduct arising prior to its retirement or removal
hereunder. After any Agent's resignation, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
Section 10.19 Assignment of Notes; Participation.
<PAGE>
-69-
(a) Each Lender may, with concurrent notice to Agent, assign to one or
more banks or other financial institutions all or a portion of its rights and
obligations under this Amended and Restated Credit Agreement and the Notes;
provided that (i) for each such assignment, the parties thereto shall execute
and deliver to Agent an assignment and assumption agreement, in form and
substance acceptable to Agent, together with any Notes subject to such
assignment, and (ii) no such assignment shall reduce the assigning Lender's
Credit Commitment to less than Fifty-One Percent (51%) of such Lender's original
Credit Commitment without the consent of Agent, unless such assignment is to a
then-current holder of a Note, provided that the number of Lenders holding
rights hereunder shall not exceed five (5) at any one time. Upon such execution
and delivery of such assignment and assumption agreement to Agent in form and
substance satisfactory to Agent and the payment by the Assigning Lender to Agent
of a processing and administration fee of $3,500, from and after the date
specified as the effective date in such Agreement (the "Acceptance Date"), (x)
the assignee thereunder shall be a party hereto, and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such agreement,
such assignee shall have the rights and obligations of a Lender hereunder and
(y) the assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such agreement, relinquish its
rights (other than any rights it may have pursuant to Section 11.5 which will
survive) and be released from the obligations so assigned under this Agreement
(and, in the case of an assignment covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(b) Each Lender may sell participations of up to forty-nine percent
(49%) of its rights and obligations under the Loan Documents to one or more
banks or other entities (including, without limitation, up to such portion of
its Credit Commitment, the Loans owing to it, and the Note held by it);
provided, however, that (i) such Lenders' obligations under the Loan Documents
(including, without limitation, its Credit Commitment to Borrower hereunder)
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of any such Note for all purposes of the Loan Documents,
(iv) the participating banks or other entities shall be entitled to the cost
protection provisions of Sections 2.10 and 11.5 hereof, but a participant shall
not be entitled to receive pursuant to such provisions an amount larger than its
share of the amount to which the Lender granting such participation would have
been entitled, (v) Borrower, the Agent and the other Lenders shall continue to
deal solely and directly with such selling Lender in connection with such
Lender's rights and obligations under the Loan Documents, and (vi) no such
transfer shall include the transfer of any of such Lender's rights to grant
consents or waivers or approve amendments or modifications to the Loan Documents
except with respect to those items requiring the action of or consent by all of
the Lenders or affecting the rights and obligations of Agent. It is understood
and agreed that each Lender may share any and all information received by it
from or on behalf of Borrower pursuant to this Agreement or any of the other
Loan Documents with any participant or prospective participant of such Lender.
<PAGE>
-70-
ARTICLE 11.
PROVISIONS OF GENERAL APPLICATION
Section 11.1 Term of Agreement. This Agreement shall continue in full
force and effect and the duties, covenants, and liabilities of Borrower
hereunder and all the terms, conditions, and provisions hereof relating thereto
shall continue to be fully operative until all Obligations to Agent and each
Lender have been satisfied in full.
Section 11.2 Notices.
(a) All notices and other communications pursuant to this Agreement
shall be in writing, either delivered in hand or sent by first-class mail,
postage prepaid, or sent by telex, telecopier, facsimile transmission or
telegraph, addressed as follows:
(i) If to Borrower, at:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Attn: A. Dale Mayo, President
Fax Number: (973) 377-4303
with copies to:
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
New York, New York 10020
Attn: Warren H. Colodner, Esq.
Fax Number: (212) 536-3901
(ii) If to Agent, at:
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Christopher B. Gribble
Fax Number: (513) 579-2858
<PAGE>
-71-
with a copy to:
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attn: J. David Rosenberg, Esq.
Fax Number: (513) 579-6457
(iii) If to a Lender, at such address set forth on
Schedule 1; or to such other addresses or by
way of such telex and other numbers as any
party hereto shall have designated in a
written notice to the other parties hereto.
(b) Except as otherwise expressly provided herein, any notice or other
communication pursuant to this Agreement or any other Loan Document shall be
deemed to have been duly given or made and to have become effective when
delivered in hand to the party to which it is directed, or, if sent by
first-class mail, postage prepaid, or by telex, telecopier, facsimile
transmission or telegraph, and properly addressed in accordance with Section
11.2(a), (i) when received by the addressee; or (ii) if sent by first class
mail, postage prepaid, on the third (3rd) Business Day following the day of the
dispatch thereof, whichever of (i) or (ii) shall be the earlier.
Section 11.3 Survival of Representations. All representations and
warranties made by or on behalf of Borrower in this Agreement, or any of the
other Loan Documents shall be deemed to have been relied upon by Agent and each
Lender notwithstanding any investigation made by Agent or any Lender and shall
survive the making of each of the Loans.
Section 11.4 Amendments. Each of the Loan Documents may be modified,
amended or supplemented in any respect whatever, only with the prior written
consent or approval of Agent and the Requisite Lenders or all of the Lenders (as
the case may be) and each other Person (other than a Lender) which is a party to
such Loan Document, all in accordance with the terms of Section 10.10 hereof.
<PAGE>
-72-
Section 11.5 Costs, Expenses, Taxes and Indemnification.
(a) Borrower absolutely and unconditionally agrees to pay to the Agent,
for the respective pro rata account of the Agent and each Lender, upon demand by
Agent or any Lender at any time and as often as the occasion therefor may
require, whether or not all or any of the transactions contemplated by any of
the Loan Documents are ultimately consummated (i) all reasonable out-of-pocket
costs and expenses which shall at any time be incurred or sustained by Agent or
any of its directors, officers, employees or agents as a consequence of, on
account of, in relation to or any way in connection with the preparation,
negotiation, execution and delivery of the Loan Documents and the perfection and
continuation of the rights of the Lenders and Agent in connection with the
Loans, as well as the preparation, negotiation, execution, or delivery or in
connection with the amendment or modification of any of the Loan Documents or as
a consequence of, on account of, in relation to or any way in connection with
the granting by Agent or any of the Lenders of any consents, approvals or
waivers under any of the Loan Documents including, but not limited to,
reasonable attorneys' fees and disbursements; and (ii) all reasonable
out-of-pocket costs and expenses which shall be incurred or sustained by Agent
or any of the Lenders or any of their directors, officers, employees or agents
as a consequence of, on account of, in relation to or any way in connection with
the exercise, protection or enforcement (whether or not suit is instituted) any
of its rights, remedies, powers or privileges under any of the Loan Documents or
in connection with any litigation, proceeding or dispute in any respect related
to any of the relationships under, or any of the Loan Documents (including, but
not limited to, all of the reasonable fees and disbursements of consultants,
legal advisers, accountants, experts and agents for Agent or any of the Lenders,
the reasonable travel and living expenses away from home of employees,
consultants, experts or agents of Agent or any of the Lenders, and the
reasonable fees of agents, consultants and experts not in the full-time employ
of Agent or any of the Lenders for services rendered on behalf of Agent or any
of the Lenders).
(b) Borrower shall absolutely and unconditionally indemnify and hold
harmless Agent and each Lender against any and all claims, demands, suits,
actions, causes of action, damages, losses, settlement payments, obligations,
costs, expenses and all other liabilities whatsoever except for claims arising
out of or related to the gross negligence or wilful misconduct of Agent or any
Lender which shall at any time or times be incurred or sustained by Agent or any
Lender or by any of their shareholders, directors, officers, employees,
subsidiaries, Affiliates or agents on account of, or in relation to, or in any
way in connection with, any of the arrangements or transactions contemplated by,
associated with or ancillary to this Agreement or any of the other Loan
Documents, whether or not all or any of the transactions contemplated by,
associated with or ancillary to this Agreement, or any of such Loan Documents
are ultimately consummated.
(c) Borrower hereby covenants and agrees that any sums expended by
Agent or any Lender which Agent or any Lender is entitled to be reimbursed for
pursuant to this Section 11.5, shall be immediately due and payable upon demand
by Agent or any Lender, and shall bear interest at the Default Interest Rate
from the date Agent or any such Lender incurred such expense until the date such
payment is made in full to Agent or such Lender.
<PAGE>
-73-
Section 11.6 Language. All notices, applications, certificates,
reports, financial statements and other financial information, correspondence
and all other communications from Borrower to Agent or any Lender pursuant to
this Agreement or any of the other Loan Documents shall be in the English
language or shall be accompanied by an English translation thereof completely
satisfactory to Agent or such Lender.
Section 11.7 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors in title and assigns; provided, however, that (i) Borrower may not
assign or delegate any of its rights or obligations hereunder to any Person or
Persons without the express prior written consent of the Agent and all of the
Lenders; and (ii) no Lender may assign or delegate its rights or obligation
hereunder to any Person or Persons except in accordance with Section 10.19
hereof.
Section 11.8 Governing Law; Jurisdiction and Venue. The undersigned
agree that inasmuch as this Agreement, the Notes and the Loan Documents are to
be executed by Borrower and accepted by Agent and Lenders in Cincinnati, Ohio
and the funds to be disbursed under the Loans are to be disbursed in Ohio, this
instrument and the rights and obligations of all parties hereunder shall be
governed by and construed under the substantive laws of the State of Ohio,
without reference to the conflict of laws principles of such state.
