Exhibit 1.01
Draft of 8/8/97
CLEARVIEW CINEMA GROUP, INC.
_____________ Shares
Common Stock
(Par Value $.01 Per Share)
UNDERWRITING AGREEMENT
________ , 1997
PRIME CHARTER LTD.
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Ladies and Gentlemen:
1. Introduction. Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell to Prime Charter Ltd. and the other
Underwriters listed on Schedule A hereto (collectively, the "Underwriters") an
aggregate of _____________ shares (the "Primary Shares") of the Company's common
stock, par value $.01 per share (the "Common Stock"). The Company also proposes
to issue and sell to the Underwriters an aggregate of not more than _________
additional shares of Common Stock (the "Additional Shares") if requested by the
Representative (as defined below) in accordance with Section 9 hereof. The
Primary Shares and the Additional Shares are collectively referred to herein as
the "Shares." The words "you" and "your" refer to the Underwriters. Prime
Charter Ltd. is acting as representative (in such capacity, the
"Representative") of the several Underwriters.
2. Representations and Warranties. The Company represents, warrants
and agrees with the Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-27819)
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Shares, including a form of prospectus subject to completion, has been prepared
by the Company in conformity with the requirements of the Act and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder. Such registration statement has been
filed with the Commission under the Act, and one or more amendments to such
registration statement may also have been so filed. After the execution of this
Agreement, the Company shall file with the Commission either (i) if such
registration statement, as it may have been amended, has been declared by the
Commission to be effective under the Act, a prospectus in the form most recently
included in an amendment to such registration statement filed with the
Commission (or, if no such amendment shall have been filed, in such registration
statement), with such insertions and changes as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act as shall have been provided to
and approved by the Representative prior to the filing thereof, or (ii) if such
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to such registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Representative prior to the filing thereof. As
used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at the time when it was
or is declared effective, including all financial schedules and exhibits
thereto; the Registration Statement shall be deemed to include any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus" means
each prospectus subject to completion that was distributed to prospective
investors; and the term "Prospectus" means the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or, if no prospectus is
required to be filed pursuant to said Rule 424(b), such term means the
prospectus included in the Registration Statement at the time when it was or is
declared effective.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus and has not instituted or, to
the best knowledge of the Company, threatened to institute any proceedings with
respect to such an order. When any Preliminary Prospectus was filed with the
Commission it (i) complied in all material respects with the requirements of the
Act and the Rules and Regulations, and (ii) did not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement or any amendment thereto
was or is declared effective and at all times subsequent thereto up to and
including the Closing Date (as defined in Section 3 hereof) and any Additional
Closing Date (as defined in Section 9 hereof), it (i) complied or will comply in
all material respects with the requirements of the Act and the Rules and
Regulations and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and any amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required to be so filed,
when the Registration Statement and any amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective) and at
all times subsequent thereto up to and including the Closing Date and any
Additional Closing Date, the Prospectus, as amended or supplemented at any such
time (i) complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations, and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing provisions of this
paragraph (b) shall not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto in reliance upon, and in conformity with, information
furnished in writing to the Company by or on behalf of the Underwriters
expressly for use therein.
(c) Each of the Company and the subsidiaries listed on Annex A
hereto (each a "Subsidiary" and, collectively, the "Subsidiaries"), (i) is a
duly incorporated and validly existing corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and authority
(corporate and other) to own or lease its properties and to conduct its business
as described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus); and
(ii) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business requires such
qualification or in which it owns or leases property, in each case except for
those jurisdictions in which the failure to so qualify or be in good standing,
individually or in the aggregate, has not had and is not reasonably likely to
have a Material Adverse Effect (as defined below). As of the Closing Date, the
Subsidiaries
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will constitute the only subsidiaries of the Company. "Material Adverse Effect"
means any development or change could be materially adverse to the business,
properties, assets, condition (financial or other) or results of operations of
the Company and the Subsidiaries, taken as a whole.
(d) The Company will have the duly authorized and validly
outstanding capitalization and the adjusted capitalization set forth under the
caption "Capitalization" in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) on the Closing Date, based on
the assumptions set forth therein. The Common Stock, Class A Preferred Stock,
A/B Warrants, Class A Warrants and the Underwriters Warrants (the "Securities")
conform to the descriptions thereof contained in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). The
outstanding shares of Common Stock have been duly authorized and validly issued
by the Company and are fully paid and non-assessable. Except as created hereby
or referred to in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), as of the Closing Date, there will be no
outstanding options, warrants, rights or other arrangements requiring the
Company or any Subsidiary at any time to issue any capital stock. As of the
Closing Date, no holders of outstanding shares of capital stock of the Company
will be entitled as such to any preemptive or other rights to subscribe for any
of the Shares and neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights for or relating to the registration of any securities of the Company.
The Shares have been duly authorized by all necessary corporate action on the
part of the Company, and on the Closing Date or any Additional Closing Date, as
the case may be, after payment therefor in accordance with the terms of this
Agreement, (i) the Shares to be sold by the Company hereunder on such date will
be validly issued, fully paid and non-assessable, and (ii) good and marketable
title to the Shares to be sold by the Company hereunder on such date will pass
to the Underwriters free and clear of any lien, encumbrance, security interest,
claim or other restriction whatsoever. Except for its equity interest in the
Subsidiaries or as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company does not,
directly or indirectly, own any stock or other equity interest in any
corporation, partnership or other entity. All of the outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable and, as of the Closing Date, will be owned by
the Company free and clear of any lien, encumbrance, security interest, claim or
other restriction whatsoever, except as disclosed in the Registration Statement.
The Company has reserved sufficient shares of Common Stock for issuance upon the
exercise of all outstanding options and warrants (including the Underwriter
Warrants (as defined in Section 3(c) hereof)). The Company has received, subject
to official notice of issuance, approval to have the Shares listed on the
American Stock Exchange (the "ASE"), and the Company does not know of any reason
or set of facts which is likely to adversely affect such approval.
(e) The financial statements and the related notes and
schedules thereto included in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present in all material respects the consolidated financial condition,
results of operations, stockholders' equity and cash flows of the entities to
which they relate at the dates and for the periods specified therein. Such
consolidated financial statements and the related notes and schedules thereto
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein). The audited financial
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statements for the businesses, which have been acquired or are to be acquired by
the Company (collectively, the "Acquired Companies") included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) have been examined and
certified by Wiss & Company LLP, which are independent public accountants within
the meaning of the Act and the Rules and Regulations, as indicated in their
reports filed therewith. The selected historical financial information set forth
under the caption "Summary Consolidated Financial Data" in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
is consistent with the financial statements contained in the Registration
Statement. The pro forma financial statements of the Company and the
Subsidiaries, and the related notes thereto, set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), have been prepared in conformity with the
requirements of the Act and the Rules and Regulations and present fairly in all
material respects the pro forma information shown therein; and the pro forma
adjustments on such pro forma financial statements have been properly applied on
the basis described in the related notes thereto. The pro forma financial data
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) under the caption "Summary Consolidated Financial
Data" has been prepared in conformity with the Act and the Rules and Regulations
with respect to pro forma financial information, the assumptions used in
preparing the pro forma financial statements included in the Registration
Statement and the Prospectus provide a reasonable basis for presenting the
effects directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those assumptions,
and the pro forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial amounts.
(f) The Company and each of the Subsidiaries have filed all
necessary federal, state and local income, franchise and other tax returns, and
have paid all taxes shown as due thereunder. The Company has no knowledge of any
tax deficiency which might be assessed against the Company or any Subsidiary,
which has had or is reasonably likely to have a Material Adverse Effect.
(g) The Company and each of the Subsidiaries maintain insurance
of the types and in amounts which they reasonably believe to be adequate for
their business, in such amounts and with such deductibles as is customary for
companies in the same or similar business, all of which insurance is in full
force and effect. The Company has no reason to believe that the Company or the
Subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
to the extent necessary to continue their business at a cost that would not have
or would not be reasonably likely to have a Material Adverse Effect, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(h) The Company maintains the "key man" life insurance
described in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(i) There is no action, suit, proceeding or investigation
(including, without limitation, in connection with any Environmental Laws (as
defined in Section 2(v) hereof)) pending or, to the Company's best knowledge,
threatened, before or by any court, regulatory body or administrative agency or
any other governmental agency or body, domestic or foreign
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which (i) questions the validity of the capital stock of the Company or this
Agreement or the Underwriter Warrant Agreement (as defined in Section 3(c)
hereof) or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Underwriter Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) could have or is
reasonably likely to have a Material Adverse Effect.
(j) The Company has full legal right, power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. This Agreement has been duly authorized, executed and delivered by the
Company; and this Agreement, assuming due authorization, execution and delivery
by each other party hereto, is a valid and binding agreement of the Company
(except as enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and to general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law). None of the Company's execution or delivery of this Agreement or the
Underwriter Warrant Agreement, its performance hereunder or thereunder, its
consummation of the transactions contemplated herein or therein, its application
of the net proceeds of the offering in the manner set forth under the caption
"Use of Proceeds," or the conduct of its business as described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or causes or will cause (or permits or will permit)
the maturation or acceleration of any liability or obligation or the termination
of any right under, or results in the creation or imposition of any lien, charge
or encumbrance upon, any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of (i) the certificate or articles of
incorporation or bylaws (or other organizational documents, as applicable) of
the Company or any of the Subsidiaries, (ii) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement, note agreement,
partnership agreement, joint venture agreement or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or by which it is or
any of them are or may be bound or to which any of their respective properties
is or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of the Subsidiaries of any
government, arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective activities or
properties, except as described in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) or with respect to matters
described in clause (ii) or (iii) above that have not and that are not
individually or in the aggregate reasonably likely to have a Material Adverse
Effect.
