SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April 23,
1998, by and between Clearview Cinema Group, Inc., a Delaware corporation (the
"COMPANY"), and Proprietary Convertible Investment Group, Inc. (the
"PURCHASER").
The Company wishes to sell to the Purchaser, and the Purchaser wishes
to buy, on the terms and subject to the conditions set forth in this Agreement,
shares (the "PREFERRED SHARES") of the Company's Class C Convertible Preferred
Stock, par value $0.01 per share (the "PREFERRED STOCK"). The Preferred Shares
are convertible pursuant to the terms of a Certificate of Designation relating
to the Preferred Stock, the form of which is attached hereto as EXHIBIT B (the
"CERTIFICATE OF DESIGNATION"), into shares (the "CONVERSION SHARES") of the
Company's common stock, par value $0.01 per share (the "COMMON STOCK").
Dividends on the Preferred Shares are payable, subject to the terms and
conditions of the Certificate of Designation, in cash or, at the option of the
Company, in shares of Common Stock (the "DIVIDEND PAYMENT SHARES"). The
Preferred Shares, the Conversion Shares and the Dividend Payment Shares are
collectively referred to herein as the "SECURITIES". The Conversion Shares and
the Dividend Payment Shares are collectively referred to herein as the "COMMON
SHARES".
The Company has agreed to effect the registration of the Conversion
Shares and the Dividend Payment Shares under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), pursuant to a Registration Rights Agreement of
even date herewith by and between the Company and the Purchaser (the
"REGISTRATION RIGHTS AGREEMENT"). The sale of the Preferred Shares by the
Company to the Purchaser will be effected in reliance upon the exemption from
securities registration afforded by the provisions of Regulation D ("REGULATION
D"), as promulgated by the Securities and Exchange Commission (the "COMMISSION")
under the Securities Act.
The Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 AGREEMENT TO PURCHASE AND SELL. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell and the Purchaser agrees to purchase three thousand (3,000) Preferred
Shares at a purchase price equal to one thousand dollars ($1,000) per share (the
"PURCHASE PRICE").
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth herein, the closing of the purchase and sale of the Preferred Shares
hereunder (the "CLOSING") will be deemed to occur when this Agreement and the
other Transaction Documents (as defined below) have been executed and delivered
by the Company and the Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price has been made by the
Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of duly executed certificates representing the Preferred
Shares purchased by the Purchaser at the Closing. The date on which the Closing
occurs is referred to herein as the "CLOSING DATE".
1.3 CERTAIN DEFINITIONS. When used herein, (A) "BUSINESS DAY" shall
mean any day on which the New York Stock Exchange (the "NYSE") and commercial
banks in the city of New York are open for business, (B) an "AFFILIATE" of a
party shall mean any person or entity controlling, controlled by or under common
control with that party and (C) "CONTROL" shall mean, with respect to an entity,
the ability to direct the business, operations or management of such entity,
whether through an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby makes the following representations and warranties
to the Company and agrees with the Company that, as of the date of this
Agreement and as of the Closing Date:
2.1 AUTHORIZATION; ENFORCEABILITY. The Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares, to acquire the Conversion Shares upon
conversion of the Preferred Shares and to execute, deliver and perform its
obligations under this Agreement, the Registration Rights Agreement and all
other agreements, documents, certificates or other instruments executed and
delivered by or on behalf of the Purchaser at the Closing. This Agreement
constitutes the Purchaser's valid and legally binding obligation, enforceable in
accordance with its terms, except as such enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 ACCREDITED INVESTOR; INVESTMENT INTENT. The Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares solely for its own account for investment
purposes as a principal and not with a present view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, the Purchaser does not agree to hold the Securities for any
minimum or specific term (except as otherwise may be provided in this Agreement)
and reserves the right to sell, transfer or otherwise dispose of the Securities
at any time in accordance with the provisions of this Agreement and with Federal
and state securities laws applicable to such sale, transfer or disposition.
2.3 INFORMATION. The Company has provided the Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to the Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Preferred Shares
hereunder. Neither such information nor any other investigation conducted by the
Purchaser or any of its representatives shall modify, amend or otherwise affect
the Purchaser's right to rely on the Company's representations and warranties
contained in this Agreement.
