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[Execution Copy]
SENIOR CREDIT AGREEMENT
dated as of December 20, 1996
by and among
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.,
NEW YORK SKYLINE, INC.,
SKYLINE VIRTUAL REALITY, INC.,
SKYLINE CHICAGO, INC.,
SKYLINE MAGIC, INC.,
SKYLINE LAS VEGAS, INC.,
PROSPECT STREET NYC DISCOVERY FUND, L.P.,
and
BANK OF NEW YORK, AS TRUSTEE
FOR THE EMPLOYEES RETIREMENT PLAN
OF THE BROOKLYN UNION GAS COMPANY
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.........................................................1
1.1 Definitions..................................................1
ARTICLE II
THE CREDITS........................................................12
2.1 Commitments.................................................12
2.2 Loans.......................................................12
2.3 Borrowing Procedure.........................................13
2.4 Issuance of Notes, Evidence of Debt, Repayment of Loans.....13
2.5 Interest on Loans...........................................14
2.6 Default Interest............................................14
2.7 Termination of Commitments..................................14
2.8 Optional Prepayment.........................................14
2.9 Pro Rata Treatment..........................................15
2.10 Sharing of Setoffs..........................................15
2.11 Payments....................................................16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS....................16
3.1 Organization................................................16
3.2 Power and Authority.........................................16
3.3 Capital Stock...............................................17
3.4 Subsidiaries................................................18
3.5 No Conflicts................................................18
3.6 Governmental Approvals and Filings..........................18
3.7 Books and Records...........................................19
3.8 SEC Documents...............................................19
3.9 Absence of Changes..........................................19
3.10 No Undisclosed Liabilities..................................21
3.11 Taxes.......................................................21
3.12 Legal Proceedings...........................................23
3.13 Compliance With Laws and Orders.............................23
3.14 Benefit Plans; ERISA........................................23
3.15 Real Property...............................................24
3.16 Tangible Personal Property..................................24
3.17 Intellectual Property Rights................................25
3.18 Contracts...................................................25
3.19 Licenses....................................................26
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3.20 Insurance...................................................26
3.21 Affiliate Transactions......................................26
3.22 Employees; Labor Relations..................................26
3.23 Environmental Matters.......................................26
3.24 Suppliers...................................................27
3.25 Inventory...................................................28
3.26 Registration Rights.........................................28
3.27 Brokers.....................................................28
3.28 New York City Advanced Technology Company; Small Business
Matters.....................................................28
3.29 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities...............................28
3.30 No Default..................................................29
3.31 Use of Proceeds; Margin Stock...............................29
3.32 Investment Company Act......................................29
3.33 Public Utility Holding Company Act..........................29
3.34 Financial Condition.........................................29
3.35 Senior Credit Documents.....................................30
3.36 Disclosure..................................................30
ARTICLE IV
CONDITIONS TO INITIAL LOANS........................................30
4.1 Borrowing Certificate. ....................................30
4.2 Representations and Warranties..............................31
4.3 Performance.................................................31
4.4 Secretary's Certificate.....................................31
4.5 Orders and Laws.............................................31
4.6 Regulatory Consents and Approvals...........................31
4.7 Third Party Consents........................................32
4.8 Opinion of Counsel..........................................32
4.9 Good Standing Certificates..................................32
4.10 UCC Filing Searches.........................................32
4.11 Operative Agreements........................................32
4.12 Issuance of Notes...........................................32
4.13 Issuance of Warrants; Listing of Common Stock...............33
4.14 Interest on Demand Note.....................................33
4.15 Certain Expenses............................................33
4.16 Potential Event of Default; Event of Default................33
4.17 Additional Matters..........................................33
ARTICLE V
CONDITIONS TO EACH ADDITIONAL LOAN.................................33
5.1 Borrowing Certificate.......................................34
5.2 Representations and Warranties..............................34