The Agent, each Lender and Borrower hereby designate all courts of
record sitting in Cincinnati, Ohio, both state and federal, as forums where any
action, suit or proceeding in respect of or arising out of this Agreement, the
Notes, Loan Documents, or the transactions contemplated by this Agreement may be
prosecuted as to all parties, their successors and assigns, and by the foregoing
designations the Agent, each Lender, and Borrower consents to the jurisdiction
and venue of such courts. BORROWER WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE
LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION WITHIN THE STATE OF OHIO FOR
THE PURPOSES OF LITIGATION TO ENFORCE SUCH OBLIGATIONS OF BORROWERS. In the
event such litigation is commenced, Borrower agrees that service of process may
be made and personal jurisdiction over Borrower obtained by service of a copy of
the summons, complaint and other pleadings required to commence such litigation
upon Borrower's appointed Agent for Service of Process in the State of Ohio,
which the undersigned hereof designates to be: CT Corporation Systems,
Cincinnati, Ohio. Borrower recognizes and agrees that the agency has been
created for the benefit of Borrower, and Agent and each Lender and agree that
this agency shall not be revoked, withdrawn, or modified without the consent of
the Agent.
Section 11.9 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED
INDUCEMENT FOR THE LENDERS TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE
OPPORTUNITY TO CONSULT COUNSEL, BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING
IN ANY WAY FROM THE OBLIGATIONS.
<PAGE>
-74-
Section 11.10 Waivers. Borrower waives notice of nonpayment, demand,
notice of demand, presentment, protest and notice of protest with respect to the
Obligations, or notice of acceptance hereof, notice of the Loans made, credit
extended, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
Section 11.11 Interpretation and Proof of Loan Documents. Whenever
possible, the provisions of each Loan Document will be construed in such a
manner as to be consistent with this Agreement and each other Loan Document. If
any of the provisions of any Loan Document are inconsistent with this Agreement,
such provisions of this Agreement will supersede such provisions of such Loan
Document. This Agreement, the Loan Documents and all documents relating hereto,
including, without limitation, (a) consents, waivers and modifications which may
hereafter be executed, (b) documents received by the Agent or any Lender at the
closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Agent or any Lender, may be
reproduced by the Agent or such Lender by an photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and the
Agent or such Lender may destroy any original document so reproduced. Borrower
agrees and stipulates that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by the Agent of such Lender in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
Section 11.12 Integration of Schedules and Exhibits. The Exhibits and
Schedules annexed to this Agreement are an integral part of this Agreement and
are incorporated herein by reference.
Section 11.13 Headings. The headings of the Articles, Sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of this Agreement.
Section 11.14 Counterparts. This Agreement may be executed in any
number of counterparts, but all of such counterparts shall together constitute
but one agreement. In making proof of this Agreement, it shall not be necessary
to produce or account for more than one counterpart hereof signed by each of the
parties hereto.
Section 11.15 Severability. Any provision of this Agreement which is
prohibited and unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.16 One General Obligation. All Loans and advances by Lenders
to Borrower under this Agreement constitute one loan, and all Obligations of
Borrower to Agent and the Lenders under this Agreement constitute one general
obligation. It is expressly understood and agreed that all of the rights of
Agent and each Lender contained in this Agreement shall likewise apply insofar
as applicable to any modification of or supplement to this Agreement.
[The rest of this page intentionally left blank. Signature pages to follow.]
<PAGE>
IN WITNESS WHEREOF, this Agreement 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 in Cincinnati, Ohio.
SIGNED IN THE PRESENCE OF:
CLEARVIEW CINEMA GROUP, INC.
By:
---------------------------
Name: A. Dale Mayo
Title: President
THE LENDERS:
THE PROVIDENT BANK
By:
-------------------------
Name: Christopher B. Gribble
Title: Vice President
AGENT:
THE PROVIDENT BANK, as Agent
By:
-------------------------
Name: Christopher B. Gribble
Title: Vice President
<PAGE>
Withdrawal
The undersigned corporations which were co-Borrowers under the Amended
and Restated Credit Agreement (as defined above) hereby consent to the execution
of the Second Amended and Restated Credit Agreement by Clearview Cinema Group,
Inc. and hereby withdraw as co-Borrowers.
WITNESSETH:
CLEARVIEW CINEMA GROUP, INC.,
CLEARVIEW THEATRE GROUP, INC.,
CCC ALLWOOD CINEMA CORP.,
CCC B.C. REALTY CORP.,
CCC BAYONNE CINEMA CORP.,
CCC BEDFORD CINEMA CORP.,
CCC BELLEVUE CINEMA CORP.,
CCC BERGENFIELD CINEMA CORP.,
CCC BRONXVILLE CINEMA CORP.,
CCC CEDAR GROVE CINEMA CORP.,
CCC CHESTER TWIN CINEMA
CORPORATION,
CCC CINEMA 304 CORP.,
CCC CLARIDGE CINEMA CORP.,
CCC CLOSTER CINEMA CORP.,
CCC EDISON CINEMA CORP.,
CCC EMERSON CINEMA CORP.,
CCC GRAND AVENUE CINEMA CORP.,
CCC HERRICKS CINEMA CORP.,
CCC KIN MALL CINEMA CORP.,
CCC KISCO CINEMA CORP.,
CCC LARCHMONT CINEMA CORP.,
CCC MADISON TRIPLE CINEMA
CORP.,
CCC MAMARONECK CINEMA CORP.,
CCC MANASQUAN CINEMA
CORPORATION,
CCC MANSFIELD CINEMA CORP.,
CCC MARBORO CINEMA CORP.,
CCC MIDDLEBROOK CINEMA CORP.,
CCC NEW CITY CINEMA CORP.,
CCC PARSIPPANY CINEMA CORP.,
CCC PORT WASHINGTON CINEMA
CORP.,
CCC ROSLYN CINEMA CORP.,
CCC SUCCASUNNA CINEMA CORP.,
<PAGE>
CCC SUMMIT CINEMA CORP. (formerly
known as 343-349 Springfield
Avenue CORP.),
CCC TENAFLY CINEMA CORP.,
CCC WASHINGTON CINEMA CORP.,
CCC WAYNE CINEMA CORP.,
CCC WOODBRIDGE CINEMA CORP.,
CCC COBBLE HILL CINEMA CORP.,
CCC COLONY CINEMA CORP.,
CCC WEST MILFORD CINEMA CORP.,
CCC BABYLON CINEMA CORP.,
MILLBURN TWIN CINEMA CORP.,
CCC MORRISTOWN CINEMA CORP.,
CCC NARBERTH CINEMA CORP.,
CCC BALA CYNWYD CINEMA CORP.,
CCC MANHASSET CINEMA CORP.,
CCC GREAT NECK CINEMA CORP.,
CCC FRANKLIN SQUARE CINEMA CORP.,
CCC SCREENING ZONE CINEMA
CORP., and
CCC CARMEL CINEMA CORP.
By:
------------------------------
Name: A. Dale Mayo,
President,
executing this document in his
capacity as President of each
Guarantor, as individually listed
above
<PAGE>
ANNEX I
SCHEDULES
1 Lenders
3.2 Mortgaged Property and Leasehold Interests
5.1(a) Jurisdictions where qualified to do business
5.1(b) Capital Stock
5.1(c) Subsidiaries
5.6 Material Adverse Changes
5.7 Material Leases of Property
5.8 Intellectual Property
5.9 Indebtedness for Borrowed Money
5.10 Litigation
5.13(a) Contracts with Affiliates
5.13(b) Indebtedness for Borrowed Money Owing to or by Affiliates
5.21 UCC Filing Offices
8.3(b) Obligations
8.4 Management Compensation
8.8(h) Liens
EXHIBITS
Exhibit A Form of Assignment of Option and
Operating Agreements
Exhibit B Deliberately Omitted
Exhibit C Form of Assignment of Trademarks
Exhibit D Form of Blocked Account Agreement
Exhibit E Form of Compliance Certificate
Exhibit F Form of Environmental Indemnity
Agreement
Exhibit G Deliberately Omitted
Exhibit H Form of Leasehold Mortgage
Exhibit I Form of Mortgage
Exhibit J Form of Pledge Agreement
Exhibit K Form of Revolving Promissory Note
Exhibit L Deliberately Omitted
Exhibit M Form of Borrower's Counsel Opinion
Letter
Exhibit N Class B Non-Voting Cumulative
Redeemable Preferred Stock
Exhibit O Class C Convertible Preferred Stock
Exhibit P Form of Subsidiary Guaranty
Exhibit Q Form of Subsidiary Security
Agreement
<PAGE>
SCHEDULE 1
PARTICIPATION CREDIT
LENDER COMMITMENT PERCENTAGE
- ------------- ---------- ----------
THE PROVIDENT BANK Revolving Credit Loan 100.00%
One East Fourth Street
7th Floor $15,000,000
Cincinnati, Ohio 45202
Christopher B. Gribble
(513) 579-2750
Exhibit 10.33
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of February 13, 1998 (the
"Agreement"), by and among Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), and Claridge Cinema's Inc., a New Jersey corporation
("Seller").
The parties hereto, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, agree as follows:
1. Definitions. The following terms have the meanings set forth in this
Section 1 unless the context clearly otherwise requires:
(a) "Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Common Stock" means the Common Stock, $.01 par value, of
the Company.
(d) "Holder" means Seller so long as Seller are holders of any
Registrable Securities and Seller's permitted successors, transferees and
assigns so long as any such successor, transferee or assignee executes and
delivers a written agreement, in form and substance satisfactory to the Company,
agreeing to be bound by the provisions of this Agreement.