2.4 LIMITATIONS ON DISPOSITION. The Purchaser acknowledges that,
except as provided
2
in the Registration Rights Agreement, the Securities have not been and are not
being registered under the Securities Act and may not be transferred, sold or
otherwise disposed of without registration under the Securities Act or unless
pursuant to an exemption therefrom (it being understood that, in the case of a
sale of Common Shares pursuant to any such exemption to a buyer that is not an
affiliate of the Purchaser, the Purchaser will deliver to the Company an opinion
of counsel to the effect that such exemption is available). Other than a
transfer of the Preferred Shares in their entirety to an affiliate of the
Purchaser, the Purchaser agrees that, without the consent of the Company, none
of the Preferred Shares may be transferred, sold or otherwise disposed of prior
to the Maturity Date (as defined in the Certificate of Designation).
2.5 LEGEND. The Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may
not be offered, sold or otherwise disposed of unless a
registration statement under the Securities Act and applicable
state securities laws shall have become effective with regard
thereto, or an exemption from registration under the Securities
Act and applicable state securities laws is available in
connection with such offer, sale or disposition. Such securities
are issued subject to the provisions of (i) the Certificate of
Designation relating to the Class C Convertible Preferred Stock
of Clearview Cinema Group, Inc. (the "Company"), (ii) a
Securities Purchase Agreement, dated as of April 23, 1998, by and
between the Company and the purchaser named therein, and (iii) a
Registration Rights Agreement, dated as of April 23, 1998, by and
between the Company and such purchaser."
Notwithstanding the foregoing, it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Common Shares is registered pursuant to an effective registration statement, (B)
such Common Shares can be sold pursuant to Rule 144 under the Securities Act
("RULE 144") and a registered broker dealer provides to the Company a customary
broker's Rule 144 letter and the Purchaser delivers to the Company a customary
seller's representation letter (including without limitation a representation of
the Purchaser's present intention to sell such Common Shares) and a copy of any
Form 144 which may have been required to be filed by the Purchaser pursuant to
Rule 144, or (C) such Common Shares are eligible for resale under Rule 144(k),
such Common Shares shall be issued without any legend or other restrictive
language and, with respect to Common Shares upon which such legend is stamped,
the Company shall issue new certificates without such legend to the holder upon
request.
2.6 SHORT SALES. The Purchaser hereby acknowledges and agrees that it
will not, directly or indirectly, engage in any short sales of shares of Common
Stock during the period from the date of this Agreement until the first date on
which the Purchaser no longer owns any Preferred Shares. Notwithstanding the
foregoing, (i) nothing contained herein will be deemed to limit the right of any
affiliate of the Purchaser to engage in short sales resulting from customer
orders or which are effected on a proprietary basis by trading personnel who are
not acting at the direction or request
3
of the Purchaser or any employee of the Purchaser (ii) the Purchaser shall have
the right, as long as the Closing Bid Price for the Common Stock exceeds the
Fixed Conversion Price (each as defined in the Certificate of Designation), to
establish an aggregate short position (including any such position previously
established) of up to ten thousand (10,000) shares of Common Stock, and to
maintain that position thereafter regardless of whether the Closing Bid Price
exceeds the Fixed Conversion Price. As used herein, the term "short sale" shall
have the meaning specified in Rule 3b-3 under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"); provided, however, that such term shall
not include any such sale (x) effected as a result of a failure by the Company
to issue Conversion Shares or to deliver certificates representing such shares
in accordance with the terms of the Certificate of Designation or (y) which
involves a number of shares of Common Stock up to and including the number of
Conversion Shares for which a Conversion Notice (as defined in the Certificate
of Designation) has been, or will be on the day on which such short sales are
effected, submitted to the Company.