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5.3 Issuance of Notes...........................................34
5.4 Issuance of Warrants; Listing of Common Stock...............34
5.5 Compliance; No Default......................................34
5.6 Effect of Each Additional Borrowing.........................34
5.7 Additional Matters..........................................34
ARTICLE VI
AFFIRMATIVE COVENANTS..............................................35
6.1 Financial Statements and Reports; Inspection................35
6.2 Corporate Existence; Compliance.............................35
6.3 Payment of Liabilities......................................35
6.4 Insurance; Maintenance of Properties........................36
6.5 Notice of Certain Events....................................36
6.6 Economic Impact Information.................................36
6.7 New York City Advanced Technology Company...................36
6.8 Reservation of Shares; Exchange of Securities...............37
6.9 Venture Capital Operating Company Status....................37
6.10 Subsidiaries................................................37
6.11 Further Assurances..........................................37
ARTICLE VII
NEGATIVE COVENANTS.................................................38
7.1 Indebtedness................................................38
7.2 Liens.......................................................38
7.3 Merger, Consolidation, Sale of Assets.......................38
7.4 Lease Obligations...........................................39
7.5 Loans and Investments.......................................39
7.6 Dividends, Etc..............................................39
7.7 Subsidiaries................................................40
7.8 Sale and Leaseback..........................................40
7.9 Charter Documents; Directors................................40
7.10 Certain Limitations.........................................40
7.11 Conflicting Agreements......................................40
7.12 Use of Proceeds.............................................40
7.13 Affiliate Transactions......................................41
7.14 Change in Nature of Business................................41
ARTICLE VIII
EVENTS OF DEFAULT..................................................41
8.1 Failure To Make Payments When Due...........................41
8.2 Default in Other Agreements.................................41
8.3 Breach of Certain Covenants and Agreements..................41
8.4 Breach of Warranty..........................................42
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8.5 Involuntary Bankruptcy; Appointment of Receiver, Etc.........42
8.6 Voluntary Bankruptcy; Appointment of Receiver, Etc...........42
8.7 Judgments and Attachments....................................42
8.8 Other Agreements.............................................43
8.9 Change of Control............................................43
8.10 Public Warrant Redemption or Exercise........................43
ARTICLE IX
MISCELLANEOUS.......................................................43
9.1 Notices......................................................43
9.2 Participations in Loans and Senior Notes.....................45
9.3 New Additional Lender........................................45
9.4 Indemnity....................................................46
9.5 Entire Agreement.............................................46
9.6 Expenses.....................................................47
9.7 Consideration for Warrants...................................47
9.8 Further Assurances; Post-Closing Cooperation.................47
9.9 Amendments and Waivers.......................................47
9.10 Independence of Covenants....................................48
9.11 No Third Party Beneficiary...................................48
9.12 No Assignment; Binding Effect................................48
9.13 Headings.....................................................48
9.14 Invalid Provisions...........................................48
9.15 Governing Law................................................48
9.16 Consent to Jurisdiction and Service of Process...............48
9.17 Waiver of Jury Trial.........................................49
9.18 Counterparts.................................................50
Exhibit A -- Borrowing Certificate
Exhibit B -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit C -- Amended and Restated Registration Rights Agreement
Exhibit D -- Form of Senior Note
Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Warrant
Exhibit G -- Secretary's Certificate
Exhibit H -- Opinion of Counsel to the Borrowers
ANNEXES
Annex 2.1 -- Commitments
Annex 2.11 -- Offices of Lenders
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SENIOR CREDIT AGREEMENT, dated as of December 20, 1996, by and
among SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York corporation (the
"Company"), NEW YORK SKYLINE, INC., a New York corporation ("NYSI"), SKYLINE
VIRTUAL REALITY, INC., a Delaware corporation ("SVRI"), SKYLINE CHICAGO, INC., a
Delaware corporation ("SCI"), SKYLINE MAGIC, INC., a Delaware corporation
("SMI"), SKYLINE LAS VEGAS, INC., a Delaware corporation ("SLVI") (the Company,
NYSI, SVRI, SCI, SMI and SLVI each a "Borrower" and together, the "Borrowers"),
PROSPECT STREET NYC DISCOVERY FUND, L.P., a Delaware limited partnership
("Prospect"), and BANK OF NEW YORK, AS TRUSTEE FOR THE EMPLOYEES RETIREMENT PLAN
OF THE BROOKLYN UNION GAS COMPANY ("Bug").