(e) "Offering" means any underwritten public offering of
shares of Common Stock by the Company or any holder thereof in accordance with
the registration requirements of the Act.
(f) "Registrable Securities" means any shares of Common Stock
now or hereafter held by Seller.
(g) "Registration", "register" and like words mean compliance
with all of the laws, rules and regulations (federal, state and local), and
provisions of agreements and corporate documents pertaining to the public
offering of securities, including registration of any public offering of
securities on any form under the Act.
2. Incidental Registration. If the Company shall at any time propose
for itself or any other person the registration under the Act of any Offering
(other than any Offering in connection with any employee benefit plan or a
transaction required to be registered by means of a registration statement on
Form S-4), the Company shall give notice of such proposed registration to all
Holders. Upon receipt of such notice, each Holder may elect to participate in
such Offering. To make such election, any such Holder must give notice to the
Company of such Holder's election and the number of Registrable Securities that
such Holder wishes to sell in such Offering within fifteen (15) days of the day
that the Company gave notice of such Offering. Subject to the provisions of the
last sentence of this Section 2, the Company shall include in such Offering such
<PAGE>
Registrable Securities and shall cause the managing underwriter or sole
underwriter of such Offering, if any, to enter into an underwriting agreement
that will have all such electing Holders as parties thereto. The rights provided
in this Section 2 are available to any Holder even though such Holder may be
free at the time to sell all of the Registrable Securities of such Holder with
respect to which registration is requested in accordance with Rule 144 (or any
similar rule or regulation) under the Act. If the managing underwriter or sole
underwriter of any Offering subject to the provisions of this Section 2 advises
the Holders participating therein in writing that marketing factors require a
limitation on the number of shares of Common Stock to be underwritten in such
Offering, then the number of shares of Common Stock that may be included in such
Offering shall be allocated as follows: (i) all shares of Common Stock to be
sold for the account of the Company shall be included; and (ii) the remaining
shares of Common Stock that may be sold pursuant to the advice of such managing
underwriter shall be allocated among all Holders and other persons participating
in such Offering in proportion, as nearly as practicable, to the respective
numbers of shares of Common Stock held by or issuable to all such persons at the
time of the filing of the registration statement for such Offering.
3. Information to be Furnished by Holders. Each Holder participating in
an Offering pursuant to Section 2 shall furnish to the Company in writing all
information within such Holder's possession or knowledge required by the
applicable rules and regulations of the Commission and by any applicable state
securities or blue sky laws concerning such Holder, the proposed method of sale
or other disposition of the shares of Common Stock being sold by such Holder in
such Offering, and the identity of and compensation to be paid to any proposed
underwriter or underwriters to be employed in connection with such Offering.
4. Costs and Expenses. Except as provided in the last sentence of this
Section 4, the Company shall pay all costs and expenses in connection with the
registration of any Offering under this Agreement. Such costs and expenses for
any Offering, include: (a) the reasonable fees and expenses of the Company's
counsel and one special counsel selected by the Holders offering shares of
Common Stock in such Offering; (b) the fees and expenses of the Company's
accountants and auditors; (c) the costs and expenses incident to the
preparation, printing and filing of any and all documents to be filed under the
Act and any applicable state securities or blue sky laws in connection with such
Offering, each prospectus forming a part of the relevant registration statement
and all amendments thereof and supplements thereto; (d) the costs incurred in
connection with the qualification of the Offering and the shares of Common Stock
being offered in such Offering under any applicable state securities or blue sky
laws (including any related fees and disbursements); (e) the cost of listing the
shares of Common Stock being offered in such Offering on any exchange; (f) the
cost of furnishing to each Holder such copies as such Holder shall reasonably
request of the relevant registration statement, each preliminary prospectus and
the final prospectus forming part of such registration statement and each
amendment thereof or supplement thereto; and (g) all expenses incident to
delivery of the shares of Common Stock being offered in such Offering to any
underwriter or underwriters. Notwithstanding anything to the contrary set forth
herein, the Company shall not be obligated to pay (i) the commissions or
discounts payable to any underwriter for any shares of Common Stock sold by any
Holder or (ii) any costs or expenses incurred in connection with any
registration statement referred to in Section 2 which any other person on whose
behalf such registration statement is being filed has agreed to pay.
5. Indemnification by Company. The Company shall, to the maximum extent
permitted by law, indemnify and hold harmless each Holder participating in any
Offering pursuant to this Agreement, any underwriter for such Holder and each
2
<PAGE>
person, if any, who controls (as defined in the Act) such Holder or such
underwriter against any losses, claims, damages, liabilities, judgments,
settlements, awards and expenses (including attorneys' fees) (each a "Loss" and
collectively "Losses") to which such Holder or underwriter or controlling person
may become subject under the Act or otherwise, insofar as such Losses are caused
by, based upon, arise out of, or relate to, any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
for such Offering, any prospectus contained therein, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company shall not be liable
in any such case to the extent that any such Loss is caused by, is based upon,
arises out of, or relates to, an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with written information
furnished by such Holder or underwriter specifically for use in preparation of
such registration statement, prospectus, amendment or supplement or if, in
respect to such statement, alleged statement, omission or alleged omission, the
final prospectus for such registration statement corrected such statement,
alleged statement, omission or alleged omission and a copy of such final
prospectus was not sent or given by or on behalf of such Holder at or prior to
the confirmation of the sale of shares of Common Stock of such Holder with
respect to which such Loss relates. The Company shall reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
incurred by such Holder, underwriter or controlling person in connection with
investigating or defending against any such Loss as incurred if such Holder,
underwriter or controlling person has provided to the Company an undertaking to
repay such reimbursed expenses if it is determined that such Holder, underwriter
or controlling person was not entitled to indemnification hereunder.
6. Indemnification by Holder. Each Holder participating in any Offering
pursuant to this Agreement shall, to the maximum extent permitted by law,
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the applicable registration statement and each person,
if any, who controls the Company against any Losses to which the Company or any
such director, officer or controlling person may become subject under the Act or
otherwise, insofar as such Losses are caused by, based upon, arise out of, or
relate to, (a) any untrue or alleged untrue statement of any material fact
contained in the registration statement for such Offering, any prospectus
contained therein, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such Losses are caused by,
based upon, arise out of, or relate to, an untrue statement or alleged untrue
statement or omission or alleged omission made in conformity with written
information furnished by such Holder specifically for use in preparation of such
registration statement, prospectus, amendment or supplement; or (b) any untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus for such registration statement if, in respect to
such statement, alleged statement, omission or alleged omission, the final
prospectus for such registration statement corrected such statement, alleged
statement, omission or alleged omission and a copy of such final prospectus was
not sent or given by or on behalf of such Holder at or prior to the confirmation
of the sale of shares of Common Stock of such Holder with respect to which such
Loss relates. Each Holder's obligation under this Section 7 shall be several and
not joint and in no event shall exceed the net proceeds received by such Holder
in the Offering to which the applicable Loss relates.
3
<PAGE>
7. Notice to Indemnitor. Promptly after receipt by any indemnified
party of notice of the commencement of any action which may involve an
indemnifiable Loss, such indemnified party shall, if a claim is to be made
against an indemnifying party with respect to such Loss pursuant hereto, notify
such indemnifying party of the commencement thereof; but the failure to so
notify such indemnifying party shall not relieve it from any liability that it
may have to such indemnified party hereunder unless such indemnifying party
shall have been actually and materially prejudiced by such failure. In case any
such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, and such indemnifying party,
without acknowledging any validity of the underlying claim, acknowledges that it
may be obligated to indemnify such indemnified party therefor, such indemnifying
party shall be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
but may not settle such action without the consent of such indemnified party,
which consent shall not be unreasonably withheld, unless such settlement
involves no payment by such indemnified party, no equitable relief against such
indemnified party and a complete release of all claims against such indemnified
party. If an indemnifying party undertakes the defense of any matter for which
indemnity is claimed under this Agreement, and if the relevant indemnified party
wishes nevertheless to retain counsel to represent it in such matter, the fees
of such counsel shall be the responsibility solely of the party retaining such
counsel unless such indemnified party and such indemnifying party have
conflicting or separate defenses in such action, in which case the attorneys'
fees of such indemnified party will be borne by such indemnifying party.
8. Additional Obligations. If, in order to effect any Offering in
accordance with this Agreement, such Offering or the shares of Common Stock
being offered in such Offering require a declaration of, registration with, or
approval of, any federal or state governmental official or authority (other than
registration under the Act or qualification or registration under state
securities or blue sky laws) before such shares of Common Stock may be sold, the
Company at its own expense shall take all reasonable actions in connection with
such registration, declaration or approval and will use its reasonable best
efforts to cause such shares of Common Stock to be duly registered or approved
as may be required; provided, however, that in connection therewith or as a
condition thereof, the Company may not be required to execute a general consent
to service or to qualify to do business in any jurisdiction. The foregoing shall
not be applicable to any regulatory requirements applicable solely to any Holder
wishing to participate in any such Offering.