2.7 SELLING RESTRICTIONS. The Purchaser shall not sell on any Trading
Day (as defined in the Certificate of Designation) a number of Conversion Shares
(the "MAXIMUM SALE AMOUNT") that exceeds the greatest of (i) seven thousand
(7,000) Conversion Shares, (ii) fifteen percent (15%) of the total number of
shares of Common Stock traded on such Trading Day on all of the exchanges and/or
markets on which the Common Stock is then traded, and (iii) fifteen percent
(15%) of the average daily trading volume for the Common Stock on all of the
exchanges and/or markets on which the Common Stock is then traded during the
period of five (5) Trading Days immediately preceding, but not including, such
Trading Day (collectively, the "SELLING RESTRICTIONS"), and shall not direct or
request that any other person sell shares of Common Stock for the purpose of
circumventing or avoiding the effect of the Selling Restrictions; PROVIDED,
HOWEVER, that if, at any time during the Restricted Period, the Purchaser
refrains from selling Conversion Shares for one or more consecutive Trading
Days, up to a maximum of five (5) Trading Days (each such period of one or more
Trading Days being referred to herein as a "NO-SALE PERIOD"), the Maximum Sale
Amount applicable to the first Trading Day on which the Purchaser sells
Conversion Shares following the end of the No-Sale Period shall be increased by
an amount equal to the aggregate of the Maximum Sale Amounts applicable to all
of the Trading Days occurring during the No-Sale Period. The Selling
Restrictions shall cease to apply (i) in the event that the Company delivers an
Exchange Notice or a Major Announcement (each as defined in the Certificate of
Designation) is made and/or (ii) twenty (20) days prior to the Maturity Date (as
defined in the Certificate of Designation) and/or (iii) at such time as the
number of Conversion Shares into which the outstanding Preferred Shares are then
convertible represents less than one percent (1%) of the number of shares of
Common Stock then outstanding.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to the Purchaser and agrees with the Purchaser that, as of the date of this
Agreement and as of the Closing Date:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its subsidiaries is duly organized, validly existing and in good standing
under the laws of the
4
jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to carry on its business as now conducted. Each of
the Company and its subsidiaries is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. The term
"subsidiaries" shall mean entities in which the Company has an equity interest
of 50% or greater.
3.2 AUTHORIZATION; CONSENTS. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement and (iii) all other
agreements, documents, certificates or other instruments executed and delivered
by or on behalf of the Company at any Closing (the instruments described in (i),
(ii) and (iii) being collectively referred to herein as the "TRANSACTION
DOCUMENTS"), to execute and perform its obligations under the Certificate of
Designation, to issue and sell the Preferred Shares to the Purchaser in
accordance with the terms hereof, to issue the Conversion Shares upon conversion
of the Preferred Shares in accordance with the Certificate of Designation and to
issue the Dividend Payment Shares in accordance with the Certificate of
Designation. All corporate action on the part of the Company by its officers,
directors and stockholders necessary for (A) the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents, and (B) the authorization, execution and filing of, and
the performance by the Company of its obligations under, the Certificate of
Designation has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than as may be required under the Securities Act and
applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the American Stock Exchange ("AMEX") or otherwise), except that the provisions
of the Transaction Documents requiring that the Common Shares be listed on the
AMEX, NYSE or the Nasdaq National Market System ("NMS") may require the approval
of the Company's stockholders in the event that the number of shares of Common
Stock issuable pursuant to the conversion of the Preferred Shares pursuant to
the Certificate of Designation is equal to or exceeds twenty percent (20%) of
the number of shares of Common Stock outstanding as of the Closing Date.
3.3 ENFORCEMENT. The Transaction Documents constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except as such enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and (ii)
general principles of equity.
3.4 DISCLOSURE DOCUMENTS; AGREEMENTS; FINANCIAL STATEMENTS; OTHER
INFORMATION. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997 and (ii) all Current
Reports on Form 8-K required to be filed by the Company with the Commission
since December 31, 1997 (collectively, the "DISCLOSURE DOCUMENTS"). The Company
is not aware of any event occurring on or prior to the Closing (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date
5
of the filing thereof with the Commission, conformed in all material respects to
the requirements of the Exchange Act, and the rules and regulations thereunder
and, as of the date of such filing, such Disclosure Document did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements required to be filed as exhibits to the Disclosure Documents have
been filed as required. Neither the Company nor any of its subsidiaries is in
breach of any agreement to which it is a party or by which it is bound where
such breach is reasonably likely to have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole. Except as set forth in the Disclosure Documents or any
schedule or exhibit attached hereto, the Company has no liabilities, contingent
or otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the Disclosure
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied at
the times and during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end adjustments). The written
information described in paragraph 2.3 above (other than such materials that
were not prepared by or on behalf of the Company) does not contain an untrue
statement of material fact and does not include any material, non-public
information.