WHEREAS, capitalized terms not otherwise defined herein have the
meanings set forth in Section 1.1; and
WHEREAS, the Borrowers wish to obtain financing and the Lenders
desire to provide such financing to the Borrowers;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Additional Borrowing" means the Loans made by the Lenders to the
Borrowers pursuant to Section 2.1(b).
"Additional Borrowing Date" means each date on which an
Additional Loan is made.
"Additional Lenders" means Bug and any New Additional Lender.
"Additional Loan Commitment" means with respect to each
Additional Lender, the commitment of such Additional Lender to make Additional
Loans hereunder, in an aggregate principal amount at any time outstanding not in
excess of the amount set forth opposite the name
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of such Additional Lender in the column entitled "Additional Loan Commitment" in
the table appearing on Annex 2.1 or, with respect to any New Additional Lender,
as shall be set forth on the signature page hereto.
"Additional Loan Commitment Termination Date" means the earliest
to occur of (i) September 20, 1997; (ii) any prepayment of any Loan; (iii) a
Change of Control; (iv) a breach by any Borrower of any of the provisions
contained in Section 7.3; and (v) any Event of Default or Potential Event of
Default, unless, in the case of this clause (v), the Additional Lenders whose
Additional Commitments represent in excess of fifty percent (50%) of all
Additional Commitments notify the Borrowers in writing that, with respect to any
particular Event of Default or Potential Event of Default, that such Additional
Lenders have elected not to terminate the Additional Loan Commitment.
"Additional Loans" means the loans made by the Additional Lenders
to the Borrowers pursuant to Section 2.1(b).
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 5% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 5% or
more of any class of equity securities (including any equity securities issuable
upon the exercise of any option or convertible security) of that Person or any
of its Affiliates, or (c) any director, partner, officer, agent, employee or
relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"Agreement" means this Senior Subordinated Credit Agreement, the
Exhibits, Annexes and the Disclosure Schedule and the certificates or other
documents or instruments delivered in accordance herewith, as the same may be
amended from time to time in accordance with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or
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indirectly, of ten percent (10%) or more of any class of equity securities, any
trust or estate in which such Person has a substantial beneficial interest or as
to which such Person serves as a trustee or in a similar capacity and any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.
"Benefit Plan" means any Plan established by any Borrower or any
Subsidiary, or any predecessor or Affiliate of any of the foregoing, to which
any Borrower or any Subsidiary contributes or has contributed, or under which
any employee, former employee or director of any Borrower or any Subsidiary or
any beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of any Borrower
or any Subsidiary, including without limitation financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and plans
and environmental studies and plans.
"Borrower" has the meaning ascribed to it in the forepart of this
Agreement.
"Borrowing" means a group of Loans made by the Lenders on a
single date.
"Borrowing Certificate" means a certificate executed and
delivered by the Borrowers in order to request a Borrowing in accordance with
the terms of Section 2.3 and substantially in the form of Exhibit A hereto.
"Bug" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Combination" means with respect to any Person any (i)
merger, consolidation or combination to which such Person is a party, (ii) any
sale, dividend, split or other disposition of any capital stock or other equity
interests of such Person, (iii) any tender offer (including without limitation a
self- tender), exchange offer, recapitalization, liquidation, dissolution or
similar transaction, (iv) any sale, dividend or other disposition of all or a
material portion of the Assets and Properties of such Person (even if less than
all or substantially all) or (v) the entering into of any agreement or
understanding, or the granting of any rights or options, with respect to any of
the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of New York are authorized or obligated to
close.
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"Business or Condition" means, with respect to any Person, the
business, condition (financial or otherwise), results of operations, Assets and
Properties and prospects of such Person.
"Capital Lease Obligations" means, as to any Person, any
obligation of such Person which is or should be classified and accounted for as
a capital lease for financial reporting purposes in accordance with GAAP, and
the amount of such obligation shall be the capitalized amount thereof determined
in accordance with GAAP on a consolidated basis.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Change of Control" means either (i) the acquisition after the
date hereof of ownership, directly or indirectly, beneficially or of record, by
any Person or group (within the meaning of the Exchange Act), other than any
Lender or any Affiliate of any Lender, of shares representing more than 20% of
the aggregate ordinary voting power (in the absence of contingencies)
represented by the issued and outstanding capital stock of the Company; or (ii)
Xxxxxx Xxxxxx shall cease to be the President of the Company; or (iii) except
for transfers to (A) Prospect or any of its Affiliates, or (B) any "Permitted
Transferee" of Xxxxxx Xxxxxx under the Stockholders Agreement, Xxxxxx Xxxxxx
shall cease to own, beneficially and of record, 100% of the Class A Common Stock
or (iv) the shares of Class A Common Stock outstanding on the date hereof shall
cease to be outstanding.