(k) There is no document or agreement of a character required
to be described in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) or to be filed as an exhibit to the
Registration Statement which is not described or filed as required. All
agreements which are in existence on the date hereof or as of the Closing Date,
copies of which are filed as exhibits to the Registration Statement to which the
Company or any of the Subsidiaries is a party or by which it is or any of them
are or may be bound or to which any of their assets or properties is or may be
subject have been duly and authorized, executed and delivered by the Company or
such Subsidiary, as the case may be, and constitute the legal, valid and binding
agreements of the Company or such Subsidiary, as the case
5
may be, enforceable against it in accordance with their respective terms (except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors'
rights generally and general equitable principles relating to the availability
of remedies). The descriptions in the Registration Statement of such documents
or agreements fairly present in all material respects the information required
to be shown with respect thereto by the Act and the Rules and Regulations, and
there are no such documents or agreements which are required by the Act or the
Rules and Regulations to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not so described or filed as
required, and the exhibits which have been filed are complete and correct copies
(excluding schedules and other attachments not required to be filed under the
Act or the Rules and Regulations) of the documents of which they purport to be
copies.
(l) Subsequent to the most recent respective dates as of which
information is given in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) and
except as expressly contemplated therein, neither the Company nor any of the
Subsidiaries has incurred, other than in the ordinary course of its business,
any liabilities or obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and the Company
has not purchased any of its outstanding capital stock or paid or declared any
dividends or other distributions on its capital stock, and there has been no
change in capital stock or indebtedness of the Company or any Subsidiary or any
other event or circumstance that could result in a Material Adverse Effect.
Neither the Company nor any of the Subsidiaries is in breach or violation of, or
in default under, any term or provision of (i) its certificate or articles of
incorporation or bylaws (or other organizational documents, as applicable), (ii)
any indenture, mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note agreement, partnership agreement, joint venture agreement or
other agreement or instrument to which it is a party by which it is or may be
bound or to which any of its properties is or may be subject, or any
indebtedness, which breach, violation or default individually or in the
aggregate is reasonably likely to have a Material Adverse Effect, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to it of any
government, arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective activities or
properties, which breach, violation or default individually or in the aggregate
is reasonably likely to have a Material Adverse Effect.
(m) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule B hereto, representing all of the Company's
executive officers and directors and the holders of the outstanding equity
securities of the Company (or securities convertible into or exchangeable or
exercisable for equity securities of the Company), to the effect that such
person or entity will not, commencing on the date of the Prospectus and
continuing for a 12-month period thereafter, without the Representative's prior
written consent (not to be unreasonably withheld), directly or indirectly,
offer, sell, pledge or otherwise encumber, or grant any option to purchase or
otherwise dispose of, any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock.
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(n) No labor disturbance by the employees of the Company or any
of the Subsidiaries exists or is, to the Company's best knowledge, imminent
which in any case is reasonably likely to have a Material Adverse Effect.
(o) The Company and the Subsidiaries neither have nor use any
material inventions, proprietary knowledge, patents or service marks. The
Company and the Subsidiaries own, or are licensed or otherwise possess
sufficient rights to use, the trademarks, trade names, logo marks and copyrights
used in or necessary for the conduct of their business (collectively, "Rights").
No claims have been asserted against the Company or any of the Subsidiaries by
any person with respect to the use of any such Rights or which challenge or
question the validity or effectiveness of any such Rights, except for any of the
foregoing which is not reasonably likely to have a Material Adverse Effect. The
use in connection with the business and operations of the Company and the
Subsidiaries of the Rights does not infringe in any material respect on the
rights of any person.
(p) No consent, approval, authorization or order of or filing
with any court, regulatory body, administrative agency or any other governmental
agency or body, domestic or foreign, is required for the Company's performance
of this Agreement or the Underwriter Warrant Agreement or the consummation of
the transactions contemplated hereby or thereby, except such as has been or may
be obtained under the Act or may be required under state securities or blue sky
laws in connection with the Underwriters' purchase and distribution of the
Shares.
(q) Except for the Registration Rights Agreement (as defined in
Section 3(c) below), as of the Closing Date, there will be no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities under the
Registration Statement.
(r) None of the Company or any of its officers, directors or
affiliates (within the meaning of the Rules and Regulations) has taken, directly
or indirectly, any action which violates Regulation M of the Exchange Act.
(s) Except as may be described in the Prospectus (or, if the
Prospectus is not yet in existence, the most recent Preliminary Prospectus)
neither the Company nor any of the Subsidiaries (A) has made any material
investment in any affiliate; (B) has any commitments to make any material
investments in any affiliate after the date hereof; or (C) has any material
liability or obligation (absolute, accrued, contingent or otherwise), whether
due or to become due, which arises out of or relates to the operations or assets
of any related affiliate.
(t) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold interests in, all
properties and assets owned or leased by it, free and clear of all liens,
encumbrances, security interests, claims, restrictions, equities and defects,
except (i) such as are described in the Registration Statement or the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) or the schedules to the Current Facility or such as do not affect
the value of any such leasehold interests, properties or assets taken as a whole
or interfere with the use made or proposed to be
7
made of any of such properties and assets, in a manner that is reasonably likely
to have a Material Adverse Effect, and (ii) liens for taxes not yet due and
payable as to which appropriate reserves have been established and reflected in
the financial statements included in the Registration Statement. The Company and
the Subsidiaries own or lease all such properties as are necessary to their
operations as now conducted or as proposed to be conducted, as set forth in the
Registration Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), it being understood that as
of the date hereof, the Company does not own or lease the United Artist Theaters
or Bayonne and Bensonhurst theaters, all of which are described in the
Prospectus; and the properties and business of the Company and the Subsidiaries
conform in all material respects to the descriptions thereof contained in the
Registration Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All the leases and subleases
under which the Company or any Subsidiary holds properties or assets as lessee
or sublessee, constitute valid leasehold interests of the Company or such
Subsidiary, free and clear of any lien, encumbrance, security interest, claim,
restriction, equity or defect, except as described in the Registration
Statement, and are in full force and effect. Neither the Company nor any
Subsidiary is in default in respect of any of the terms or provisions of any
such leases or subleases or has notice of any claim which has been asserted by
anyone adverse to the Company's or any of the Subsidiaries' rights as lessee or
sublessee under any such leases or subleases or affecting or questioning the
Company's or any of the Subsidiaries' right to the continued possession of the
leased or subleased premises under any such lease or sublease, except which, in
each case, are not reasonably likely to have a Material Adverse Effect.
(u) Neither the Company nor any Subsidiary has violated any
federal or state law relating to discrimination in the hiring, promotion or pay
of employees, nor any applicable federal or state wages and hours law, nor any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or the rules and regulations promulgated thereunder, which violation
has had or is reasonably likely to have a Material Adverse Effect. Neither the
Company nor any Subsidiary is subject to any decree, order, judgment or similar
adjudication which would prohibit the Company or any Subsidiary from conducting
its business, in all material respects, as its business is described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and
except as could not reasonably be expected to have a Material Adverse Effect,
the properties, assets and operations of each of the Company and the
Subsidiaries are in compliance with all applicable federal, state and local laws
(including, without limitation, common law), rules and regulations, orders,
decrees, judgments, permits and licenses relating to worker health and safety,
and to the protection and clean-up of the natural environment and to the
protection or preservation of natural resources, including, without limitation,
those relating to the processing, manufacturing, generation, handling, disposal,
transportation or release of hazardous materials (collectively, "Environmental
Laws"). With respect to such properties, assets and operations, there are no
events, conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries of which the Company is aware
that may interfere with or prevent compliance or continued compliance with
applicable Environmental Laws or otherwise result in liability to the Company or
any of its Subsidiaries pursuant to applicable Environmental Laws in a manner
that could reasonably be expected to have a Material Adverse Effect. Except as
described in the Prospectus (or, if the Prospectus is not in
8
existence, the most recent Preliminary Prospectus) or except as could not
reasonably be expected to have a Material Adverse Effect, (A) to the Company's
knowledge, none of the Company or any of its Subsidiaries is the subject of any
federal, state or local investigation pursuant to Environmental Laws and (B)
none of the Company or any of its Subsidiaries has received any written notice
or claim pursuant to Environmental Laws. The term "hazardous materials" shall
mean those substances that are regulated by or pursuant to any applicable
Environmental Laws.
(w) The Underwriter Warrants will conform to the description
thereof in the Registration Statement and in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and,
when sold to and paid for by the Representative (or its designee(s)) in
accordance with the Underwriter Warrant Agreement, will have been duly
authorized and validly issued and will constitute valid and binding obligations
of the Company and the holders thereof will be entitled to the benefits of the
Underwriter Warrant Agreement and the Registration Rights Agreement. As of the
Closing Date the Warrant Shares (as defined in Section 3(c) hereof) will have
been duly authorized and reserved for issuance upon exercise of the Underwriter
Warrants by all necessary corporate action on the part of the Company and, when
issued upon such exercise in accordance with the terms of the Underwriter
Warrant Agreement at the price therein provided, will be validly issued, fully
paid, non-assessable and free of preemptive rights and will conform to the
description thereof in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(x) Each of the Company and the Subsidiaries holds all
franchises, licenses, permits, approvals, certificates and other authorizations
from federal, state and other governmental or regulatory authorities necessary
for the ownership, leasing and operation of its properties or required for the
present and proposed conduct of its business (other than the proposed
acquisition of the United Artist Theaters described in the Prospectus), and such
franchises, licenses, permits, approvals, certificates and other governmental
authorizations are in full force and effect and the Company and the Subsidiaries
are in compliance therewith, except as described in the Schedules to the Current
Facility or where any such failure is not reasonably likely to have a Material
Adverse Effect.
(y) Except as described in the Registration Statement
(including the exhibits thereto), no Subsidiary will be prohibited or restricted
as of the Closing Date, directly or indirectly, from paying any dividends to the
Company, from making any other distributions on its capital stock, from repaying
to the Company any loans or advances to it from the Company or from transferring
any of its property or assets to the Company or any other Subsidiary.
(z) None of the Company or any of the Subsidiaries is subject
to registration as an "investment company" under the Investment Company Act of
1940, as amended, or will be subject to such registration following issuance of
the Shares.
(aa) None of the Company or any Subsidiary or, to the Company's
knowledge, any director, officer, agent, employee, or other person associated
with, or acting on behalf of, the Company or any Subsidiary has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or
9
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"); or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the FCPA.