3.5 CAPITALIZATION. The capitalization of the Company as of the date
hereof, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares) exercisable
for, or convertible into or exchangeable for any shares of Common Stock and the
number of shares initially to be reserved for issuance upon conversion of the
Preferred Shares is set forth on SCHEDULE 3.5 hereto. All of such outstanding
shares of capital stock have been, or upon issuance will be, validly issued,
fully paid and non-assessable. No shares of the capital stock of the Company are
subject to preemptive rights or any other similar rights of the stockholders of
the Company or any liens or encumbrances created by or through the Company.
Except as disclosed on SCHEDULE 3.5, or as contemplated herein, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries.
6
3.6 VALID ISSUANCE. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company, (ii) based in part upon the representations of the
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be entitled
to all of the rights, preferences and privileges set forth in the Certificate of
Designation. The Conversion Shares are duly authorized and reserved for issuance
and, when issued upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation, will be duly and validly issued, fully
paid and nonassessable, free and clear of any taxes, liens, claims, preemptive
or similar rights or encumbrances imposed by or through the Company. The
Dividend Payment Shares are duly authorized and, upon the issuance thereof in
accordance with the terms of the Certificate of Designation, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company.
3.7 NO CONFLICT WITH OTHER INSTRUMENTS. Neither the Company nor any of
its subsidiaries is in violation of any provisions of its charter, Bylaws or any
other governing document as amended and in effect on and as of the date hereof
or in default (and no event has occurred which, with notice or lapse of time or
both, would constitute a default) under any provision of any instrument or
contract to which it is a party or by which it is bound, or of any provision of
any Federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company, which would have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole. Other than as set forth on
SCHEDULE 3.7, the (i) execution, delivery and performance of this Agreement and
the other Transaction Documents, (ii) execution and filing of the Certificate of
Designation, and (iii) consummation of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the reservation for issuance and issuance of the Conversion Shares and the
Dividend Payment Shares) will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument or contract or an event
which results in the creation of any lien, charge or encumbrance upon any assets
of the Company or of any of its subsidiaries or the triggering of any preemptive
or anti-dilution rights or rights of first refusal or first offer on the part of
holders of the Company's securities.
3.8 FINANCIAL CONDITION; TAXES; LITIGATION.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, there has been no material
adverse change to the Company's business, operations, properties, financial
condition, prospects or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents.
7
3.8.2 The Company has filed all tax returns required to be
filed by it and paid all taxes which are due, except for taxes which it
reasonably disputes, other than tax returns as to which the failure to file
would not have a material adverse effect on the consolidated business or
financial condition of the Company and its subsidiaries taken as a whole.
3.8.3 Each of the Company and its subsidiaries is not the
subject of any pending or, to the Company's knowledge, threatened inquiry,
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, the
Commission or any state securities commission or other governmental or
regulatory entity.
3.8.4 Except as described on SCHEDULE 3.8.4, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its subsidiaries, or against any officer, director or employee of the Company or
any such subsidiary in connection with such person's employment therewith.
Neither the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have
a material adverse effect on the consolidated business or financial condition of
the Company and its subsidiaries taken as a whole.
3.9 REPORTING COMPANY; FORM SB-2. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company is currently eligible to register for resale shares of its
Common Stock on a registration statement on Form SB-2 under the Securities Act
pursuant to Rule 415 thereunder.
3.10 ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares and
the issuance of Dividend Payment Shares in accordance with the terms of the
Certificate of Designation may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of Preferred Shares and to issue Dividend Payment Shares in
accordance with the terms of the Certificate of Designation is unconditional and
absolute regardless of the effect of any such dilution.
3.11 INTELLECTUAL PROPERTY. The Company and its subsidiaries each owns
or possesses adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other intellectual
property rights necessary to conduct the business now operated by it, and is not
aware of any infringement by a third party with respect to such rights or of any
infringement by it or conflict with asserted rights of others that, in any such
case, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole.
8
3.12 REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as described
on SCHEDULE 3.12 hereto, (A) the Company has not granted or agreed to grant to
any person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation which has not been
waived.