"Class A Common Stock" has the meaning ascribed thereto in
Section 3.3.
"Closing" means the making of the Initial Loans hereunder.
"Closing Date" means the date on which the Initial Loans are
made.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Commitment" means, with respect to each Lender, the sum of such
Lenders Initial Loan Commitment and Additional Loan Commitment; provided,
however, that with respect to any New Additional Lender, Commitment shall mean
such Lender's Additional Loan Commitment.
"Common Stock" has the meaning ascribed thereto in Section 3.3.
"Company" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of the Company).
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"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Defined Benefit Plan" means each Plan which is subject to Part 3
of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Demand Note" has the meaning ascribed to it in Section 2.2(b).
"Disclosure Schedule" means the schedules delivered to the
Lenders by the Borrowers herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as are
required to be included therein by the Borrowers pursuant to this Agreement.
"Environmental Law" means any Law relating to human health, or
protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or otherwise relating to the
treatment, storage, disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Event of Default" has the meaning ascribed to it in Article
VIII.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Final Maturity Date" means December 20, 2001.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include, without limitation, any
stock exchange, quotation service and the National Association of Securities
Dealers.
"Hazardous Material" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (B) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes,"
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"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (iv) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding accounts payable incurred in the ordinary course of business), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (vi) all guarantees by such
Person of Indebtedness of others, (vii) all Capital Lease Obligations of such
Person, (viii) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (ix)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Liabilities" has the meaning ascribed to it in
Section 9.4.
"Indemnitees" has the meaning ascribed to it in Section 9.4.
"Indemnitor" has the meaning ascribed to it in Section 9.4.
"Indemnity, Subrogation and Contribution Agreement" means the
form of Indemnity, Subrogation and Contribution Agreement attached as Exhibit B
hereto, as such agreement may be amended, modified or restated from time to
time.
"Independent Credit Agreement" means the Loan and Security
Agreement (Equipment) dated as of November 27, 1996 between Independent
Resources, Inc., a New York corporation and the Company, as such agreement may
be amended, modified or restated from time to time.
"Initial Loan Commitment" means, with respect to each Lender, the
commitment of such Lender to make an Initial Loan hereunder, in an aggregate
principal amount as set forth opposite the name of such Lender in the column
entitled "Initial Loan Commitment" in the table appearing on Annex 2.1.
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"Initial Loans" means the loans made by the Lenders to the
Borrowers pursuant to Section 2.1(a).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by any Borrower
or any Subsidiary (other than securities issued by any Subsidiary of any
Borrower or any Subsidiary).
"Investment Period" means the period commencing on the Closing
Date and ending on later of (i) the date on which all Loans and all other
amounts owing under this Agreement and any operative Agreement have been
indefeasibly paid in full in cash and the Commitments have been terminated and
(ii) the date on which no Lender holds any Preferred Stock, Warrants, Common
Stock or other debt or equity securities of any Borrower.
"IRS" means the United States Internal Revenue Service.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Lenders" means each of Prospect, Bug and any Person made a
Lender pursuant to Section 9.2 or any New Additional Lender pursuant to Section
9.3.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person,
whether absolute, accrued, contingent (or based upon a contingency), known or
unknown, fixed or otherwise, or whether due or to become due.
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
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"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loans" means the Initial Loans and the Additional Loans.
"Loan Period" means the period commencing on the Closing Date and
ending on the date on which all Loans and all other amounts owing under this
Agreement and any Operative Agreement have been indefeasibly paid in full in
cash and the Commitments have been terminated.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses, including without limitation interest,
reasonable expenses of investigation, court costs, reasonable fees and expense
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include without limitation, all fees and expenses, including without
limitation reasonable fees and expenses of attorneys, incurred in connection
with (i) the investigation or defenses of any third party or other claim with
respect to which any Lender may be indemnified pursuant to Section 10.4 hereof
(ii) asserting or disputing any rights under this Agreement against any party
hereto or otherwise). Also included within the meaning of Loss shall be the
diminution in value of any securities of any Borrower held by any Lender,
including without limitation, the Warrants and Shares of Common Stock issuable
upon exercise thereof.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"NASDAQ" has the meaning ascribed to it in Section 4.13.