(ab) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has not incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(ac) Except as previously disclosed to the Representative in
writing, no officer, director or stockholder of the Company has any affiliation
or association with the NASD or any member thereof.
(ad) All issuances of securities by the Company described in
response to Item 26 of Part II of the Registration Statement were exempt from
registration under the Act and were exempt from or complied in all respects with
the provisions of all applicable state securities laws.
3. Purchase, Sale and Delivery of the Shares and Underwriter
Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter
severally and not jointly agrees to purchase from the Company, the number of
Primary Shares set forth opposite its name on Schedule A hereto, in each case at
a purchase price of $________ per Share.
(b) Delivery of certificates, and payment of the purchase
price, for the Primary Shares shall be made at the offices of the Representative
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as shall
be agreed upon by the Company and the Representative. Such delivery and payment
shall be made at 10:00 a.m., New York City time, on ________ , 1997 or at such
other time and date thereafter as shall be agreed upon by the Company and the
Representative. The time and date of such delivery and payment are herein called
the "Closing Date." Delivery of the certificates for the Primary Shares shall be
made to the Representative for the respective accounts of the Underwriters
against payment of the purchase price therefor by a wire transfer in Federal
(same day) funds drawn to the order of the Company. The certificates for the
Primary Shares to be so delivered will be in definitive, fully registered form,
will bear no restrictive legends and will be in such denominations and
registered in such names as the Representative shall request not less than two
full business days prior to the Closing Date. The certificates for the Primary
Shares will be made available to the Representative at such office or such other
place as the Representative may designate for inspection, checking and packaging
not later than 12:00 p.m., New York City time, on the business day prior to the
Closing Date.
(c) On the Closing Date, the Company will issue and sell to the
Representative, or at the direction of the Representative to its designees
including one or more of the Underwriters, other members of the National
Association of Securities Dealers, Inc. (the "NASD") participating in the
offering and their respective bona fide officers or partners, for a
10
purchase price of $.01 per warrant, warrants (the "Underwriter Warrants")
entitling the holders thereof initially to purchase an aggregate of ____________
shares of Common Stock, subject to adjustment as provided in the Underwriter
Warrants, for a period of five years commencing on the effective date of the
Registration Statement. The Underwriter Warrants shall be exercisable at a price
equal to 120% of the initial public offering price per Share and shall be
subject to and entitled to the benefits of the terms and provisions set forth
more particularly in the warrant agreement relating thereto executed by the
Company on the Closing Date in substantially the form of Exhibit A hereto (the
"Underwriter Warrant Agreement") and a registration rights agreement (including
any side-letters thereto) substantially in the form of Exhibit B hereto
("Registration Rights Agreement"). The shares of Common Stock issuable upon
exercise of the Underwriter Warrants are referred to herein as the "Warrant
Shares."
4. Public Offering of the Shares. It is understood that the
Underwriters propose to make a public offering of the Shares at the price and
upon the other terms set forth in the Prospectus.
5. Covenants of the Company. The Company covenants and agrees with
the Underwriters that:
(a) The Company will use its reasonable best efforts to cause
the Registration Statement and any amendments thereto to become effective as
promptly as practicable. If required, the Company will file the Prospectus and
any amendment or supplement thereto with the Commission in the manner and within
the appropriate time period required by Rule 424(b) under the Act. During any
time when a Prospectus relating to the Shares is required to be delivered under
the Act, the Company (i) will comply with all requirements imposed upon it by
the Act and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the Prospectus or the amendment referred
to in the third sentence of Section 2(a) hereof, any amendment or supplement to
the Prospectus or any amendment to the Registration Statement of which the
Representative shall not previously have been advised and furnished with a copy
a reasonable period of time prior to the proposed filing or as to which filing
the Representative shall reasonably object, unless (with respect to any time
after the Closing Date) the Company has received the written advice of its
counsel that such amendment or supplement may be required by law, rule or
regulation. If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
under the Act, then promptly following the execution of this Agreement the
Company will prepare and file or transmit for filing with the Commission in
accordance with said Rule 430A copies of the Prospectus including the
information omitted in reliance on Rule 430A.
(b) The Company shall cause each Subsidiary to comply with the
covenants and agreements set forth herein that are applicable to it.
(c) Promptly after the Company is advised or obtains knowledge
thereof, the Company will advise the Representative (i) when the Registration
Statement has become effective and, if the provisions of Rule 430A promulgated
under the Act will be relied upon, when the Prospectus has been filed in
accordance with said Rule 430A and when any post-effective amendment to the
Registration Statement has been filed and becomes effective;
11
(ii) of any request made by the Commission for amending the Registration
Statement, for supplementing any Preliminary Prospectus or the Prospectus or for
additional information; (iii) of any suspension of the qualification of the
Shares for offering or sale in any jurisdiction; or (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or the institution or threat of any
investigation or proceeding for that purpose. The Company will use its
reasonable best efforts to prevent the issuance of any such stop order and, if
issued, to obtain the lifting thereof as soon as possible.
(d) The Company will (i) use its reasonable best efforts to
arrange for the qualification of the Shares for offer and sale under the state
securities or blue sky laws of such jurisdictions as the Underwriters may
designate, (ii) continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares, and (iii) make such
applications, file such documents and furnish such information as may be
required for the purposes set forth in clauses (i) and (ii) of this subsection
(d); provided, however, that the Company shall not be required to qualify as a
foreign corporation or file a general or unlimited consent to service of process
in any such jurisdiction or take any action that would subject the Company to
taxation in such jurisdiction if it is not already so subject.
(e) The Company consents to the use of the Prospectus and any
amendment or supplement thereto by the Underwriters and all dealers to whom the
Shares may be sold in connection with the offering or sale of the Shares and for
such period of time thereafter as the Prospectus is required by law to be
delivered in connection therewith. If, at any time when a prospectus relating to
the Shares is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, or if it becomes
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the Rules and Regulations, the Company promptly will so notify the
Representative and, subject to Section 5(a)(ii) hereof, promptly will prepare
and file with the Commission an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that will correct such statement or
omission or effect such compliance, each such amendment or supplement to be
reasonably satisfactory to counsel to the Underwriters.
(f) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company will make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations.
(g) The Company will furnish to its stockholders, as soon as
practicable, annual reports (including financial statements audited by
independent public accountants) and unaudited quarterly reports of earnings, and
during the period of three years after the date hereof will deliver to the
Representative for the benefit of the Underwriters:
12
(i) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as of the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal year,
accompanied by a copy of the report thereon of independent public
accountants;
(ii) concurrently with furnishing such quarterly reports to its
stockholders, statements of income for the Company for each quarter in the
form furnished to the Company's stockholders;
(iii) as soon as they are available, copies of
all information (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all publicly
available reports and financial statements furnished to or filed with the
Commission, the NASD or the ASE;
(v) every press release and every material news item or article
of interest to the financial community in respect of the Company or its
affairs which was released or prepared by the Company; and
(vi) any additional information of a public nature concerning
the Company or its business which the Representative may reasonably
request.
During such three-year period the foregoing financial statements will be
on a consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and will be accompanied by similar financial
statements for any subsidiary which is not so consolidated to the extent that
such financial statements are prepared by the Company.
(h) The Company will appoint a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock approved by the
Representative; and the Company will not change or terminate such appointment
for a period of two years after the Closing Date without first obtaining the
Representative's consent which shall not be unreasonably withheld.
(i) The Company will furnish, without charge, to the
Representative or on the Representative's order, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement, and any pre-effective or post-effective amendments
thereto (two of which copies will manually be signed and will include all
financial statements and exhibits) and the Prospectus and all amendments and
supplements thereto, in each case as soon as available and in such quantities as
the Representative may reasonably request. The Company will provide the
Representative copies of its report on Form SR required by Rule 463 under the
Act and any amendments thereto, including all exhibits, concurrently with the
filing thereof with the Commission.
(j) The Company will not, directly or indirectly, without the
prior written consent of the Representative, issue, offer, sell, pledge or
otherwise encumber, or grant any option to purchase or otherwise dispose of, any
shares of Common Stock or any securities
13
convertible into or exchangeable or exercisable for shares of Common Stock for a
12-month period after the date of the Prospectus except pursuant to this
Agreement or the Underwriter Warrant Agreement or except for (i) issuances of
Common Stock pursuant to the exercise of stock options outstanding on or granted
subsequent to the date hereof pursuant to a stock option or other employee
benefit plan described in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and in existence on the date
of this Agreement, or (ii) issuances of Common Stock pursuant to the exercise of
warrants disclosed in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus); provided, however, that the
Representative shall not unreasonably withhold such consent in connection with
the issuance, offer or sale of shares of Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) by the Company to an
unaffiliated third party in connection with an acquisition in which the Company
uses such securities as part or all of the consideration paid by it.
(k) The Company will cause the Shares to be duly listed on the
ASE prior to the Closing Date, subject to official notice of issuance.
(l) None of the Company, any of its officers or directors or
any of their affiliates (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to violate Regulation M of the Exchange Act,
although no representation or warranty is hereby expressed for actions taken in
connection with the Concurrent Transactions.
(m) The Company will apply the net proceeds of the offering
received by it in substantially the manner set forth under the caption "Use of
Proceeds" in the Prospectus. Prior to the application of such net proceeds, the
Company will invest or reinvest such proceeds only in the following investments
so long as they have maturities of one year or less: (i) obligations issued or
guaranteed by the United States or by any person controlled or supervised by or
acting as an instrumentality of the United States pursuant to authority granted
by Congress; (ii) obligations issued or guaranteed by any state or political
subdivision thereof rated either Aa or higher or MIG 1 or higher, by ▇▇▇▇▇'▇
Investors Service, Inc. or AA or higher, or an equivalent, by Standard & Poor's
Corporation; (iii) commercial paper which is rated either Prime-1 or higher or
an equivalent by ▇▇▇▇▇'▇ Investors Service, Inc. or A-1 or higher or an
equivalent by Standard & Poor's Corporation; and (iv) fully insured certificates
of deposit or time deposits of banks or trusts companies organized under the
laws of the United States having a minimum equity of $50,000,000.