3.13 TRADING ON AMEX. The Common Stock is listed on the AMEX and
trading in the Common Stock on the AMEX has not been suspended. The Company is
in full compliance with all material requirements of the AMEX for continued
listing of the Common Stock, and does not reasonably anticipate that the Common
Stock will be delisted from the AMEX, whether by reason of the transactions
contemplated by this Agreement, the other Transaction Documents or the
Certificate of Designation, and is not aware of any inquiry by and has not
received any notice from the AMEX regarding any failure or alleged failure by
the Company to comply with such requirements.
3.14 SOLICITATION. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
3.15 FEES. Except as described on SCHEDULE 3.15 hereto, the Company is
not obligated to pay any compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby.
3.16 FOREIGN CORRUPT PRACTICES. To the knowledge of the Company,
neither the Company, nor any of its subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.17 OTHER ISSUANCES OF SECURITIES. The Company has not issued (and
will not issue) any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into, exchangeable for or
otherwise entitling the holder thereof to acquire shares of Common Stock which
would be integrated with the sale of the Preferred Shares to the Purchaser, or
the issuance of the Conversion Shares upon conversion thereof, for purposes of
9
determining whether stockholder approval is required under the listing
requirements of the AMEX.
3.18 TITLE. Except as set forth on SCHEDULE 3.18, the Company and its
subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property, in each case purported
to be owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects, except for liens, claims or encumbrances as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries. Any real
property and facilities held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
3.19 REGULATORY PERMITS. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
4. COVENANTS OF THE COMPANY.
4.1 CORPORATE EXISTENCE. The Company shall, so long as the Purchaser or
any affiliate of the Purchaser beneficially owns any Securities, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes.
4.2 PROVISION OF INFORMATION. The Company shall provide the Purchaser,
as long as any Preferred Shares are outstanding, with copies of its annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and proxy statements and other materials sent to stockholders, in each such
case promptly after the filing thereof with the Commission.
4.3 FORM D; BLUE-SKY QUALIFICATION. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Purchaser promptly after such filing. The Company shall, on
or before the Closing Date, take such action as is necessary to qualify the
Preferred Shares for sale under applicable state or "blue-sky" laws or obtain an
exemption therefrom, and shall provide evidence of any such action to the
Purchaser at or prior to such Closing.
4.4 REPORTING STATUS. As long as the Purchaser or any affiliate of the
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to Rule 144(k) (or any
successor rule or regulation), (i) the Company shall timely file with the
Commission all reports required to be so filed pursuant to the Exchange Act and
(ii) the Company shall not terminate its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit
10
such termination. The Company agrees to file with the Commission a Form 8-K
describing the terms of the transactions contemplated by this Agreement and the
other Transaction Documents, with the Transaction Documents attached to such
Form 8-K as an exhibit thereto, on or before the fifteenth (15th) day following
the Closing Date in the form required by the Exchange Act.
4.5 RESERVATION OF COMMON STOCK. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares hereunder, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Preferred Shares (the "RESERVED AMOUNT"). As
of the Closing Date, the Reserved Amount shall be equal to no less than 150% of
the number of shares of Common Stock issuable upon conversion of all of the
Preferred Shares to be issued at the Closing (such number to be determined using
the Conversion Price in effect on the Closing Date). If during any period of
five (5) consecutive business days, the Reserved Amount is less than 150% of the
number of shares of Common Stock then issuable upon conversion of all of the
Preferred Shares then outstanding (such number to be determined using the
Conversion Price in effect on such date), the Company must take action
(including without limitation seeking stockholder authorization for the
authorization or reservation of additional shares of Common Stock) as soon as
practicable but in no event later than the fifth (5th) business day following
receipt by the Company of notice thereof from the Purchaser or in the case of
stockholder authorization (i) within sixty (60) days following receipt by the
Company of notice thereof from the Purchaser or (ii) if earlier, the second (2d)
Business Day following the Corporation's receipt of notice from the Commission
that the Commission has no comments or no further comments on the Corporation's
related proxy statement) to increase the Reserved Amount to no less than 150% of
the number of shares of Common Stock into which such outstanding Preferred
Shares are then convertible. The Company shall not reduce the number of shares
reserved for issuance hereunder without the written consent of the Purchaser.