9. Rule 144 Covenants. With a view to making available to each Holder
the benefits of Rule 144 under the Act (which term as used in this Section 9
includes the present Rule 144 and any other, additional, substitute,
supplemental or analogous rule or regulation of the Commission that may at any
time permit a Holder to sell Registrable Securities to the public without
compliance with the registration requirements of the Act), the Company (a) shall
maintain registration of the Common Stock under Section 12 or 15(d) of the
Securities Exchange Act of 1934, as amended; (b) shall file with the Commission
in a timely manner all reports and other documents required to be filed by an
issuer of securities registered under the Securities Exchange Act of 1934, as
amended, so as to maintain the availability of Rule 144 to the Holders; (c) at
its expense, forthwith upon any Holder's request, shall deliver to such Holder a
certificate, signed by one of the Company's principal officers, stating (i) the
4
<PAGE>
Company's name, address and telephone number (including area code); (ii) the
Company's I.R.S. taxpayer identification number; (iii) the Company's Commission
file number; (iv) the number of shares of Common Stock outstanding as shown by
the most recent report or statement published by the Company or filed by the
Company with the Commission; and (v) that the Company has filed the reports
required to be filed under the Securities Exchange Act of 1934, as amended, for
a period of at least 90 days prior to the date of such certificate and in
addition has filed the most recent annual report required to be filed thereunder
and such other or additional information as shall be necessary to make available
to such Holder the ability to offer and sell the maximum number of shares of
Common Stock under Rule 144; and (d) when Rule 144 is being complied with, shall
deliver securities not bearing any legend restricting transfer of such
securities, as requested from time to time by any Holder subject to this
Agreement.
10. Notices. All notices and other communications provided for
hereunder must be in writing and shall be deemed to have been given on the same
day when personally delivered or sent by confirmed facsimile transmission or on
the next business day when delivered by receipted courier service or on the
third business day when mailed with sufficient postage, registered or certified
mail, return receipt requested, to the following addresses:
(a) if to the Company: Clearview Cinema Group, Inc., 97 Main
Street, Chatham, New Jersey 07928, Telecopy No. (201) 377-4303, marked
"Attention: President," with a copy to: Kirkpatrick & Lockhart LLP, 1251 Avenue
of the Americas, New York, New York 10020, Attention: Jerry H. Owens, Esq.;
(b) if to Seller: c/o Craig Zeltner, 12 Fenner Place, Wayne,
New Jersey 07470, with a copy to: Alter Bartfeld & Mantel LLP, 90 Park Avenue,
New York, New York 10016, marked "Attention: Arnold L.
Bartfeld, Esq."
or to such other address as any party shall have furnished to the other parties
pursuant to this Section 10. Failure to send a copy of a notice to any attorney
shall not vitiate any notice sent to a party.
11. Entire Agreement; Modification of Agreement; Consents. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof. Changes in or additions to this Agreement may be
made and/or compliance with any covenant or condition herein set forth may be
omitted only upon written consent of all the parties hereto; provided, however,
that any agreement by any person to become a party to this Agreement because
such person has acquired shares of Common Stock from Seller only needs to be
executed by such person and the Company to be binding upon all of the parties
hereto.
12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors, transferees and assigns. For purposes of this Agreement, any person
who is a successor to or assignee of any party hereto by operation of law,
including by means of a merger, consolidation or share exchange or by the laws
of intestacy or inheritance or pursuant to a will (but only if such person is
the administrator or executor of the applicable estate) and excluding any person
who receives a distribution of shares of Common Stock as an heir, upon
dissolution or liquidation (whether full or partial), as a dividend on or a
redemption (whether full or partial) of such person's interest in such party or
5
<PAGE>
by any other means, shall be deemed to be a permitted successor or assignee
hereunder upon execution of an agreement to become a party hereto. Any person
who receives a distribution of shares of Common Stock from any party hereto by
any other means or for any other reason shall only be permitted to become a
party hereto if (a) such person, after such distribution, beneficially owns at
least five percent of the then outstanding shares of Common Stock, on a fully
diluted basis, or (b) such person is an affiliate of the Company (as defined in
Rule 144 under the Act), and such person executes an agreement to become a party
hereto.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to any of its
principles of conflicts of law.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
15. Term. This Agreement shall remain in full force and effect until
the earliest to occur of (a) the liquidation or dissolution of the Company, (b)
the sale of all or substantially all of the assets of the Company, and (c) the
tenth anniversary of the date hereof.
16. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) As used in this Agreement, the term "person" means any
individual, corporation, partnership, joint venture, trust, limited liability
company, governmental authority or other entity.
(c) The invalidity or unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof or such provision in other jurisdictions, and this Agreement
shall be construed in such jurisdiction in all respects as if such invalid or
unenforceable provision were omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision in such jurisdiction there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first set forth
above.
CLEARVIEW CINEMA GROUP, INC.
By: ___________________________
A. Dale Mayo
President
CLARIDGE CINEMA'S INC.
By: ___________________________
6
EXHIBIT 10.34
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of April 30, 1998 (the
"Agreement"), by and among Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), and the individuals identified on the signature pages hereto
(collectively "Stockholders").
The parties hereto, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, agree as follows:
1. Definitions. The following terms have the meanings set forth in this
Section 1 unless the context clearly otherwise requires:
(a) "Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Common Stock" means the Common Stock, $.01 par value, of
the Company.
(d) "Holder" means Stockholders so long as Stockholders are
holders of any Registrable Securities and Stockholders' permitted successors,
transferees and assigns so long as any such successor, transferee or assignee
executes and delivers a written agreement, in form and substance satisfactory to
the Company, agreeing to be bound by the provisions of this Agreement.
(e) "Offering" means any underwritten public offering of
shares of Common Stock by the Company or any holder thereof in accordance with
the registration requirements of the Act.
(f) "Registrable Securities" means any shares of Common Stock
now or hereafter held by Stockholders.
(g) "Registration", "register" and like words mean compliance
with all of the laws, rules and regulations (federal, state and local), and
provisions of agreements and corporate documents pertaining to the public
offering of securities, including registration of any public offering of
securities on any form under the Act.
2. Incidental Registration. If the Company shall at any time propose
for itself or any other person the registration under the Act of any Offering
(other than any Offering in connection with any employee benefit plan or a
transaction required to be registered by means of a registration statement on
Form S-4), the Company shall give notice of such proposed registration to all
Holders. Upon receipt of such notice, each Holder may elect to participate in
such Offering. To make such election, any such Holder must give notice to the
Company of such Holder's election and the number of Registrable Securities that
such Holder wishes to sell in such Offering within fifteen (15) days of the day
that the Company gave notice of such Offering. Subject to the provisions of the
last sentence of this Section 2, the Company shall include in such Offering such
<PAGE>
Registrable Securities and shall cause the managing underwriter or sole
underwriter of such Offering, if any, to enter into an underwriting agreement
that will have all such electing Holders as parties thereto. The rights provided
in this Section 2 are available to any Holder even though such Holder may be
free at the time to sell all of the Registrable Securities of such Holder with
respect to which registration is requested in accordance with Rule 144 (or any
similar rule or regulation) under the Act. If the managing underwriter or sole
underwriter of any Offering subject to the provisions of this Section 2 advises
the Holders participating therein in writing that marketing factors require a
limitation on the number of shares of Common Stock to be underwritten in such
Offering, then the number of shares of Common Stock that may be included in such
Offering shall be allocated as follows: (i) all shares of Common Stock to be
sold for the account of the Company shall be included; and (ii) the remaining
shares of Common Stock that may be sold pursuant to the advice of such managing
underwriter shall be allocated among all Holders and other persons participating
in such Offering in proportion, as nearly as practicable, to the respective
numbers of shares of Common Stock held by or issuable to all such persons at the
time of the filing of the registration statement for such Offering.
3. Information to be Furnished by Holders. Each Holder participating in
an Offering pursuant to Section 2 shall furnish to the Company in writing all
information within such Holder's possession or knowledge required by the
applicable rules and regulations of the Commission and by any applicable state
securities or blue sky laws concerning such Holder, the proposed method of sale
or other disposition of the shares of Common Stock being sold by such Holder in
such Offering, and the identity of and compensation to be paid to any proposed
underwriter or underwriters to be employed in connection with such Offering.
4. Costs and Expenses. Except as provided in the last sentence of this
Section 4, the Company shall pay all costs and expenses in connection with the
registration of any Offering under this Agreement. Such costs and expenses for
any Offering, include: (a) the reasonable fees and expenses of the Company's
counsel and one special counsel selected by the Holders offering shares of
Common Stock in such Offering; (b) the fees and expenses of the Company's
accountants and auditors; (c) the costs and expenses incident to the
preparation, printing and filing of any and all documents to be filed under the
Act and any applicable state securities or blue sky laws in connection with such
Offering, each prospectus forming a part of the relevant registration statement
and all amendments thereof and supplements thereto; (d) the costs incurred in
connection with the qualification of the Offering and the shares of Common Stock
being offered in such Offering under any applicable state securities or blue sky
laws (including any related fees and disbursements); (e) the cost of listing the
shares of Common Stock being offered in such Offering on any exchange; (f) the
cost of furnishing to each Holder such copies as such Holder shall reasonably
request of the relevant registration statement, each preliminary prospectus and
the final prospectus forming part of such registration statement and each
amendment thereof or supplement thereto; and (g) all expenses incident to
delivery of the shares of Common Stock being offered in such Offering to any
underwriter or underwriters. Notwithstanding anything to the contrary set forth
herein, the Company shall not be obligated to pay (i) the commissions or
discounts payable to any underwriter for any shares of Common Stock sold by any
Holder or (ii) any costs or expenses incurred in connection with any
registration statement referred to in Section 2 which any other person on whose
behalf such registration statement is being filed has agreed to pay.