(n) The Company will timely file all such reports, forms or
other documents as may be required from time to time under the Act, the Rules
and Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder; and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Rules and Regulations and the
Exchange Act and the rules and regulations thereunder.
(o) The Company will not take any action to facilitate the sale
of any shares of Common Stock pursuant to Rule 144 under the Act if any such
sale would violate any of the Lock-Up Agreements.
14
(p) During a period of three years after the date hereof, the
Company will retain Wiss & Company LLP as its independent auditors; provided,
however, that, upon written notice to the Representative during such period, the
Company may retain a "Big Six" firm of independent certified public accountants,
or in the alternative, the Company may retain another firm of independent
certified public accountants qualified to practice in front of the Commission,
which firm is reasonably acceptable to the Representative.
(q) The Company will supply the Representative, within 30 days
prior to the end of each of the fiscal years ending December 31, 1997, 1998 and
1999, with any internal forecasts or reports prepared in the ordinary course of
business for the succeeding fiscal year. For each period covered by any internal
forecast or report to be supplied to the Representative, the Company also will
supply financial statements prepared in detail substantially similar to the
financial statements previously delivered to the Representative so as to allow
comparison to the internal forecast or report.
(r) During a period of five years after the date of the
Prospectus, the Company will permit an agent of the Representative to attend all
meetings of the Company's Board of Directors (the "Board") as a non-voting
observer, will give such agent notice of all meetings of the Board at the same
time and in the same manner that directors are notified and will reimburse such
agent for all expenses incurred in attending Board meetings (including but not
limited to food, transportation and lodging) and compensate such agent in the
same manner as an independent director is reimbursed and compensated for each
meeting attended. During such five-year period, the Company will hold no less
than four formal meetings of the Board each year. In lieu of the foregoing, for
a period of two years following completion of the offering or, if longer, for a
period of up to five years following the completion of the offering so long as
the Representative and its affiliates are the beneficial owners of at least 50%
of the Underwriter Warrants and/or the Warrant Shares, at the request of the
Representative, the Company shall nominate ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or another mutually
acceptable agent of the Representative to serve as a director of the Company and
shall exercise reasonable best efforts (including the solicitation of proxies
from stockholders of the Company) to cause such person to be elected to the
Board.
(s) During a period of three years after the date hereof, the
Company shall provide at its sole expense to the Representative (i) copies of
its daily transfer sheets and (ii) copies of the ASE monthly summaries of
trading activity of the Company.
(t) During such period as the Company is subject to the
periodic reporting requirements of the Exchange Act, the Company shall use its
reasonable best efforts so that during such period the Company will be listed in
one or more of the securities manuals published by Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc. or another comparable publisher and that, at
all times during such period, such listing will, at a minimum, contain the names
of the Company's officers and directors, a balance sheet as of a date not more
than 15 months prior to such time and a statement of operations for either the
fiscal year preceding such date or the most recent fiscal year of operations.
6. Expenses.
(a) Regardless of whether the transactions contemplated by this
Agreement are consummated, and regardless of whether for any reason this
Agreement is terminated, the
15
Company will pay, and hereby agrees to indemnify the Underwriters against, all
fees and expenses incident to the performance of the obligations of the Company,
including, but not limited to, (i) fees and expenses of accountants and counsel
for the Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and shipping of copies of
the Registration Statement and any pre-effective or post-effective amendments
thereto, any Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto (including postage costs related to the delivery by the
Underwriters of any Preliminary Prospectus or Prospectus or any amendment or
supplement thereto); (iii) all fees and expenses relating to the qualification
of the Shares under state securities or blue sky laws, including the costs of
preparing and mailing the preliminary and final blue sky memoranda and filing
fees and disbursements and fees of counsel and other related expenses, if any,
in connection therewith; provided, however, that the maximum amount that the
Company shall be obligated to pay with respect to disbursements (other than
filing fees) and fees of counsel shall not exceed $25,000; (iv) all filing fees
of the Commission and the NASD relating to the Shares; (v) any fees and expenses
in connection with the listing of the Shares on the ASE; (vi) costs and expenses
incident to the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Shares, including transfer agent's and registrar's
fees and any applicable transfer taxes incurred in connection with the delivery
to the Underwriters of the Shares to be sold by the Company pursuant to this
Agreement; (vii) all costs and expenses of the Company incident to any meetings
with prospective investors in the Shares; and (viii) the fees and expenses of
the Representative's counsel which shall not exceed $75,000 (including $25,000
for blue sky counsel fees referred to above) in the event the transactions
contemplated by this Agreement are not consummated (other than blue sky filing
and registration fees payable to applicable blue sky authorities, all of which
shall be paid by the Company). In addition to the foregoing, the Company shall
provide the Representative on behalf of the Underwriters with a non-accountable
expense allowance in an amount equal to 2.5% of the gross offering proceeds
received by the Company, $100,000 of which has previously been paid by the
Company to the Representative in two installments of $50,000 each. The
Representative hereby acknowledges receipt of such $100,000 which payment shall
be credited against the non-accountable expense allowance to be paid by the
Company. The unpaid portion of the expense allowance based on gross proceeds
from the sale of the Primary Shares shall be deducted from the funds to be paid
by the Underwriters in payment for the Primary Shares pursuant to Section 3 of
this Agreement on the Closing Date. To the extent any Additional Shares are
sold, any remaining expense allowance based on the gross proceeds from the sale
of the Additional Shares shall be deducted from the funds to be paid by the
Underwriters in payment for the Additional Shares, pursuant to Section 9 of this
Agreement on any Additional Closing Date. The Company represents, warrants and
agrees that all such payments and reimbursements will be promptly and fully
made.
(b) If the purchase of the Shares as herein contemplated is not
consummated for any reason other than by reason of the Representative's election
pursuant to Section 11(a) or in the case of an individual Underwriter other than
such Underwriter's default under this Agreement, then the Company shall
reimburse each non-defaulting Underwriter (other than the Representative, whose
fees and expenses shall be covered by subsection (a) above) for its
out-of-pocket expenses (including counsel fees and disbursements) incurred in
connection with any investigation and preparation made by it in respect of
marketing of the Shares or in contemplation of the performance by it of its
obligations hereunder, and the Representative may retain any portion of the
expense allowance referred to in subsection (a) above that was previously paid
to it.
16
7. Conditions of the Underwriters' Obligations. The obligation of the
Underwriters to purchase and pay for the Shares is subject to the continuing
accuracy in all material respects of the representations and warranties of the
Company herein as of the date hereof and as of the Closing Date as if they had
been made on and as of the Closing Date; the accuracy in all material respects
on and as of the Closing Date of the statements of officers of the Company made
pursuant to subsection (f) below; the performance in all material respects by
the Company on and as of the Closing Date of its covenants and agreements
hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the
Act, the Registration Statement shall have been declared effective and the
Prospectus containing the information omitted pursuant to Rule 430A shall have
been filed with the Commission not later than the Commission's close of business
on the second business day following the date hereof or such later time and date
to which the Representative shall have consented; if the Company does not elect
to rely on Rule 430A, the Registration Statement shall have been declared
effective not later than 11:00 a.m., New York City time, on the date hereof or
such later time and date to which the Representative shall have consented; if
required, in the case of any changes in or amendments or supplements to the
Prospectus in addition to those contemplated above, the Company shall have filed
such Prospectus as amended or supplemented with the Commission in the manner and
within the time period required by Rule 424(b) under the Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company or the Representative, shall
be threatened or contemplated by the Commission; and the Company shall have
complied with any request of the Commission for additional information to be
included in the Registration Statement or the Prospectus or otherwise.
(b) The Representative shall not have in good faith advised the
Company that the Registration Statement or any amendment thereto contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or is necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received the favorable opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, counsel to the
Underwriters, with respect to the issuance and sale of the Shares, the
Registration Statement, the Prospectus and such other related matters as the
Representative reasonably may request, and such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State of
New York, the general corporate law of the State of Delaware and the federal law
of the United States, upon the opinions of counsel satisfactory to the
Representative and such counsel shall have received such documents and other
information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Representative shall have received
the opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to the Company, addressing
the matters set forth below:
(i) Each of the Company and the Subsidiaries (A) is a duly
incorporated (other than ______ (the "Other Subsidiaries") as to which no
opinion need be given as
17
to due incorporation) and validly existing corporation in good standing
under the laws of its jurisdiction of incorporation, with the corporate
power and authority to own or lease its properties and to conduct its
business as described in the Registration Statement or the Prospectus, and
(B) is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction (x) in which the conduct of its
business requires such qualification or (y) in which it owns or leases
property, in each case except for those jurisdictions in which the failure
to so qualify has not had and is not reasonably likely to have a Material
Adverse Effect.
(ii) The Company has the authorized capital stock set forth in
the Prospectus; the Securities conform as to legal matters in all material
respects to the descriptions thereof contained in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly
issued by the Company, are fully paid and nonassessable, and are free of
any preemptive or similar rights to subscribe for any of the Shares; the
Company has duly authorized the issuance and sale of the Shares to be sold
by it hereunder; such Shares, when issued by the Company and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will conform as to legal matters in all material
respects to the description thereof contained in the Prospectus and will
not be subject to any preemptive or similar rights; the Shares have been
approved for listing on the ASE, subject to official notice of issuance;
and, to such counsel's knowledge, there are no outstanding warrants,
options or other rights granted by the Company to purchase shares of its
Common Stock or other securities other than as described in the
Prospectus.