4.6 USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Preferred Shares for general corporate purposes only, in the ordinary
course of its business and consistent with past practice, including without
limitation for the acquisition or development of movie theaters, and shall not
use such proceeds to make a loan to any employee, officer or director of the
Company or to repurchase or pay a dividend on shares of Common Stock or other
securities junior to the Class C Preferred Stock.
4.7 LISTING ON AMEX. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include the number of shares of
Common Stock required to be reserved by the Company pursuant to Section 4.5
above for listing on the AMEX and (ii) use its best efforts to maintain such
listing on the AMEX or, if applicable, the NYSE or NMS.
4.8 USE OF PURCHASER NAME. Except as may be required by applicable law,
the Company shall not use, directly or indirectly, the Purchaser's name or the
name of any of its affiliates in any advertisement, announcement, press release
or other similar communication unless it has received the prior written consent
of the Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.
11
4.9 COMPANY'S INSTRUCTIONS TO TRANSFER AGENT. On or prior to the
Closing Date, the Company shall execute and deliver irrevocable instructions to
its transfer agent (the "TRANSFER AGENT") (i) to issue certificates representing
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation and receipt of a valid Conversion Notice
(as defined in the Certificate of Designation) from the holder thereof in the
amount specified in such Conversion Notice, in the name of such holder or its
nominee, (ii) to issue certificates representing the Dividend Payment Shares
upon the issuance thereof in accordance with the Certificate of Designation,
(iii) to deliver such certificates to such holder no later than the close of
business on or before the later of (a) the third (3rd) business day following
the related Conversion Date or Dividend Payment Date (each as defined in the
Certificate of Designation), as the case may be, and (b) the date on which the
certificate(s) representing the Preferred Shares being converted are delivered
to the Company or the Transfer Agent by such holder and (iv) that the Conversion
Shares or the Dividend Payment Shares, as the case may be, will not bear a
restrictive legend as long as (A) the resale or transfer (including without
limitation a pledge) of such shares is registered pursuant to an effective
registration statement, (B) such shares can be sold pursuant to Rule 144, a
registered broker dealer provides to the Company a customary broker's Rule 144
letter and the holder delivers to the Company a customary seller's
representation letter including without limitation a representation of the
holder's present intention to sell such shares, or (C) such shares are eligible
for resale under Rule 144(k), and, with respect to shares upon which such legend
may be stamped, upon the occurrence of any such event, the Transfer Agent shall
issue new certificates without such legend to the holder upon request. The
Company shall instruct the Transfer Agent that, in lieu of delivering physical
certificates representing shares of Common Stock to a Purchaser upon conversion
of the Preferred Shares, or issuance of the Dividend Payment Shares, and as long
as the Transfer Agent is a participant in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer program, and the Purchaser has not informed
the Company that it wishes to receive physical certificates therefor, the
transfer agent may effect delivery of Conversion Shares or Dividend Payment
Shares, as the case may be, by crediting the account of the Purchaser or its
nominee at DTC for the number of shares for which delivery is required hereunder
within the time frame specified above for delivery of certificates. The Company
represents to and agrees with the Purchaser that it will not give any
instruction to the Transfer Agent that will conflict with the foregoing
instruction or otherwise restrict the Purchaser's right to convert the Preferred
Shares or to receive Conversion Shares or Dividend Payment Shares in accordance
with the terms of the Certificate of Designation. In the event that the
Company's relationship with the Transfer Agent should be terminated for any
reason, the Company will use its best efforts to cause the Transfer Agent to
continue to act as transfer agent pursuant to the terms hereof until such time
that a successor transfer agent is appointed by the Company and receives the
instructions described above.