"New Additional Lender" has the meaning ascribed to it in Section
9.3.
"New York City Advanced Technology Company" means any company
which satisfies the following criteria: (i) the chief executive office or other
senior-level managerial office is in New York City and (ii) (A) for a company
with fifty (50) or fewer full-time employees, at least seventy-five percent
(75%) of the company's full-time employees are persons required to pay New York
City income tax (resident or nonresident) or (B) for a company with more than
fifty (50) full-time employees, at least forty (40) of the company's full-time
employees, plus fifty percent (50%) of the company's full-time employees in
excess of fifty (50) employees, are persons required to pay New York City
income-tax (resident or nonresident).
"Note Purchase Agreement" means the Note Purchase Agreement dated
as of November 6, 1996 by and between the Company and Prospect, as such
agreement may be amended, modified or restated from time to time.
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"NYSI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of NYSI).
"Operative Agreements" means the Senior Notes, the Warrants and
the Registration Rights Agreement and any support or other agreements entered
into in connection with the transactions contemplated by this Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien (other than those described in clause (i)) arising in the
ordinary course of business by operation of Law with respect to a Liability that
is not yet due or delinquent, (iii) any minor imperfection of title or similar
Lien which individually or in the aggregate with other such Liens does not
impair the value or marketability of the property subject to such Lien or
interferes with the use of such property in the conduct of the business of any
Borrower or any Subsidiary of any Borrower and which do not secure obligations
for money borrowed and (iv) any Liens securing Indebtedness permitted under
clause (ii) of Section 7.1.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
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"Potential Event of Default" means a condition or event which,
after notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any applicable grace or
cure period.
"Preferred Stock" has the meaning ascribed to it in Section 3.3.
"Prospect" has the meaning ascribed to it in the forepart of this
Agreement.
"Public Warrants" means the Company's Redeemable Class A Warrants
and Redeemable Class B Warrants issued in connection with the Company's initial
public offering in February 1994.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement dated as of the Closing Date by and among the
Company and the Lenders, substantially in the form and to the effect of Exhibit
C hereto, as such agreement may be amended, modified or restated from time to
time.
"Regulation G, T. and X" means Regulation G, T. and X of the
Board of Governors of the Federal Reserve System as in effect from time to time.
"Release" has the meaning ascribed to it in Section 3.23(a).
"Required Lenders" means, at any time, Lenders whose principal
amount of and accrued and unpaid interest on outstanding Loans represent in
excess of fifty percent (50%) of all outstanding Loans at such time.
"Responsible Officer" means the Chief Executive Officer and Chief
Financial Officer of a Borrower.
"SBA" means the U.S. Small Business Administration.
"SBA Act" means the Small Business Act of 1953, as amended, and
the Small Business Act of 1958, as amended.
"SBA Regulations" means the rules and regulations of the SBA
promulgated under the SBA Act (13 CFR 107 et seq.; and 13 CFR 121 et seq.
collectively).
"SBIC" means a Small Business Investment Company licensed by the
SBA under Section 301(c) of the Small Business Investment Act of 1958, as
amended.
"SCI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SCI).
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"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning ascribed to it in Section 3.8.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Senior Note" means one or more of the Senior Notes of the
Borrowers issued pursuant to Section 2.4(a), in the form attached as Exhibit D
hereto.
"SLVI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SLVI.
"Stock Purchase Agreement" means the Stock Purchase Agreement
dated as of July 7, 1995 by and between the Company and Prospect, as such
agreement may be amended, modified or restated from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated
as of July 7, 1995 among the Company and its Stockholders, as such agreement may
be amended, modified or restated from time to time.
"Subsidiary" means any Person in which any Borrower, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests or the voting power.
"Subsidiary Guarantee Agreement" means the form of Subsidiary
Guarantee Agreement attached as Exhibit E hereto, as such agreement may be
amended, modified or restated from time to time.