(iii) The Registration Statement is effective under the Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement
or any amendment thereto has been issued; and no proceedings for that
purpose, to the knowledge of such counsel, have been instituted or are
pending or are threatened or contemplated under the Act. The Registration
Statement and the Prospectus (except for the financial statements,
schedules and other financial, market and statistical data included
therein and information provided by the Underwriters for inclusion therein
(which for the purposes hereof shall be the information described in
Section 8(b)(ii) below, as to all of which such counsel need not express
any opinion), complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations; the descriptions
contained and summarized in the Registration Statement or the Prospectus
of contracts and other documents as they pertain to legal matters are
accurate and fairly represent in all material respects the information
required to be shown by the Act and the Rules and Regulations; to the
knowledge of such counsel, there are no contracts or documents which are
required by the Act to be described in the Registration Statement or the
Prospectus or to be filed as exhibit to the Registration Statement which
are not so described or filed as required by the Act and the Rules and
Regulations; to the knowledge of such counsel, there are no statutes or
regulations and there is not pending or threatened against the Company or
any Subsidiary any action, suit, proceeding or investigation before or by
any court, regulatory body, or administrative agency or any other
governmental agency or body, domestic or foreign, of a character required
to be disclosed in the Registration Statement or the Prospectus which is
not so
18
disclosed therein; and the statements set forth under the headings
"Business," "Management and Directors," "Principal Stockholders," "The
Concurrent Transactions," "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide an accurate summary of such legal
matters, documents and proceedings.
(iv) The Company has the full corporate power and authority to
enter into this Agreement and to consummate the transactions provided for
herein; this Agreement has been duly authorized, executed and delivered by
the Company; and this Agreement, assuming due authorization, execution and
delivery by each other party hereto, is a valid and binding agreement of
the Company (except as enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other
similar laws affecting creditors' rights generally and to general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law). None of the Company's execution or
delivery of this Agreement, its performance hereof, its consummation of
the transactions contemplated herein or its application of the net
proceeds of the offering in the manner set forth under the caption "Use of
Proceeds" conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes a
default under, or results in the creation or imposition of any lien,
charge or encumbrance upon, any property or assets of the Company or any
of the Subsidiaries pursuant to the terms of (A) the certificate or
articles of incorporation or bylaws of the Company or any of the
Subsidiaries (other than the Other Subsidiaries), (B) any indenture,
mortgage, deed of trust, voting trust agreement, stockholders' agreement,
note agreement, partnership agreement, joint venture agreement or other
agreement or instrument listed in the Exhibit Index to the Registration
Statement (together "Contracts"), or (C) any statute, rule or regulation
of any regulatory body or administrative agency or other regulatory body
or administrative agency or other governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of the Subsidiaries
or any of their respective activities or properties, or any judgment,
decree or order (together "Orders") identified to such counsel by the
Company as the only material Orders of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having such jurisdiction, except with respect
to clauses (B) or (C) above that is not reasonably likely to have a
Material Adverse Effect; and, to the knowledge of such counsel, no
consent, approval, authorization or order of any court, governmental
agency or body, domestic or foreign, has been or is required for the
Company's performance of this Agreement or the consummation of the
transactions contemplated hereby, except such as have been obtained under
the Act or may be required under state securities or blue sky laws in
connection with the purchase and distribution by the Underwriters of the
Shares.
(v) To such counsel's knowledge, no claims have been asserted
against the Company to the effect that the conduct of the business of the
Company and the Subsidiaries is in violation of any federal, state or
local statute, administrative regulation or other law, domestic or
foreign, or that the Company and the Subsidiaries have failed to obtain
all licenses, permits, franchises, certificates and other authorizations
from state, federal and other regulatory authorities as are necessary or
required for the ownership, leasing and operation of their properties and
the conduct of
19
their business as presently conducted and as contemplated in the
Prospectus (other than the proposed acquisition of the United Artist
Theaters described in the Prospectus).
(vi) The issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and, except as otherwise described in the Prospectus,
are owned directly or indirectly by the Company, free and clear of any
perfected security interests or, to the knowledge of such counsel, any
other liens, encumbrances, claims or security interests; to the best
knowledge of such counsel no Subsidiary is currently prohibited, directly
or indirectly, from paying any dividends to the Company from making any
other distribution on its capital stock, from repaying to the Company any
loans or advances to it from the Company or from transferring any of its
property or assets to the Company or any Subsidiary, except in each case
as described herein or as described in or contemplated by the Registration
Statement and the exhibits thereto.
(vii) The Company has full corporate power and authority to
enter into the Underwriter Warrant Agreement and the Registration Rights
Agreement and to consummate the transactions provided for therein; and the
Underwriter Warrant Agreement and Registration Rights Agreement have been
duly authorized, executed and delivered by the Company, and are valid,
legal and binding agreements of the Company, enforceable against the
Company in accordance with their terms (except as enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally
and to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law).
(viii) The Underwriter Warrants conform as to legal matters to
the description thereof in the Registration Statement and in the
Prospectus and are duly authorized and validly issued and constitute
valid, legal and binding obligations of the Company enforceable in
accordance with the terms thereof (except as enforceability may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally
and to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law); the Warrant Shares have
been duly and validly authorized and reserved for issuance upon exercise
of the Underwriter Warrants and, when issued upon exercise in accordance
with the terms of and for the consideration set forth in the Underwriter
Warrant Agreement, will be duly and validly issued, fully paid and
non-assessable and free of preemptive rights and shall be entitled to the
benefit of the terms and provisions of the Registration Rights Agreement.
(ix) The Company is not and, after giving effect to the
offering and sale of the Shares pursuant hereto, will not be an
"investment company" as defined in Section 3(a) of the Investment Company
Act of 1940, as amended.
(x) The issuances of securities by the Company referred to in
response to Item 26 of Part II of the Registration Statement were exempt
from registration under the Act and were exempt from or complied with the
provisions of all applicable state securities laws.
20
In addition, such counsel shall state that, in the course of the
preparation of the Registration Statement and the Prospectus, it has
participated in conferences with officers and representatives of the Company,
representatives of the Company's independent public accountants and with your
representatives and your counsel, at which the contents of the Registration
Statement and the Prospectus and related matters were discussed, and (without
taking any further action to verify independently the statements made in the
Registration Statement and the Prospectus and, except as stated in the foregoing
opinion, without assuming responsibility for the accuracy, completeness or
fairness of such statements) nothing has come to such counsel's attention that
causes it to believe that either the Registration Statement as of the date it is
declared effective and as of the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of the date thereof and as of the Closing
Date contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
opinion with respect to the financial statements, schedules and other financial,
market or statistical data included in or excluded from the Registration
Statement or the Prospectus or any information provided by the Underwriters
expressly for inclusion therein (which for the purposes hereof shall be the
information described in Section 8(b)(ii) below.)).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the law of the State of New
York, the general corporate law of the State of Delaware, the unofficial
compilation of the laws of the State of New Jersey and the federal law of the
United States, such counsel may rely upon or substitute the opinion of other
counsel reasonably satisfactory to the Representative. The foregoing opinion
shall also state that the Representative is justified in relying upon such
opinion of other counsel, and copies of such opinion shall be delivered to the
Representative and counsel to the Underwriters. Such counsel need express no
opinion as to the enforceability of the indemnification provisions contained in
this Agreement.
References to the Registration Statement and the Prospectus in this
paragraph (d) shall include any amendment or supplement thereto at the date of
such opinion.
(e) The Representative shall have received a letter (the "Comfort
Letter"), dated the date of delivery thereof (which, if the Effective Time is
prior to the execution and delivery of this Agreement, shall be on or prior to
the date of this Agreement or, if the Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of the
amendment or post-effective amendment to the Registration Statement to be filed
shortly prior to the Effective Time), of Wiss & Company LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating in effect
that:
(i) in their opinion the financial statements and schedules audited
by them and included in the Registration Statement and the
Prospectus comply in form in all material respects with the
applicable accounting
21
requirements of the Act and the related published Rules
and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for review of interim
financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the
unaudited financial statements included in the Registration
Statement and the Prospectus;
(iii) on the basis of the review referred to in clause (ii) above, a
reading of the latest available interim financial statements of
the Company, a reading of the minutes of all meetings of the
stockholders and directors (including each committee thereof)
of the Company and its subsidiaries, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came
to their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in form in
all material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements in the Registration Statement and the Prospectus;
(B) the information set forth in the Prospectus under the
captions "Summary Consolidated Financial Data" or "Pro Forma
Consolidated Financial Data" does not agree with the amounts set
forth in the unaudited consolidated financial statements or the
audited consolidated financial statements, as the case may be, from
which it was derived or was not determined on a basis substantially
consistent with that of the corresponding amounts in the audited
financial statements included in the Registration Statement and the
Prospectus;
(C) at the date of the latest available balance sheet read by
such accountants, and at a subsequent specified date not more than
five days prior to the date of such letter, there was any decrease in
stockholders' equity or change in the capital stock or any increase
in short-term indebtedness or long-term debt of the Company and its
consolidated Subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included in the
Registration Statement and the Prospectus; or
(D) for the period from the closing date of the latest income
statement included in the Registration Statement and the Prospectus
to the closing date of the latest available income statement read by
such accountants, there were any decreases, as compared with the
corresponding period of the previous year and with the period of
corresponding length ended the date of the latest income
22
statement included in the Registration Statement and the Prospectus,
in sales or in the total or per share amounts of consolidated
net operating income, income from continuing operations or net
income or any increases or decreases, as the case may be, in other
items specified by the Representatives;
except in all cases set forth in clauses (C) and (D) above for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur;
(iv) they have proved the arithmetic accuracy of the application of
the pro forma adjustments to the historical amounts in the
unaudited pro forma financial information included in the
Registration Statement and the Prospectus and on the basis of
the foregoing procedure and a reading of the unaudited pro
forma financial statements included in the Registration
Statement and the Prospectus, a reading of the minutes of all
meetings of the stockholders and directors (including each
committee thereof) of the Company and its subsidiaries,
inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to
believe that the pro forma financial statements included in the
Registration Statement and the Prospectus do not comply in all
material respects with the applicable accounting requirements
of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of such financial statements or on the pro forma
basis described in the notes thereto; and
(v) they have compared specified dollar amounts (or percentages
derived from such dollar amounts), numerical data and other
financial information contained in the Registration Statement
and the Prospectus (in each case to the extent that such dollar
amounts, percentages, numerical data and other financial
information are derived from the general accounting records of
the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived
directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages,
numerical data and other financial information to be in
agreement with such results.