-2-
<PAGE>
5. Indemnification by Company. The Company shall, to the maximum extent
permitted by law, indemnify and hold harmless each Holder participating in any
Offering pursuant to this Agreement, any underwriter for such Holder and each
person, if any, who controls (as defined in the Act) such Holder or such
underwriter against any losses, claims, damages, liabilities, judgments,
settlements, awards and expenses (including attorneys' fees) (each a "Loss" and
collectively "Losses") to which such Holder or underwriter or controlling person
may become subject under the Act or otherwise, insofar as such Losses are caused
by, based upon, arise out of, or relate to, any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
for such Offering, any prospectus contained therein, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company shall not be liable
in any such case to the extent that any such Loss is caused by, is based upon,
arises out of, or relates to, an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with written information
furnished by such Holder or underwriter specifically for use in preparation of
such registration statement, prospectus, amendment or supplement or if, in
respect to such statement, alleged statement, omission or alleged omission, the
final prospectus for such registration statement corrected such statement,
alleged statement, omission or alleged omission and a copy of such final
prospectus was not sent or given by or on behalf of such Holder at or prior to
the confirmation of the sale of shares of Common Stock of such Holder with
respect to which such Loss relates. The Company shall reimburse each such
Holder, underwriter or controlling person for any legal or other expenses
incurred by such Holder, underwriter or controlling person in connection with
investigating or defending against any such Loss as incurred if such Holder,
underwriter or controlling person has provided to the Company an undertaking to
repay such reimbursed expenses if it is determined that such Holder, underwriter
or controlling person was not entitled to indemnification hereunder.
6. Indemnification by Holder. Each Holder participating in any Offering
pursuant to this Agreement shall, to the maximum extent permitted by law,
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the applicable registration statement and each person,
if any, who controls the Company against any Losses to which the Company or any
such director, officer or controlling person may become subject under the Act or
otherwise, insofar as such Losses are caused by, based upon, arise out of, or
relate to, (a) any untrue or alleged untrue statement of any material fact
contained in the registration statement for such Offering, any prospectus
contained therein, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such Losses are caused by,
based upon, arise out of, or relate to, an untrue statement or alleged untrue
statement or omission or alleged omission made in conformity with written
information furnished by such Holder specifically for use in preparation of such
registration statement, prospectus, amendment or supplement; or (b) any untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus for such registration statement if, in respect to
such statement, alleged statement, omission or alleged omission, the final
prospectus for such registration statement corrected such statement, alleged
statement, omission or alleged omission and a copy of such final prospectus was
not sent or given by or on behalf of such Holder at or prior to the confirmation
of the sale of shares of Common Stock of such Holder with respect to which such
Loss relates. Each Holder's obligation under this Section 7 shall be several and
not joint and in no event shall exceed the net proceeds received by such Holder
in the Offering to which the applicable Loss relates.
-3-
<PAGE>
7. Notice to Indemnitor. Promptly after receipt by any indemnified
party of notice of the commencement of any action which may involve an
indemnifiable Loss, such indemnified party shall, if a claim is to be made
against an indemnifying party with respect to such Loss pursuant hereto, notify
such indemnifying party of the commencement thereof; but the failure to so
notify such indemnifying party shall not relieve it from any liability that it
may have to such indemnified party hereunder unless such indemnifying party
shall have been actually and materially prejudiced by such failure. In case any
such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, and such indemnifying party,
without acknowledging any validity of the underlying claim, acknowledges that it
may be obligated to indemnify such indemnified party therefor, such indemnifying
party shall be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
but may not settle such action without the consent of such indemnified party,
which consent shall not be unreasonably withheld, unless such settlement
involves no payment by such indemnified party, no equitable relief against such
indemnified party and a complete release of all claims against such indemnified
party. If an indemnifying party undertakes the defense of any matter for which
indemnity is claimed under this Agreement, and if the relevant indemnified party
wishes nevertheless to retain counsel to represent it in such matter, the fees
of such counsel shall be the responsibility solely of the party retaining such
counsel unless such indemnified party and such indemnifying party have
conflicting or separate defenses in such action, in which case the attorneys'
fees of such indemnified party will be borne by such indemnifying party.
8. Additional Obligations. If, in order to effect any Offering in
accordance with this Agreement, such Offering or the shares of Common Stock
being offered in such Offering require a declaration of, registration with, or
approval of, any federal or state governmental official or authority (other than
registration under the Act or qualification or registration under state
securities or blue sky laws) before such shares of Common Stock may be sold, the
Company at its own expense shall take all reasonable actions in connection with
such registration, declaration or approval and will use its reasonable best
efforts to cause such shares of Common Stock to be duly registered or approved
as may be required; provided, however, that in connection therewith or as a
condition thereof, the Company may not be required to execute a general consent
to service or to qualify to do business in any jurisdiction. The foregoing shall
not be applicable to any regulatory requirements applicable solely to any Holder
wishing to participate in any such Offering.
9. Rule 144 Covenants. With a view to making available to each Holder
the benefits of Rule 144 under the Act (which term as used in this Section 9
includes the present Rule 144 and any other, additional, substitute,
supplemental or analogous rule or regulation of the Commission that may at any
time permit a Holder to sell Registrable Securities to the public without
compliance with the registration requirements of the Act), the Company (a) shall
maintain registration of the Common Stock under Section 12 or 15(d) of the
Securities Exchange Act of 1934, as amended; (b) shall file with the Commission
in a timely manner all reports and other documents required to be filed by an
issuer of securities registered under the Securities Exchange Act of 1934, as
amended, so as to maintain the availability of Rule 144 to the Holders; (c) at
-4-
<PAGE>
its expense, forthwith upon any Holder's request, shall deliver to such Holder a
certificate, signed by one of the Company's principal officers, stating (i) the
Company's name, address and telephone number (including area code); (ii) the
Company's I.R.S. taxpayer identification number; (iii) the Company's Commission
file number; (iv) the number of shares of Common Stock outstanding as shown by
the most recent report or statement published by the Company or filed by the
Company with the Commission; and (v) that the Company has filed the reports
required to be filed under the Securities Exchange Act of 1934, as amended, for
a period of at least 90 days prior to the date of such certificate and in
addition has filed the most recent annual report required to be filed thereunder
and such other or additional information as shall be necessary to make available
to such Holder the ability to offer and sell the maximum number of shares of
Common Stock under Rule 144; and (d) when Rule 144 is being complied with, shall
deliver securities not bearing any legend restricting transfer of such
securities, as requested from time to time by any Holder subject to this
Agreement.
10. Notices. All notices and other communications provided for
hereunder must be in writing and shall be deemed to have been given on the same
day when personally delivered or sent by confirmed facsimile transmission or on
the next business day when delivered by receipted courier service or on the
third business day when mailed with sufficient postage, registered or certified
mail, return receipt requested, to the following addresses:
(a) if to the Company: Clearview Cinema Group, Inc., 7 Waverly
Place, Madison, New Jersey 07940, Telecopy No. (201) 377-4303, marked
"Attention: President," with a copy to: Kirkpatrick & Lockhart LLP, 1251 Avenue
of the Americas, New York, New York 10020, Attention: David L. Forney, Esq.;
(b) if to Stockholders: c/o Ferman & Nelson, 21 Sunset Strip,
P.O. Box 648, Succasunna, New Jersey 07876, marked "Attention: John Nelson,"
with a copy to: Alter Bartfeld & Mantel LLP, 90 Park Avenue, New York, New York
10016, marked "Attention: Arthur S. Mantel, Esq."
or to such other address as any party shall have furnished to the other parties
pursuant to this Section 10. Failure to send a copy of a notice to any attorney
shall not vitiate any notice sent to a party.
11. Entire Agreement; Modification of Agreement; Consents. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof. Changes in or additions to this Agreement may be
made and/or compliance with any covenant or condition herein set forth may be
omitted only upon written consent of all the parties hereto; provided, however,
that any agreement by any person to become a party to this Agreement because
such person has acquired shares of Common Stock from Stockholders only needs to
be executed by such person and the Company to be binding upon all of the parties
hereto.
12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors, transferees and assigns. For purposes of this Agreement, any person
who is a successor to or assignee of any party hereto by operation of law,
including by means of a merger, consolidation or share exchange or by the laws
of intestacy or inheritance or pursuant to a will (but only if such person is
the administrator or executor of the applicable estate) and excluding any person
who receives a distribution of shares of Common Stock as an heir, upon
-5-
<PAGE>
dissolution or liquidation (whether full or partial), as a dividend on or a
redemption (whether full or partial) of such person's interest in such party or
by any other means, shall be deemed to be a permitted successor or assignee
hereunder upon execution of an agreement to become a party hereto. Any person
who receives a distribution of shares of Common Stock from any party hereto by
any other means or for any other reason shall only be permitted to become a
party hereto if (a) such person, after such distribution, beneficially owns at
least five percent of the then outstanding shares of Common Stock, on a fully
diluted basis, or (b) such person is an affiliate of the Company (as defined in
Rule 144 under the Act), and such person executes an agreement to become a party
hereto.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to any of its
principles of conflicts of law.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
15. Term. This Agreement shall remain in full force and effect until
the earliest to occur of (a) the liquidation or dissolution of the Company, (b)
the sale of all or substantially all of the assets of the Company, and (c) the
tenth anniversary of the date hereof.
16. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) As used in this Agreement, the term "person" means any
individual, corporation, partnership, joint venture, trust, limited liability
company, governmental authority or other entity.