4.10 CAPITAL RAISING LIMITATION/REGISTRATION LIMITATION. Unless
otherwise consented to in writing by the Purchaser, the Company will not (A)
during the ninety (90) day period following the Closing Date, issue, offer for
sale or sell any Common Stock or other equity security of the Company, or any
security or instrument convertible or exercisable into or exchangeable for
Common Stock or any such equity security, except pursuant to securities or other
rights described on SCHEDULE 4.10(A) (the "CAPITAL RAISING LIMITATION"), or (B)
during the one hundred and eighty (180) day period following the day on which
the Registration Statement (as defined in the
12
Registration Rights Agreement) is declared effective by the Commission, register
any Common Stock or other equity security of the Company (other than Conversion
Shares or Dividend Payment Shares) on a registration statement filed by the
Company under the Securities Act, except pursuant to the rights described on
SCHEDULE 4.10(B) (the "REGISTRATION LIMITATION"). The Capital Raising Limitation
will not apply to (i) the issuance of Common Stock as consideration in a merger,
consolidation or acquisition, in connection with a theater development project,
or pursuant to an employee benefit plan of the Company, in any such case the
primary purpose of which is not to raise equity capital, (ii) the issuance of
Common Stock pursuant to a strategic partnership or joint venture which is
formed for a bona fide commercial purpose, (iii) the issuance of Common Stock
pursuant to a registered public offering, or (iv) the issuance of warrants,
options or other rights to receive Common Stock in connection with a registered
public offering of the Company's debt securities or an offering of the Company's
debt securities pursuant to Rule 144A under the Securities Act where, in either
such case, the Company receives gross proceeds in excess of fifty million
dollars ($50,000,000). The Registration Limitation will not apply with respect
to "piggyback" rights granted by the Company prior to the date of this Agreement
which would allow the holders of the Company's securities to include such
securities on a registration statement being filed by the Company under the
Securities Act.
4.11 RIGHT OF FIRST OFFER. The Company agrees that, prior to any offer
or sale by the Company of Common Stock (or any securities convertible or
exercisable into or exchangeable for Common Stock) during the one (1) year
period following the Closing Date (the "FIRST OFFER PERIOD"), it will deliver to
the Purchaser written notice describing the proposed issuance, including the
terms and conditions thereof, and provide the Purchaser with an option during
the ten (10) business day period following delivery of such notice to purchase
all or any part of the securities being offered on substantially the same terms
as contemplated by the Company in connection with such issuance (the "RIGHT OF
FIRST OFFER"). The Purchaser may exercise the Right of First Offer by delivering
written notice of such exercise to the Company on or before the last day of such
ten business day period. In the event that the Purchaser either fails to
exercise the Right of First Offer during such ten business day period or informs
the Company in writing that it does not intend to participate in all or a part
of the issuance to which such Right of First Offer relates, the Company may
offer to a third party the amount of securities which were declined by the
Purchaser, on the same terms as were offered to the Purchaser. The Right of
First Offer will not apply with respect to a bona fide registered public
offering of the Common Stock.
13
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT CLOSING. The Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase Preferred Shares, are conditioned upon the fulfillment (or waiver by
the Purchaser) of each of the following events as of the Closing Date:
5.1.1 the representations and warranties of the Company
set forth in this Agreement shall be true and
correct in all material respects as of such date
as if made on such date;
5.1.2 the Company shall have complied with or performed
in all material respects all of the agreements,
obligations and conditions set forth in this
Agreement that are required to be complied with or
performed by the Company on or before the Closing;
5.1.3 the Company shall have delivered to the Purchaser
a certificate, signed by an officer of the
Company, certifying that the conditions specified
in paragraphs 5.1.1 and 5.1.2 above have been
fulfilled as of the Closing;
5.1.4 the Company shall have filed the Certificate of
Designation with the Secretary of State of the
State of Delaware and shall have furnished the
Purchaser with a file-stamped copy thereof;
5.1.5 the Company shall have delivered to the Purchaser
an opinion of counsel for the Company, dated as of
such date, in substantially the form set forth on
Exhibit 5.1.5 hereto;
5.1.6 the Company shall have delivered duly executed
certificates representing the Preferred Shares
being so purchased;
5.1.7 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.8 the Common Stock shall be listed on the AMEX and
trading in the Common Stock shall not have been
suspended;
5.1.9 there shall have been no material adverse changes
in the Company's consolidated business or
financial condition since the date of the
Company's most recent audited financial statements
contained in the Disclosure Documents;
5.1.10 the Company shall have authorized and reserved for
issuance at least
14
one hundred and fifty percent (150%) of the
aggregate number of shares of Common Stock
issuable upon conversion of all of the Preferred
Shares to be issued at the Closing (such number to
be determined using the Conversion Price in effect
on the Closing Date); and
5.1.11 each of the Company's executive officers who own
shares of Common Stock shall have executed and
delivered a letter agreement addressed to the
Purchaser regarding such person's agreement to
refrain from selling such person's holdings of
Common Stock for one (1) year from the Closing
Date, PROVIDED that such sales may be made
-------- pursuant to (i) a registered public
offering, (ii) a merger, acquisition or tender
offer that requires or permits such person to
tender such Common Stock, (iii) a strategic
partnership or joint venture which is formed for a
bona fide commercial purpose or (iv) rights
granted to a pledgee of such Common Stock pursuant
to a margin arrangement.