For purposes of this subsection, if the Effective Time is subsequent
to the execution and delivery of this Agreement, "Registration Statement" shall
mean the registration statement as proposed to be amended by the amendment or
post-effective amendment to be filed shortly prior to the Effective Time, and
"Prospectuses" shall mean the prospectus included in the Registration Statement.
In addition, on the Closing Date the Representative shall have
received from Wiss & Company LLP a letter dated the Closing Date stating that,
as of a specified date not earlier than five days prior to the Closing Date,
nothing has come to the attention of such firm to suggest that the statements
made in the Comfort Letter are not true and correct.
23
(f) On the Closing Date, the Representative shall have received a
certificate, dated the Closing Date, of the principal executive officer and the
principal financial officer of the Company to the effect that each of such
persons has carefully examined the Registration Statement and the Prospectus and
any amendments or supplements thereto and this Agreement the Underwriter Warrant
Agreement and the Registration Rights Agreement and that to their knowledge:
(i) The representations and warranties of the Company in this
Agreement, the Underwriter Warrant Agreement and the Registration Rights
Agreement are true and correct in all material respects, as if made on and
as of the Closing Date, and the Company has complied in all material
respects with all agreements and covenants and satisfied in all material
respects all conditions contained in this Agreement, the Underwriter
Warrant Agreement and the Registration Rights Agreement on its part to be
performed or satisfied at or prior to the Closing Date.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or are contemplated or
threatened under the Act, and any and all filings required by Rule 424 and
Rule 430A have been timely made.
(iii) The Registration Statement and Prospectus and each
amendment and each supplement thereto, if any, contain all statements and
information required to be included therein under the Act and the Rules
and Regulations, and neither the Registration Statement nor any amendment
thereto includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and neither the Prospectus (or any
supplement thereto) nor any Preliminary Prospectus includes or included
any untrue statement of a material fact or omits or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, up to and
including the Closing Date, neither the Company nor any of the
Subsidiaries has incurred, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent;
neither the Company nor any of the Subsidiaries has purchased any of its
outstanding capital stock or paid or declared any dividends or other
distributions on its capital stock; neither the Company nor any of the
Subsidiaries has entered into any material transactions not in the
ordinary course of business; and there has not been any change in the
capital stock or consolidated long-term debt or any increase in the
consolidated short-term borrowings (other than any increase in short-term
borrowings in the ordinary course of business) of the Company or any
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has sustained any material loss or damage to its property or
assets, whether or not insured.
References to the Registration Statement and the Prospectus in this
paragraph (f) are to such documents as amended and supplemented at the date of
the certificate.
24
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, up to and including
the Closing Date, there has not been (i) any change in the capital stock or debt
of the Company or decrease in the net current assets or stockholders equity of
the Company from the amounts specified in the Comfort Letter, or (ii) any
change, or any development involving a prospective change, in the business or
properties of the Company and the Subsidiaries, taken as a whole, which change
or decrease in the case of clause (i) or change or development in the case of
clause (ii) makes it impractical or inadvisable in the Representative's judgment
to proceed with the public offering or the delivery of the Shares as
contemplated by the Prospectus.
(h) The Representative shall have received a Lock-Up Agreement
from each person who is a director or executive officer of the Company or who
prior to the Closing Date owns any outstanding shares of equity securities of
the Company (or securities convertible into or exchangeable or exercisable for
equity securities of the Company) as contemplated by Section 2(l) hereof.
(i) The Shares shall have been duly approved for trading on the
ASE subject only to official notice of issuance.
(j) The Company shall have furnished the Representative with
such further opinion letters, certificates or documents as the Representative or
counsel to the Underwriters may reasonably request. All opinions, certificates,
letters and documents to be furnished by the Company pursuant to the provisions
hereof shall be reasonably satisfactory to the Representative and its counsel
and in such quantities as the Representative reasonably requests. The
certificates delivered hereunder shall constitute representations, warranties
and agreements of the Company as to all matters set forth therein as fully and
effectively as if such matters had been set forth in this Agreement.
(k) The Common Stock shall be qualified in such states as the
Representative may request pursuant to Section 5(d), and each such qualification
shall be in effect and not subject to any stop order or other proceeding on the
Closing Date.
(l) The Company shall have executed and delivered to the
Representative the Underwriter Warrant Agreement and Registration Rights
Agreement in the forms attached hereto. Until the expiration of the Underwriter
Warrants, the Company shall keep reserved sufficient shares of Common Stock for
issuance upon exercise thereof.
(m) On the Closing Date, the Concurrent Transactions shall have
been completed as described in the Prospectus, and the Company shall have
provided to the Representative copies of all documents with respect thereto as
it may reasonably request.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several (and actions in
respect thereof) to which such Underwriter or such controlling person may become
subject under the Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
25
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or any blue sky application or other document executed by the Company
specifically for the purpose of qualifying, or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify, any or all of the Shares under the securities or blue sky laws thereof
(any such application, document or information being hereinafter called a "Blue
Sky Application"), or arise out of or are based upon 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 will reimburse, as
incurred, such Underwriter or such controlling persons for any reasonable legal
or other expenses incurred by such Underwriter or such controlling persons in
connection with investigating, defending or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action; provided,
however, that the Company will 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 of such documents in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such
Underwriter expressly for use therein; and provided, further, that such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage,
liability or action purchased Shares which are the subject thereof to the extent
that any such loss, claim, damage, liability or action (i) results from the fact
that such Underwriter failed to send or give a copy of the Prospectus (as
amended or supplemented) to such person at or prior to the confirmation of the
sale of such Shares to such person in any case where such delivery is required
by the Act and (ii) arises out of or is based upon an untrue statement or
omission of a material fact contained in such Preliminary Prospectus that was
corrected in the Prospectus (as amended and supplemented), unless such failure
resulted from noncompliance by the Company with Section 5(i) hereof. The Company
acknowledges that the statements set forth in Section 8(b)(ii) below have been
furnished by the Underwriters to the Company expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus. The indemnity agreement contained
in this subsection (a) shall be in addition to any liability which the Company
may have at common law or otherwise.
(b) (i) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any and all losses, claims, damages or liabilities
(and actions in respect thereof) to which the Company or any such director,
officer, or controlling person may become subject under the Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or the Prospectus or any Preliminary
Prospectus, or any amendment or supplement thereto; or in any Blue Sky
Application, or arise out of or are based upon the omission or the 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 untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished in writing by such Underwriter to the
Company
26
expressly for use therein; and will reimburse, as incurred, all reasonable legal
or other expenses incurred by or on behalf of the Company or any such director,
officer or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action.
(ii) The Company acknowledges that the information furnished by the
Underwriters consists only of the following information in the Prospectus: the
last paragraph at the bottom of the cover page concerning the terms of the
offering by the Underwriters, the legends concerning over-allotments and
stabilizing on the inside front cover page and the concession and reallowance
figures appearing in the second paragraph under the caption "Underwriting." Such
statements have been furnished by the Underwriters to the Company expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(iii) The indemnity agreement contained in this subsection (b) shall
be in addition to any liability which any Underwriter may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 8, notify such indemnifying party or
parties of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8 or to the extent that
the indemnifying party was not adversely affected by such omission. In case any
such action is brought against an indemnified party and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select one separate counsel to assume such legal defenses and
otherwise to participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses (other than the reasonable costs of investigation)
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party has employed such counsel in connection
with the assumption of such different or additional legal defenses in accordance
with the proviso to the immediately preceding sentence, (ii) the indemnifying
party has not employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized in
writing the employment of counsel to the indemnified party at the expense of the
indemnifying party. In addition to the foregoing, no indemnifying party shall,
without the prior written consent (not to be unreasonably withheld) of an
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any such
indemnified party or any person who
27
controls any such indemnified party within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Underwriters and any such indemnified party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under this Section 8 in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof referred to herein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) (i) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified,
on the other hand, from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. In any case where the Company is a contributing party and any
Underwriter is the indemnified party, the relative benefits received by the
Company on the one hand and such Underwriter on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares (before deducting expenses) bear to the total underwriting discounts
received by such Underwriter hereunder, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by such Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include 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 subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11 (f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
subsection (d), (i) each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter and (ii) each director of
the Company, each officer of the Company who has signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company, subject in each case to this subsection
(d). Any party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in respect
to which a claim for contribution may be made against another party or parties
under this subsection (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any other
obligation (x) it or they may have hereunder or otherwise than under
28
this subsection (d), or (y) to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement contained in
this subsection (d) shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
9. Right to Increase Offering. At any time during a period of 30 days
after the date of the Prospectus, the Representative, by no less than two
business days' prior notice to the Company, may designate one or more closings
(which may be concurrent with, and part of, the closing on the Closing Date or
may be an additional closing or closings held on a date subsequent to the
Closing Date; in either case any such date shall be referred to herein as an
"Additional Closing Date") at which the Underwriters may purchase all or less
than all of the Additional Shares in accordance with the provisions of this
Section 9 at the purchase price per share to be paid for the Primary Shares;
provided, however, that a maximum of three Additional Closing Dates shall be
allowed pursuant to this Section 9. In no event shall any Additional Closing
Date be later than 10 business days after written notice of election to purchase
Additional Shares is given.
The Company agrees to sell to each Underwriter on each Additional
Closing Date such Underwriter's pro rata portion (equal to the percentage
determined by dividing the number of Primary Shares to be purchased by such
Underwriter by the total number of Primary Shares to be purchased by all
Underwriters) of the number of Additional Shares specified in such notice, and
each Underwriter agrees to purchase such Additional Shares from the Company on
such Additional Closing Date. Such Additional Shares may be purchased by the
Underwriters solely for the purpose of covering over-allotments made in
connection with the sale of the Primary Shares.
No Additional Shares shall be sold or delivered unless the Primary
Shares previously have been, or simultaneously are, sold and delivered. The
right to purchase the Additional Shares or any portion thereof may be
surrendered and terminated at any time upon notice by the Representative to the
Company.
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Primary Shares shall apply, mutatis mutandis, to any
Additional Closing Date for the sale of Additional Shares.