(c) The invalidity or unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof or such provision in other jurisdictions, and this Agreement
shall be construed in such jurisdiction in all respects as if such invalid or
unenforceable provision were omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision in such jurisdiction there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first set forth
above.
CLEARVIEW CINEMA GROUP, INC.
By:
------------------------------
A. Dale Mayo
President
-----------------------------------
John Nelson
-----------------------------------
Seth Ferman
-----------------------------------
Pamela Ferman
-----------------------------------
Martin Drescher
-6-
Exhibit 10.35
--------------------------
A/B Exchange
Registration Rights Agreement
Dated as of June 12, 1998
by and among
Clearview Cinema Group, Inc.,
the Subsidiary Guarantors
and
Lehman Brothers Inc.
--------------------------
<PAGE>
This Registration Rights Agreement (this "Agreement") is made
and entered into as of June 12, 1998 by and among Clearview Cinema Group, Inc.,
a Delaware corporation, the Subsidiary Guarantors (as defined in the Indenture)
(collectively, the "Company"), and Lehman Brothers Inc. (the "Initial
Purchaser").
This Agreement is made pursuant to the Purchase Agreement,
dated June 9, 1998 (the "Purchase Agreement"), by and among the Company, the
Subsidiary Guarantors and the Initial Purchaser, which provides for the sale by
the Company to the Initial Purchaser of $80,000,000 aggregate principal amount
of the Company's 10 7/8% Senior Notes due 2008 (the "Series A Notes"). The Notes
will be guaranteed, jointly and severally, on an unsecured senior basis by a
guarantee (the "Subsidiary Guarantees") by each of the Company's subsidiaries.
In order to induce the Initial Purchaser to purchase the Series A Notes, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchaser set forth in Section 2 of the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
Broker-Dealer: Any broker or dealer registered under
the Exchange Act.
Closing Date: The date on which the Series A Notes
were first sold.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be
deemed "Consummated" for purposes of this Agreement upon the
occurrence of (i) the filing and effectiveness under the
Securities Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange
Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer
open for a period not less than the minimum period required
pursuant to Section 3(b) hereof and (iii) the delivery by the
Company to the Registrar under the Indenture of Series B Notes
in the same aggregate principal amount as the aggregate
principal amount of Series A Notes that were tendered by
Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A
Notes, each Interest Payment Date until the earlier of (i) the
date on which Liquidated Damages no longer are payable or (ii)
maturity of the Series A Notes.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Company under
the Securities Act of the Series B Notes pursuant to a
Registration Statement pursuant to which the Company offers
the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer
Restricted Securities held by such Holders for Series B Notes
in an aggregate principal amount equal to the aggregate
principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
<PAGE>
Exchange Offer Registration Statement: The
Registration Statement relating to the Exchange Offer,
including the Prospectus which forms a part thereof.
Exempt Resales: The transactions in which the Initial
Purchaser proposes to sell the Series A Notes to (i) certain
"qualified institutional buyers," as such term is defined in
Rule 144A under the Securities Act and (ii) outside the United
States to Persons other than U.S. Persons in offshore
transactions meeting the requirements of Rule 904 of
Regulation S under the Securities Act.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a)
hereof.
Indenture: The Indenture, dated as of June 12, 1998,
among the Company and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee"), pursuant to which the
Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms
thereof.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture
and the Notes.
NASD: National Association of Securities Dealers,
Inc.
Notes: The Series A Notes and the Series B Notes.
Participant: As defined in Section 8(a) hereof.
Person: An individual, partnership, corporation,
limited liability company, trust or unincorporated
organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration
Statement, as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment
Date relating to Notes, each Person who is a Holder of Notes
on the record date with respect to the Interest Payment Date
on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of
the Company relating to (a) an offering of Series B Notes
pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to a Shelf
Registration Statement, which is filed pursuant to the
provisions of this Agreement including the Prospectus included
therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material
incorporated by reference therein.
Securities Act: The Securities Act of 1933, as
amended.
Series A Notes: As defined in the preamble hereto.
2
<PAGE>
Series B Notes: The Company's 107/8% Senior Notes due
2008 to be issued pursuant to the Indenture in the Exchange
Offer.
Shelf Filing Deadline: As defined in Section 4
hereof.
Shelf Registration Statement: As defined in Section 4
hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the
Indenture.
Transfer Restricted Securities: Each Note, until the
earliest to occur of (i) the date on which such Note has been
exchanged by a person other than a Broker-Dealer for a Series
B Note in the Exchange Offer, (ii) following the exchange by a
Broker-Dealer in the Exchange Offer of such Note for one or
more Series B Notes, the date on which such Series B Notes are
sold to a purchaser who receives from such Broker-Dealer on or
prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii)
the date on which such Note has been effectively registered
under the Act and disposed of in accordance with a Shelf
Registration Statement or (iv) the date on which such Note is
eligible to be distributed to the public pursuant to Rule 144
under the Securities Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
2. Securities Subject to This Agreement.
(a) Transfer Restricted Securities. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a
"Holder") whenever such Person beneficially owns Transfer Restricted
Securities.
3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), the Company shall (i)
cause to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 60 days after the Closing
Date, a Registration Statement under the Securities Act relating to the
Series B Notes and the Exchange Offer, (ii) use its best efforts to
cause such Registration Statement to become effective at the earliest
possible time, but in no event later than 150 days after the Closing
Date, (iii) in connection with the foregoing, file (A) all
pre-effective amendments to such Registration Statement as may be
necessary in order to cause such Registration Statement to become
effective, (B) if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Securities Act
and (C) cause all necessary filings in connection with the registration
and qualification of the Series B Notes to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of
the Exchange Offer, and (iv) upon effectiveness of such Registration
Statement, commence the Exchange Offer. The Exchange Offer shall be on
the appropriate form permitting registration of the Series B Notes to
be offered in exchange for the Transfer Restricted Securities and to
permit resales of Series B Notes held by Broker-Dealers as contemplated
by Section 3(c) below.
3
<PAGE>
(b) The Company shall cause the Exchange Offer Registration
Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period
be less than 20 business days. The Company shall cause the Exchange
Offer to comply with all applicable federal and state securities laws.
No securities other than the Notes shall be included in the Exchange
Offer Registration Statement. The Company shall use its best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable
date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution"
section contained in the Prospectus contained in the Exchange Offer
Registration Statement that any Broker-Dealer who holds Series A Notes
that are Transfer Restricted Securities and that were acquired for its
own account as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly
from the Company), may exchange such Series A Notes pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of the Series B Notes
received by such Broker-Dealer in the Exchange Offer, which prospectus
delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such
resales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Series B Notes
held by any such Broker-Dealer except to the extent required by the
Commission.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Series B Notes acquired by Broker-
Dealers for their own accounts as a result of market-making activities or other
trading activities, and to ensure that it conforms with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of 90 days from the date
on which the Exchange Offer Registration Statement is consummated or, if
earlier, when all Series B Notes received by such participating Broker-Dealers
in exchange for Transfer Restricted Securities acquired for their own account as
a result of market-making or other trading activities have been disposed of by
such participating Broker-Dealers. The Company shall provide sufficient copies
of the latest version of such Prospectus to such participating Broker-Dealers
promptly upon request at any time during such 90-day period in order to
facilitate such resales.
4. Shelf Registration.
(a) Shelf Registration. If (i) the Company is not required to
file an Exchange Offer Registration Statement or to Consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company after the
Consummation of the Exchange Offer and on or prior to the 20th business
day following the Consummation of the Exchange Offer (A) that such
4
<PAGE>
Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not
resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the prospectus
contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that
such Holder is a Broker-Dealer and holds Series A Notes acquired
directly from the Company or one of its affiliates, then the Company
shall use its best efforts to:
(x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act, which
may be an amendment to the Exchange Offer Registration
Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the
60th day after the date on which the Company determines that
it is not required to file the Exchange Offer Registration
Statement or permitted to Consummate the Exchange Offer or (2)
the 60th day after the date on which the Company receives
notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) above (such earliest date being
the "Shelf Filing Deadline"), which Shelf Registration
Statement shall provide for resales of all Transfer Restricted
Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) use its best efforts to cause such Shelf
Registration Statement to be declared effective by the
Commission on or before the 150th day after the Shelf Filing
Deadline.
The Company shall use its best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required
by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements
of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a
period of at least two years following the Closing Date or such shorter
period that will terminate when all Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf
Registration Statement or become eligible for resale pursuant to Rule
144 without volume or other restrictions.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in
writing, within 10 business days after receipt of a request therefor,
such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant
to Section 5 hereof unless and until such Holder shall have provided
all such reasonably requested information. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by
such Holder not materially misleading.
5. Liquidated Damages.
(a) If (a) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date
specified for such filing in Sections 3(a) and 4(a) of this Agreement,
5
<PAGE>
as applicable (b) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified
for such effectiveness in Sections 3(a) and 4(a) of this Agreement, as
applicable (the "Effectiveness Target Date"), (c) the Exchange Offer
has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (d) any Registration Statement required by
this Agreement is filed and declared effective but shall thereafter
cease to be effective or fail to be usable for its intended purpose
without being succeeded within two business days by (i) a
post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within two business days
thereafter or (ii) a supplement to the Prospectus included in the
Registration Statement (each such event referred to in clauses (a)
through (d), a "Registration Default"), the Company will pay Liquidated
Damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default
continues. The amount of the Liquidated Damages payable to any Holder
of Transfer Restricted Securities shall increase by an additional $.05
per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages for all Registration Defaults of $.50 per
week per $1,000 principal amount of Transfer Restricted Securities.
Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of Liquidated
Damages with respect to such Transfer Restricted Securities will cease.
All payment obligations of the Company set forth in the
preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such
obligations with respect to such Transfer Restricted Security shall
have been satisfied in full.
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of
which Liquidated Damages are required to be paid (an "Event Date").
Liquidated Damages shall be paid by depositing with the Trustee, in
trust, for the benefit of the Holders thereof, on or before the
applicable Interest Payment Date (whether or not any payment other than
Liquidated Damages is payable on the Securities), immediately available
funds in sums sufficient to pay the Liquidated Damages then due to
Holders of Transfer Restricted Securities with respect to which the
Trustee serves. Each obligation to pay Liquidated Damages shall be
deemed to accrue from the applicable Event Date.
6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company shall comply with all of the provisions
of Section 6(c) below, shall use its best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel
to the Company there is a question as to whether the Exchange
Offer is permitted by applicable law, the Company hereby
agrees to seek a no-action letter or other favorable decision
from the Commission allowing the Company to Consummate an
Exchange Offer for such Series A Notes. The Company hereby
agrees to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take
6
<PAGE>
commercially unreasonable action to effect a change of
Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B)
deliver to the Commission staff an analysis prepared by
counsel to the Company setting forth the legal bases, if any,
upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission
staff of such submission.
(ii) As a condition to its participation in
the Exchange Offer pursuant to the terms of this Agreement,
each Holder of Transfer Restricted Securities shall furnish,
upon the request of the Company, prior to the Consummation
thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A)
it is not an affiliate of the Company, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in
its ordinary course of business. In addition, all such Holders
of Transfer Restricted Securities shall otherwise cooperate in
the Company's preparations for the Exchange Offer. Each Holder
hereby acknowledges and agrees that any Broker- Dealer and any
such Holder using the Exchange Offer to participate in a
distribution of the securities to be acquired in the Exchange
Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993,
and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction
should be covered by an effective registration statement
containing the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-B if the
resales are of Series B Notes obtained by such Holder in
exchange for Series A Notes acquired by such Holder directly
from the Company.
(iii) Prior to effectiveness of the Exchange
Offer Registration Statement, the Company shall provide a
supplemental letter to the Commission (A) stating that the
Company is registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that the Company has not entered
into any arrangement or understanding with any Person to
distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of
business and has no arrangement or understanding with any
Person to participate in the distribution of the Series B
Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the
provisions of Section 6(c) below and shall use its best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods
of distribution thereof, and pursuant thereto the Company will as
expeditiously as possible prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate
form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the
intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without
7
<PAGE>
limitation, any Registration Statement and the related Prospectus
required to permit resales of Notes by Broker-Dealers), the Company
shall:
(i) use its best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company shall file
promptly an appropriate amendment or supplement to such
Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either
clause (A) or (B), use its best efforts to cause such
amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission
such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep the
Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable; cause the
Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the
Securities Act in a timely manner; and comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) in the case of a Shelf Registration
Statement, advise the underwriter(s), if any, and selling
Holders of Transfer Restricted Securities promptly and, if
requested by such Persons, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to
any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes
or (D) of the existence of any fact or the happening of any
event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions
to or changes in the Registration Statement or the Prospectus
in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company shall use its
best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
8
<PAGE>
(iv) in the case of a Shelf Registration
Statement, furnish to each of the selling Holders of Transfer
Restricted Securities and each of the underwriter(s), if any,
before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or
Prospectus, which documents will be subject to the review of
such Holders and underwriter(s), if any, for a period of at
least two business days, and the Company will not file any
such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus if
a selling Holder of Transfer Restricted Securities covered by
such Registration Statement or the underwriter(s), if any,
shall not have had an opportunity to participate in the
preparation thereof;
(v) in the case of a Shelf Registration
Statement, promptly prior to the filing of any document that
is to be incorporated by reference into a Registration
Statement or Prospectus, make the Company's representatives
available for discussion of such document and other customary
due diligence matters;
(vi) in the case of a Shelf Registration
Statement, make available at reasonable times for inspection
by the selling Holders, any underwriter participating in any
disposition pursuant to such Registration Statement, and any
attorney or accountant retained by such selling Holders or any
of the underwriter(s) who shall certify to the Company that
they have a current intention to sell Transfer Restricted
Securities pursuant to a Shelf Registration Statement all
financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its
effectiveness;
(vii) in the case of a Shelf Registration
Statement, if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including,
without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the
offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment;
(viii) unless the Transfer Restricted
Securities are then rated, cause the Transfer Restricted
Securities covered by the Registration Statement to be rated
with the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of Notes
covered thereby or the underwriter(s), if any;
(ix) in the case of a Shelf Registration
Statement, furnish to each selling Holder of Transfer
Restricted Securities and each of the underwriter(s), if any,
without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits
incorporated therein by reference);
9
<PAGE>
(x) in the case of a Shelf Registration
Statement, deliver to each selling Holder of Transfer
Restricted Securities and each of the underwriter(s), if any,
without charge, as many copies of the Prospectus (including
each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; subject to the
last paragraph of this Section 6(c), the Company hereby
consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders of Transfer
Restricted Securities and each of the underwriter(s), if any,
in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any
amendment or supplement thereto in accordance with the method
or methods of distribution described therein;
(xi) in the case of a Shelf Registration
Statement, enter into such agreements (including an
underwriting agreement), and make such representations and
warranties, and take all such other actions in connection
therewith, in each case as are customarily made by issuers, in
order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement, all to such extent
as may be reasonably requested by any Purchaser or by any
Holder of Transfer Restricted Securities or underwriter in
connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten
Registration, the Company shall:
(A) upon request, furnish to each
Purchaser, each selling Holder of Transfer Restricted
Securities and each underwriter, if any, in such
substance and scope as they may reasonably request
and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon
the date of the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated
the date of effectiveness of the Shelf
Registration Statement, signed by (y) the
Chairman of the Board, its President or a
Vice President and (z) the Chief Financial
Officer of the Company, confirming, as of
the date thereof, the matters set forth in
paragraph (i) of Section 6 of the Purchase
Agreement and such other matters as such
parties may reasonably request;
(2) an opinion, dated the
date of effectiveness of the Shelf
Registration Statement, of counsel for the
Company, covering the matters set forth in
paragraph (d) of Section 6 of the Purchase
Agreement and such other matter as such
parties may reasonably request, and in any
event including a statement to the effect
that, although such counsel are
not passing upon and do not assume any
responsibility for the accuracy,
completeness or fairness of the statements
contained in the Shelf Registration
Statement, such counsel has participated in
conferences with officers of the Company and
with the independent public accountants for
the Company concerning the preparation of
such Registration Statement and the related
10
<PAGE>
Prospectus and have made certain inquiries
in connection with the preparation of the
such Registration Statement and the related
Prospectus; such counsel advises that on the
basis of such counsel's review of the
Registration Statement and the procedures
described in this letter that nothing has
come to such counsel's attention that causes
such counsel to believe that the applicable
Registration Statement (other than the
financial statements and related schedules
and other financial, market or statistical
data therein, as to which such counsel
express no opinion), at the time such
Registration Statement or any post-effective
amendment thereto became effective,
contained an untrue statement of a material
fact or omitted to state a material fact
required to be stated therein or necessary
to make the statements therein not
misleading, or that the Prospectus contained
in such Registration Statement as of its
date, contained an untrue statement of a
material fact or omitted to state a material
fact necessary in order to make the
statements therein, in light of the
circumstances under which they were made,
not misleading; and
(3) a customary comfort
letter, dated as of the date of
effectiveness of the Shelf Registration
Statement, from the Company's independent
accountants, in the customary form and
covering matters of the type customarily
covered in comfort letters by underwriters
in connection with primary underwritten
offerings, and affirming the matters set
forth in the comfort letters delivered
pursuant to paragraph (h) of Section 6 of
the Purchase Agreement, without exception.
(B) set forth in full or incorporate
by reference in the underwriting agreement, if any,
the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and
certificates as may be reasonably requested by such
parties to evidence compliance with clause (A) above
and with any customary conditions contained in the
underwriting agreement or other agreement entered
into by the Company pursuant to this clause (xi), if
any.