5.1.12 each of the Company's executive officers who owns
shares of Common Stock shall have executed and
delivered a letter agreement addressed to the
Purchaser regarding such person's agreement to
vote such shares in favor of any proposal made at
or in connection with any meeting of the holders
of the Company's Common Stock regarding (i)
approval of the transactions contemplated herein
or (ii) the authorization of additional shares of
Common Stock for issuance upon conversion of the
Preferred Shares; and
5.1.13 the Company shall have notified the Purchaser in
writing of the name, address, telephone number and
fax number of the Transfer Agent (and the name of
a contact person or persons) for the purpose of
delivering Conversion Notices (as defined in the
Certificate of Designation).
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The Company's
obligations at the Closing are conditioned upon the fulfillment (or waiver by
the Company) of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of the
Purchaser shall be true and correct in all
material respects as of such date as if made on
such date;
5.2.2 the Purchaser shall have complied with or
performed all of the agreements, obligations and
conditions set forth in this Agreement that are
required to be complied with or performed by the
Purchaser on or before the Closing; and
15
5.2.3 the Purchaser shall have delivered to the Company
a certificate, signed by an officer of the
Purchaser, certifying that the conditions
specified in paragraphs 5.2.1 and 5.2.2 above have
been fulfilled as of the Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
6.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign its
rights and obligations hereunder, in connection with any private sale or
transfer of the Preferred Shares to an affiliate of the Purchaser in accordance
with the terms hereof, as long as, as a condition precedent to such transfer,
the transferee executes an acknowledgment agreeing to be bound by the applicable
provisions of this Agreement, in which case the term "Purchaser" shall be deemed
to refer to such transferee as though such transferee were an original signatory
hereto. The Company may not assign it rights or obligations under this
Agreement.
6.3 NO RELIANCE. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of the other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
16
6.4 INJUNCTIVE RELIEF. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Purchaser
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate and
specific performance of such obligations without the necessity of showing
economic loss.
6.5 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and construed under the laws of the State of New York without regard
to the conflict of laws provisions thereof. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
6.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.7 HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.8 NOTICES. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely delivery to a nationally-recognized overnight courier and (iii) on
the third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
17
IF TO THE COMPANY:
Clearview Cinema Group, Inc.
00 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attn: A. Xxxx Xxxx
Tel: 000-000-0000
Fax: 000-000-0000
WITH A COPY TO:
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
IF TO THE PURCHASER:
Proprietary Convertible Investment Group, Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue, 3rd Floor
New York, New York 10010
Attn: Xxxxx Xxxxx, Xxxx XxXxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
6.9 EXPENSES. The Company and the Purchaser each shall pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement, PROVIDED, HOWEVER, that the Company
shall reimburse the Purchaser for all out-of-pocket expenses (including without
limitation legal fees and expenses) incurred by it in connection its due
diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of the Certificate of Designation, this
Agreement and the other Transaction Documents in an amount not to exceed twenty
five thousand dollars ($25,000).
6.10 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the Purchaser, and no provision hereof may be waived other than
by a written instrument signed by the party against whom enforcement of any such
waiver is sought.
18
6.11 ADJUSTMENT DUE TO STOCK SPLITS, ETC. Any reference herein
to a number of shares of Common Stock shall be adjusted upwards or downwards, as
the case may be, in the event that (A) the number of outstanding shares of
Common Stock is increased by a stock split, a stock dividend on the Common
Stock, a reclassification of the Common Stock or other similar event, or (B) the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares or other similar event.
Remainder of Page Intentionally Left Blank]
19
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
CLEARVIEW CINEMA GROUP, INC.
By: __________________________
Name:
Title:
PROPRIETARY CONVERTIBLE INVESTMENT
GROUP, INC.
By: ______________________________
Name:
Title:
20