10. Representations, Etc. to Survive Delivery. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and the Underwriters, respectively, set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters, and
will survive delivery of and payment for the Shares. Any successor or successors
to any Underwriter shall be entitled to the indemnity, contribution and
reimbursement agreements contained in this Agreement.
11. Effective Date and Termination.
(a) This Agreement shall become effective at 11:00 a.m., New
York City time, on the first business day following the date hereof or at such
earlier time after the Registration Statement becomes effective as the
Representative in its sole discretion shall
29
release the Shares for sale to the public, unless prior to such time the
Representative shall have received written notice from the Company that it
elects that this Agreement shall not become effective or the Representative
shall have given written notice to the Company that the Representative on behalf
of the Underwriters elects that this Agreement shall not become effective;
provided, however, that the provisions of Sections 6 and 8 hereof and this
Section 11 shall at all times be effective. For purposes of this subsection (a),
the Shares to be purchased hereunder shall be deemed to have been so released
upon the earlier of notification by the Representative to securities dealers
releasing such Shares for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently published
relating to the Shares.
(b) This Agreement (except for the provisions of Sections 6 and
8 hereof) may be terminated by the Representative on behalf of the Underwriters
by notice to the Company in the event that the Company has failed to comply in
any material respect with any of the provisions of this Agreement required to be
performed at or prior to the Closing Date or any Additional Closing Date, or if
any of the representations or warranties of the Company are not accurate in any
material respect, or if the covenants, agreements or conditions of or applicable
to the Company herein contained have not been complied with in any material
respect or materially satisfied within the time specified on the Closing Date or
any Additional Closing Date, respectively, or if prior to the Closing Date or
any Additional Closing Date:
(i) the Company or any of the Subsidiaries shall have sustained
a loss (regardless of whether or not such loss was insured) by explosion,
strike, fire, flood, accident or other calamity of such a character as to
interfere materially with the conduct of the business and operations of
the Company and the Subsidiaries, taken as a whole;
(ii) trading in the Common Stock shall have been suspended by
the Commission or the ASE or trading in securities generally on the New
York Stock Exchange or the Nasdaq National Market shall have been
suspended or a material limitation on such trading shall have been imposed
or minimum or maximum prices shall have been established on any such
exchange or market system;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak
or escalation of any other insurrection or armed conflict involving the
United States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the present or
prospective business, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole that, in each case, in the
Representative's judgment makes it impracticable or inadvisable to make or
consummate the public offering or the sale or delivery of the Shares on
the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
30
(c) Termination of this Agreement under this Section 11 after
the Primary Shares have been purchased by the Underwriters hereunder shall be
applicable only to the Additional Shares. Termination of this Agreement shall be
without liability of any party to any other party other than as provided in
Sections 6 and 8 hereof.
12. Default by One of More of the Underwriters. If one or more of the
Underwriters shall fail to purchase the Primary Shares to be purchased by it on
the Closing Date (the "Defaulted Shares"), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all but not
less than all of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms set forth herein. If, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of
the Primary Shares, the non-defaulting Underwriters shall be obligated to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the
Primary Shares, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action pursuant to this Section 12 shall relieve any defaulting Underwriter
from liability in respect of its default. In the event of any such default which
does not result in a termination of this Agreement, the Representative and the
Company shall each have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or the Prospectus or in any other documents or arrangements.
13. Notices. All communications hereunder shall be in writing and (i)
if sent to the Representative, shall be mailed or delivered or telecopied and
confirmed by letter to Prime Charter Ltd. at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: [▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇], and (ii) if sent to the Company,
shall be mailed or delivered or telecopied and confirmed to the Company at ▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: A. ▇▇▇▇ ▇▇▇▇.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and the Underwriters and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person, except that the Company's
representations, warranties, indemnity and contribution agreements shall also be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and except that the Underwriters' indemnity and contribution agreements shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, and any person or persons,
if any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from any Underwriter will
be deemed a successor because of such purchase.
31
15. Applicable Law, Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to the choice of law or conflict of law principles thereof. Each
party hereto consents to the jurisdiction of each court in which any action is
commenced seeking indemnity or contribution pursuant to Section 8 hereof and
agrees to accept, either directly or through an agent, service of process of
each such court.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate the Underwriters' acceptance thereof in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CLEARVIEW CINEMA GROUP, INC.
By:_______________________________________________
A. ▇▇▇▇ ▇▇▇▇
Chairman of the Board, President and
Chief Executive Officer
Accepted as of the date first written:
PRIME CHARTER, LTD.,
Individually
and as Representative of the
several Underwriters
By:_____________________________________
Name:
Title:
32
SCHEDULE A
Underwriters
Underwriter Primary Shares
33
SCHEDULE B
Parties to Lock-Up Agreements
CMCO, Inc.
CMNY Capital II, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Cinema, Inc.
▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
A. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
MidMark Capital, L.P.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
34
ANNEX A
Subsidiaries of the Company
COMPANY INCORPORATION
------- -------------
Clearview Theater Group, Inc. New Jersey
CCC Madison Triple Cinema Corp. New Jersey
CCC ▇▇▇▇▇▇▇ Twin Cinema Corporation New Jersey
CCC Manasquan Cinema Corporation New Jersey
CCC Summit Cinema Corp. New Jersey
CCC Grand Avenue Cinema Corp. Delaware
CCC Herricks Cinema Corp. Delaware
CCC Port Washington Corp. Delaware
CCC ▇▇▇▇▇▇▇ Cinema Corp. Delaware
CCC ▇▇▇▇▇▇▇ Cinema Corp. Delaware
CCC New City Cinema Corp. Delaware
CCC Washington Cinema Corp. Delaware
CCC Bedford Cinema Corp. Delaware
CCC Kisco Cinema Corp. Delaware
CCC B.C. Realty Corp. Delaware
CCC Bergenfield Cinema Corp. Delaware
CCC Closter Cinema Corp. Delaware
CCC Tenafly Cinema Corp. Delaware
DRAFT OF AUGUST 8, 1997
EXHIBIT A
WARRANT AGREEMENT
BETWEEN
CLEARVIEW CINEMA GROUP, INC.
AND
PRIME CHARTER LTD.
DATED AS OF August , 1997
WARRANT AGREEMENT, dated as of August , 1997 (the "Effective Date"),
between CLEARVIEW CINEMA GROUP, INC., a Delaware corporation (the "Company"),
and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its
designee(s)______, warrants (the "Warrants") to purchase an aggregate of
____________ shares (the "Warrant Shares") of the Company's common stock, par
value $.01 per share (the "Common Stock"), in connection with a public offering
by the Company of ________________ shares of Common Stock (the "Offering")
pursuant to a registration statement (the "Registration Statement") on Form SB-2
(File No. 333-27819) filed by the Company with the Securities and Exchange
Commission.
THEREFORE, in consideration of the mutual undertakings contained herein,
the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter as representative of the several underwriters named
therein (the "Underwriting Agreement") related to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each a "Permitted Designee") for a purchase price of $.01
per Warrant. The certificate for the Warrants (the "Warrant Certificate") shall
be substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the
Warrants at its principal executive offices for the registration of the issuance
and transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be
transferable only upon surrender thereof at the Company's principal executive
offices duly endorsed by its Holder or by such Holder's duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant Certificate may be exchanged, at the option of the Holder thereof, for
another Warrant Certificate or Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares upon surrender at the Company's principal executive
offices. Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except to a Permitted Designee, by
operation of law or by reason of a reorganization of the Company. Thereafter,
the Warrants and any Warrant Shares shall be freely transferable subject only to
compliance with applicable securities laws.
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $[120% of IPO price] (the "Exercise Price"), as such purchase price and
number of Warrant Shares may be adjusted from time to time pursuant to the
provisions of Section 8 hereof payable in full at the time of exercise of such
Warrant. The Warrants may be exercised, in whole or in part, at any time or from
time to time during the four-year period commencing on the first anniversary of
the Effective Date and ending at 5:00 p.m., New York City time, on the fifth
anniversary of the Effective Date (the "Expiration Date"). After the Expiration
Date, any unexercised Warrants shall be void and all rights of the Holders with
respect thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of Common
Stock having an aggregate Fair Market Value (as defined below) on the date of
exercise equal to the aggregate Exercise Price then in effect for the number of
Warrants being exercised, (c) by a surrender of Warrants covering a number of
Warrant Shares having an aggregate Fair Market Value, net of the applicable
aggregate Exercise Price therefor, equal to the aggregate Exercise Price then in
effect for the number of Warrants being exercised, or (d) by a combination of
the aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
Nasdaq National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender
at the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Common Stock, by
surrender of certificates duly endorsed for transfer (with all transfer taxes
paid or provided for), and (c) if payment is to be made by a surrender of
Warrants, by surrender of certificates representing such Warrants. Promptly
after the exercise of any Warrants, upon compliance with Section 5 hereof, the
Company shall issue a certificate or certificates for the number of full Warrant
Shares to which the Holder thereof is entitled, registered in accordance with
the instructions
2
set forth in the Election to Purchase, together with cash as provided in Section
10 of this Warrant Agreement payable in respect of fractional shares and (if
applicable) a new Warrant Certificate or Certificates representing all remaining
unexercised Warrants. All Warrant Shares shall be duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights, and free from
all liens and charges other than those created by the Holder. Upon compliance
with Section 5 hereof, Certificates representing such Warrant Shares and
remaining unexercised Warrants shall be issued by the Company in such names and
denominations, and shall be delivered to such persons, as are specified by
written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Common Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of stock in respect of
which such Warrants are then exercisable shall be issuable as of the date on
which such books shall next be opened (whether before or after the Expiration
Date) and, until such date, the Company shall be under no duty to deliver any
certificate for such Warrant Shares or for shares of such other class of stock;
and, provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Common Stock or other stock sufficient to permit the exercise
in full of the Warrants and any transfer agent for the Common Stock or other
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or
3
otherwise make available any cash that may be payable as provided in Section 10
hereof. All Warrants surrendered upon the exercise thereof shall be canceled.
After the Expiration Date, no shares shall be subject to reservation in respect
of any unexercised Warrants.