If at any time the representations and
warranties of the Company contemplated in clause (A)(1) above
cease to be true and correct, the Company shall so advise the
Initial Purchaser and the underwriter(s), if any, and each
selling Holder promptly and, if requested by such Persons,
shall confirm such advice in writing;
(xii) in the case of a Shelf Registration,
prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders of Transfer
Restricted Securities, the underwriter(s), if any, and their
respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the
selling Holders of Transfer Restricted Securities or
underwriter(s) may reasonably request and do any and all other
acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement;
provided, however, that the Company shall be required to
register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than
as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in the case of a Shelf Registration,
shall issue, upon the request of any Holder of Series A Notes
covered by the Shelf Registration Statement, Series B Notes,
having an aggregate principal amount equal to the aggregate
11
<PAGE>
principal amount of Series A Notes surrendered to the Company
by such Holder and being sold by such Holder; such Series B
Notes to be issued to and registered in the name of the
purchaser(s) of such Notes; in return, the Series A Notes held
by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in the case of a Shelf Registration,
cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be
sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s),
if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such
underwriter(s);
(xv) use its best efforts to cause the
Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by
clause (c)(iii)(D) above shall exist or have occurred, prepare
a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading;
(xvii) provide a CUSIP number for all
Transfer Restricted Securities not later than the effective
date of the Registration Statement and provide the Trustee
under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit
with The Depository Trust Company;
(xviii) cooperate and assist in any filings
required to be made with the NASD and in the performance of
any due diligence investigation by any underwriter (including
any "qualified independent underwriter") that is required to
be retained in accordance with the rules and regulations of
the NASD, and use its best efforts to cause such Registration
Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to
enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted
Securities; provided, however, that Company shall not be
required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would
subject it to service of process in suits or to taxation,
other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not
now so subject;
(xix) otherwise use its best efforts to
comply with all applicable rules and regulations of the
Commission, and make generally available to its security
holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not
be audited) for the twelve-month period (A) commencing at the
12
<PAGE>
end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement;
(xx) cause the Indenture to be qualified
under the TIA not later than the effective date of the first
Registration Statement required by this Agreement, and, in
connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its
best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other
forms and documents required to be filed with the Commission
to enable such Indenture to be so qualified in a timely
manner; and
(xxi) provide promptly to each Holder upon
request each document filed with the Commission pursuant to
the requirements of Section 13 and Section 15 of the Exchange
Act.
Each Holder agrees by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition
of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder
will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities that was
current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period regarding the effectiveness
of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice.
7. Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless
of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and
regulations of the NASD)); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all
fees and disbursements of counsel for the Company; (v) any application
and filing fees in connection with listing Notes on a national
securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of
any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
13
<PAGE>
8. Indemnification and Contribution.
(a) In connection with a Shelf Registration Statement or in
connection with any delivery of a Prospectus contained in an Exchange Offer
Registration Statement by any participating Broker-Dealer or Initial Purchaser,
as applicable, who seeks to sell Series B Notes the Company shall indemnify and
hold harmless each Holder of Transfer Restricted Securities included within any
such Shelf Registration Statement and each participating Broker-Dealer or
Initial Purchaser selling Series B Notes, and each person, if any, who controls
any such person within the meaning of Section 15 of the Securities Act (each, a
"Participant") from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Series B Notes) to which such Participant or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any such
Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse each Participant
promptly upon demand for any legal expenses of one counsel (in addition to local
counsel, if necessary) or other expenses reasonably incurred by such Participant
in connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that (i) the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or omission
or alleged omission made in any such Registration Statement or any prospectus
forming part thereof or in any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of any Participant specifically for inclusion therein; and provided further that
as to any preliminary Prospectus, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of any such Participant or any
controlling person of such Participant on account of any loss, claim, damage,
liability or action arising from the sale of the Series B Notes to any person by
that Participant if (i) that Participant failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act and (ii) the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such preliminary Prospectus was corrected in the Prospectus,
unless, in each case, such failure resulted from non-compliance by the Company
with Section 6(c). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Participant or to any
controlling person of that Participant.
(b) Each Participant, severally and not jointly, shall
indemnify and hold harmless the Company and its respective directors, officers,
employees or agents and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer, employees or agents or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary Prospectus, Registration Statement or
Prospectus or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
14
<PAGE>
written information furnished to the Company by or on behalf of that Participant
specifically for inclusion herein, and shall reimburse the Company and any such
director, officer, employee or agent or controlling person for any legal or
other expenses reasonably incurred by the Company or any such director, officer,
employee or agent or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Participant may otherwise have to the
Company or any such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall have notified the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the indemnified party shall have
the right to employ separate counsel reasonably satisfactory to the indemnifying
party to represent jointly the indemnified party and those other Participants
and their respective officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Participants against the indemnifying party under this Section
8 if, in the reasonable judgment of the indemnified party it is advisable for
the indemnified party and those Participants, officers, employees and
controlling persons to be jointly represented by separate counsel, and in that
event the customary fees and expenses of such separate counsel shall be paid by
the indemnifying party. In no event shall the indemnifying parties be liable for
the fees and expenses of more than one counsel (in addition to local counsel).
Each indemnified party, as a condition of the indemnity agreements contained in
Section 8, shall use its best efforts to cooperate with the indemnifying party
in the defense of any such action or claim. No indemnifying party shall (i)
without the prior written consent of the indemnified parties (which consent
shall not be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Company
15
<PAGE>
on the one hand and the Participants on the other with respect to the statements
or omissions which resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Participants, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(d) shall be
deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Participant shall be required to contribute
any amount in excess of the amount by which proceeds received by such
Participant from an offering of the Notes exceeds the amount of any damages
which such Participant has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Participants'
obligations to contribute as provided in this Section 8(d) are several and not
joint.
9. Rule 144A.
At any time the Company is not subject to Section 13 of the
Exchange Act, the Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lockup letters and
other documents required under the terms of such underwriting arrangements.
11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
12. Miscellaneous.
(a) Remedies. The Company agrees that monetary
damages (including the Liquidated Damages contemplated hereby) would
not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. The Company will not
on or after the date of this Agreement enter into any agreement with
respect to its securities that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the
16
<PAGE>
provisions hereof. The Company has not previously entered into any
agreement granting any registration rights with respect to their
securities to any Person that would afford any rights to any such
Person to participate in or otherwise pertain to the Registration
Statements contemplated by this Agreement. The rights granted to the
Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company will
not take any action with respect to the Notes that would materially and
adversely affect the ability of the Holders to Consummate any Exchange
Offer.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given
unless the Company has obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities. Notwithstanding the foregoing, a waiver or consent to or
departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the
rights of other Holders whose securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier guaranteeing
overnight delivery:
(i) if to a Holder, at the address set forth
on the records of the Registrar under the Indenture, with a
copy to the Registrar under the Indenture; and
(ii) if to the Company:
Clearview Cinema Group, Inc.
97 Main Street
Chatham, New Jersey 07928
Attention: President and
Chief Executive Officer
With a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Attention: Janice C. Hartman, Esq.
All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the
same to the Trustee at the address specified in the Indenture.
17
<PAGE>
(f) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns
of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer
Restricted Securities; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a
Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
without regard to the Conflict of Law rules thereof.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(k) Entire Agreement. This Agreement together with
the other Operative Documents (as defined in the Purchase Agreement) is
intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with
respect to the registration rights granted by the Company with respect
to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to
such subject matter.
(l) Required Consents. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held
by the Company or its affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CLEARVIEW CINEMA GROUP, INC.
By: ___________________________________
Name: A. Dale Mayo
Title: Chairman of the Board, President
and Chief Executive Officer
CCC ALLWOOD CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC B.C. REALTY 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
19
<PAGE>
CCC BAYONNE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC BEDFORD CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC 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 CARMEL CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
20
<PAGE>
CCC CEDAR GROVE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC CHESTER TWIN CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
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 COBBLE HILL CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
21
<PAGE>
CCC COLONY 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 FRANKLIN SQUARE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC GRAND AVENUE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC GREAT NECK CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
22
<PAGE>
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
23
<PAGE>
CCC MANASQUAN CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC MANHASSET CINEMA CORP.
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 MORRISTOWN CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC NARBERTH CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
24
<PAGE>
CCC NEW CITY CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC PARSIPPANY CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC PORT WASHINGTON CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC ROSLYN CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC SCREENING ZONE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC SUCCASUNNA CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
25
<PAGE>
CCC SUMMIT CINEMA 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
CCC WAYNE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC WEST MILFORD CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
CCC WOODBRIDGE CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
26
<PAGE>
CLEARVIEW THEATER GROUP, INC.
By: ___________________________________
Name: A. Dale Mayo
Title: President
MILLBURN TWIN CINEMA CORP.
By: ___________________________________
Name: A. Dale Mayo
Title: President
Accepted as of the date hereof:
LEHMAN BROTHERS INC.
By: _________________________________
Name:
Title:
27
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registation Statement on Form SB-2 of our report dated March 19, 1998
relating to the consolidated financial statements of Clearview Cinema Group,
Inc. and its subsidiaries which appears in such Prospectus. We also consent to
the references to us under the headings "Experts", "Summary Historical and Pro
Forma Financial Data" and "Selected Financial Data" in such Prospectus. However,
it should be noted that PricewaterhouseCoopers LLP has not prepared or certified
such "summary Historical and Pro Forma Financial Data" and "Selected Financial
Data".
PricewaterhouseCoopers LLP
New York, New York
July 2, 1998
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of
this Registation Statement on Form SB-2 of our reports dated February 10, 1997
relating to the consolidated financial statements of Clearview Cinema Group,
Inc.; June 4, 1997 relating to the combined financial statements of the United
Artists Theatre Circuit, Inc. Theaters at Bronxville, Larchmont, Wayne, New City
and Mamaroneck; October 22, 1997 relating to the combined financial statements
of the Nelson Ferman Theaters at Parsippany and Roxbury; and December 4, 1997
relating to the combined financial statements of the CJM Theaters at Kin-Mall,
Middlebrook, Cedar Grove and Bellevue which appear in such Prospectus.
We also consent to reference to us under the headings "Experts" and
"Summary Consolidated Financial Data" which appear in such Prospectus. However,
it should be noted that Wiss and Company, LLP did not prepare or certify such
"Summary Consolidated Financial Data."
WISS & COMPANY, LLP
Woodbridge, New Jersey
July 2, 1998