8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which initially
will be $_________, shall be adjusted and readjusted from time to time as
provided in this Section 8.1 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
Section 8.1.
8.1.2 Issuance of Additional Shares of Common Stock. In case the
Company, at any time after the date of the Closing, shall issue additional
shares of Common Stock for no consideration in connection with a dividend, stock
split or other distribution on the Common Stock (including, without limitation,
any distribution of Common Stock by way of spin-off, reclassification or
corporate rearrangement), then, and in each such case, the Exercise Price shall
be reduced concurrently with such issuance to a price (calculated to the nearest
cent) determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Common
Stock outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any time
after the Effective Date, shall pay or make a dividend or other distribution on
the Common Stock (including, without limitation, any distribution of stock
(other than Common Stock), or other securities, including securities that are
convertible into or exchangeable or exercisable for Common Stock, property or
options by way of dividend, spin-off, reclassification, or corporate
rearrangement) then, and in each such case, the Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date minus the value
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in
effect immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.1.3 for a dividend payable in shares of Common Stock or payable in cash or
other property and declared out of the earned surplus (i.e., retained earnings)
of the Company (excluding any
4
portion thereof resulting from a revaluation of property) or which is declared
but is then not paid or made. For purposes of the foregoing, a dividend or
distribution payable other than in cash shall be considered payable out of
earned surplus only to the extent that such earned surplus is charged an amount
equal to the fair value of such dividend or distribution at the time of payment
as determined in good faith by the Board of Directors of the Company. In the
event a dividend or distribution covered under this Section 8.1.3 is declared
prior to the Expiration Date but not paid by such date, the Expiration Date
shall be extended until the payment thereof.
8.1.4 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall be
proportionately increased concurrently with the effectiveness of such
combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Section 8.1 would be
less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Common Stock and
the Company shall have no obligation to change such value to permit a further
reduction of the Purchase Price; provided, however, that, except in the event of
transactions contemplated under Section 8.1.4 hereof, the Company agrees not to
change the par or stated value of the Common Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of Section 8.1, the number of
Warrant Shares that the Holder of a Warrant shall be entitled to receive upon
exercise thereof shall be adjusted to equal that number of Warrant Shares
determined by multiplying the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such adjustment of the Exercise Price by a
fraction of which:
(a) the numerator shall be the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect immediately
following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares issuable
upon exercise of each Warrant to be mailed to the Holders, at their last
addresses appearing in the Warrant register, and shall cause a copy thereof to
be mailed to each transfer agent for the Common Stock. The Company shall retain
a firm of independent public accountants of recognized standing selected by the
Board of Directors (who may be the regular accountants employed by the Company)
to
5
make any computation required by this Section 8, and a certificate signed by
such firm shall accompany said notice and shall be conclusive evidence of the
correctness of such adjustments.
9. Consolidation, Merger, Sale of Assets,
Reorganization, etc.
9.1 General Provisions. In case the Company at any time after the
Effective Date (a) shall consolidate with or merge into any other person and not
be the continuing or surviving person of such consolidation or merger, or (b)
shall permit any other person to consolidate with or merge into the Company and
the Company shall be the continuing or surviving person but, in connection with
such consolidation or merger, the Common Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, or (c) shall transfer, directly or indirectly,
all or substantially all its properties and assets to any other person, or (d)
shall effect a capital reorganization or reclassification of the Common Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligation. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in subdivisions (a) through (d) of Section 9.1 unless,
prior to the consummation thereof, the person (other than the Company) that may
be required to deliver any cash, stock or other securities or property upon
exercise of any Warrant as provided herein shall assume, by written instrument
delivered to the Holders of the Warrants, (a) the obligations of the Company
under this Warrant Agreement and the Warrants (and if the Company shall survive
the consummation of any such transaction, such assumption shall not release the
Company from, any continuing obligations of the Company under this Warrant
Agreement and the Warrants), provided that this paranthetical is not intended to
and shall not multiply or increase the expected benefits otherwise derived from
ownership of the Warrants and (b) the obligation to deliver to such Holder such
cash, stock or other securities or other property as such Holder may be entitled
to receive in accordance with the provisions of this Section 9. Such person
shall similarly deliver to the Company an opinion of counsel to the effect that
this Warrant Agreement and the Warrants shall continue in full force and effect
after any such transaction and that the terms hereof (including, without
limitation, all of the provisions of Section 8 and this Section 9.2) and thereof
shall be applicable to the cash, stock or other securities or property that such
person may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of
6
this Warrant Agreement or the Warrants, but will at all times, whether or not
requested to do so, in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders against dilution or other impairment.
Without limiting the generality of the foregoing, the Company agrees that it
shall take all such reasonable action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock upon the exercise of all Warrants from time to
time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrant Shares have not been
registered under the Act pursuant to the Registration Statement. Prime Charter
acknowledges that the Warrants and the Warrant Shares may not be transferred
except pursuant to (i) an effective registration statement under the Act, or
(ii) any available exemption from registration under the Act permitting such
disposition of securities and upon delivery to the Company of an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such exemption
from registration is available. Prime Charter agrees that the certificates
representing the Warrants and Warrant Shares shall bear an appropriate
restrictive legend to such effect.
12. Registration Rights. The Company will provide such registration
rights to the Holders of the Warrants as are set forth in the Registration
Rights Agreement dated as of May 23, 1997 (and related side letter) attached as
Exhibit B to the Underwriting Agreement.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Common
Stock (or other securities that may then be issuable in lieu thereof upon the
exercise of Warrants), including without limitation any dividend or distribution
from earned surplus, any dividend or distribution of stock, assets or evidences
of indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its
Common Stock,
(c) consolidate or merge with or into another entity,
7
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment to
the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof,
then the Company shall cause a notice of its intention to take such action to be
sent by first-class mail, postage prepaid, at least 20 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such distribution or issuance or
to vote upon such proposed consolidation, merger, liquidation, sale or
conveyance to each Holder at its address appearing on the Warrant register, but
failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such distribution, issuance, consolidation, merger, liquidation, sale or
conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement
to be given or made by any Holder to or on the Company shall be sufficiently
given or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed as follows:
Clearview Cinema Group, Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: A. ▇▇▇▇ ▇▇▇▇
Any notice or demand required by this Warrant Agreement to be given or made by
the Company to or on the Holder of any Warrant shall be sufficiently given or
made, whether or not such Holder receives the notice, if sent by first-class
mail, postage prepaid, addressed to such Holder at his last address as shown on
the books of the Company.
15. Governing Law. The validity, interpretation and performance of
this Warrant Agreement, of each Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
8
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as of
the date first set forth above.
CLEARVIEW CINEMA GROUP, INC.
By:
----------------------------------------------
Name: A. ▇▇▇▇ ▇▇▇▇
Title: Chairman of the Board, President and
Chief Executive Officer
PRIME CHARTER LTD.
By:
----------------------------------------------
Name:
Title:
9
ANNEX A
NEITHER THE WARRANTS REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (ii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. IN ADDITION, THE WARRANTS REPRESENTED
HEREBY MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF ________ __, 1997 BETWEEN
CLEARVIEW CINEMA GROUP, INC. AND PRIME CHARTER LTD.
No._____ _____ Warrants
Void After 5:00 p.m. New York City Time
On ________ , 2002
CLEARVIEW CINEMA GROUP, INC.
Warrant Certificate
THIS CERTIFIES THAT, for value received, _________________. or registered
assigns, is the Holder of the number of Warrants set forth above, each Warrant
entitling the owner thereof to purchase at any time after ______________, 1998
and prior to 5:00 p.m., New York City time, on ________ __, 2002 (the
"Expiration Date"), one fully paid and nonassessable share of common stock, par
value $.01 per share ("Common Stock"), of Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $[120% of IPO price], upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase
(attached hereto) duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares that may be purchased upon
exercise thereof, any such shares of Common Stock being referred to as "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement dated as of
________ __, 1997 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
Holders of the Warrant Certificates. A copy of the Warrant Agreement is on file
at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or
Warrant Certificates of like tenor, evidencing Warrants entitling the Holder to
purchase a like aggregate number of shares of Common Stock as the Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered
entitled such Holder to purchase. If this Warrant Certificate shall be exercised
in part, the Holder hereof shall be entitled to receive upon surrender hereof
another Warrant Certificate or Warrant Certificates for the number of whole
Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the appropriate
number of Warrants or Warrant Shares in a cashless exercise or in a combination
thereof as provided in Section 4.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate as such shall be entitled to vote or
to receive dividends or to consent or to receive notice as a stockholder of the
meetings of stockholders for the election of directors of the Company or any
other matter or to any rights whatsoever as stockholder of the Company, until
the Warrant or Warrant evidenced by this Warrant Certificate shall have been
exercised and the Warrant Shares shall have become delivered as provided in the
Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other class of
stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, Clearview Cinema Group, Inc. has caused the signature
(or facsimile signature) of its Chairman and Secretary to be printed hereon.
Dated: ________ __, 1997
CLEARVIEW CINEMA GROUP, INC.
By:
--------------------------
Name:
Title:
Attest:
-----------------------------
Secretary
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer the Warrant
Certificates).
TO CLEARVIEW CINEMA GROUP, INC.
FOR VALUE RECEIVED, _______________________________ hereby sells
assigns and transfers unto ____________________ this Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________________, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
DATED:______________________, 19__
Signature_____________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO CLEARVIEW CINEMA GROUP, INC.
The undersigned hereby (1) irrevocably elects to exercise_______________
Warrants represented by this Warrant Certificate to purchase__________ shares of
Common Stock issuable upon the exercise of such Warrants, (2) makes payment in
full of the aggregate Exercise Price for such Warrants by enclosure of a bank
cashier's check or money order therefor or by surrendering Warrants or shares of
Common Stock for application to the aggregate Exercise Price, upon condition
that new Warrants be issued for the balance of the Warrants remaining, and (3)
requests that certificates for shares and Warrants be issued in the name of:
(Please insert social security or other
identifying number) ____________
--------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number) ____________
--------------------------------------
(Please print name and address)
DATED:______________________, 19__
-----------------------------------
Signature
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.