"Subsidiary Guarantor" means each Subsidiary that delivers a
Subsidiary Guarantee Agreement as required pursuant to Section 6.10.
"SVRI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SVRI).
"Tax Losses" has the meaning ascribed to it in Section 3.11(i).
"Tax" or "Taxes" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
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"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Transfer Tax" has the meaning set forth in Section 6.3.
"Warrant" means, collectively, one or more warrants issued to the
Lenders in connection with this Agreement, in the form attached as Exhibit F
hereto and any warrants issued in exchange or replacement thereof.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of a Borrower or a Subsidiary. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
ARTICLE II
THE CREDITS
2.1 Commitments. Subject to the terms and conditions and relying
upon the representations and warranties of the Borrowers herein set forth, (a)
each of Prospect and Bug agrees, severally and not jointly, to make an Initial
Loan to the Borrowers on the Closing Date in an aggregate principal amount not
to exceed its Initial Loan Commitment and (b) each Additional Lender agrees,
severally and not jointly, to make Additional Loans to the Borrowers, at any
time and from time to time on or after the date hereof, and until the Additional
Loan Commitment Termination Date, in an aggregate principal amount not to exceed
such Additional Lender's Additional Loan Commitment. Amounts paid or prepaid in
respect of Loans may not be reborrowed.
2.2 Loans.
(a) Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Lenders ratably (subject to Section 9.3) in accordance with
their respective Initial Loan Commitments or Additional Loan Commitments, as
applicable; provided, however, that the failure of any Lender to make any Loan
shall not in itself relieve any other Lender of its obligation to lend hereunder
(it being understood, however, that no Lender shall be responsible for the
failure of any other Lender to make any Loan required to be made by such other
Lender). The Loans comprising any Borrowing shall be in an aggregate principal
amount that is (i) not
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less than $500,000 and, in each case, in an integral multiple of $100,000 or
(ii) equal to the remaining available balance of the applicable Commitment.
(b) Each Lender (other than Prospect) shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available or next day funds to such account in New York City as the
Borrowers may designate in the applicable Borrowing Certificate. The Initial
Loan to be made by Prospect hereunder shall be made by the surrender to the
Company for cancellation of the Demand Promissory Note (the "Demand Note") in
the initial aggregate principal amount of $1,500,000 issued by the Company to
Prospect on November 6, 1996 against payment in full in cash to Prospect of all
accrued and unpaid interest on the Demand Note and the issuance to Prospect of a
Senior Note in the aggregate principal amount of Prospect's Initial Loan
Commitment.
2.3 Borrowing Procedure. In order to request the Initial
Borrowing, the Borrowers shall hand deliver or telecopy to each of Prospect and
Bug a duly completed Borrowing Certificate not later than 11:00 a.m., New York
time, at least one (1) Business Day prior to the Closing Date. In order to
request an Additional Borrowing, the Borrowers shall notify each Additional
Lender by telephone of its intent to request an Additional Borrowing and shall
hand deliver or telecopy to each Additional Lender a duly completed Borrowing
Certificate not later than 11:00 a.m., New York City time, at least seven (7)
Business Days before a proposed Additional Borrowing. Each Borrowing Certificate
shall be irrevocable, shall be signed by or on behalf of the Borrowers by a
Responsible Officer and shall specify the following information: (i) the date of
the requested Borrowing (which shall be a Business Day); (ii) the number and
location of the account in New York City to which funds are to be disbursed;
(iii) the amount of the requested Borrowing; and (iv) the amount of each
Lender's portion of the requested Borrowing.
2.4 Issuance of Notes, Evidence of Debt, Repayment of Loans.
(a) Each Borrower shall execute and deliver to each of Prospect
and Bug on the date of the Initial Loan and to each Additional Lender on the
date of each Additional Loan, a Senior Note dated the date of the Initial Loan
or such Additional Loan, as applicable, in the aggregate principal amount of
such Loan and with other appropriate insertions.
(b) The Borrowers, jointly and severally, unconditionally promise
to pay to each Lender the then unpaid principal amount of each Loan of such
Lender, together with all accrued and unpaid interest thereon, on the Final
Maturity Date.
(c) Each Lender shall maintain an account or accounts evidencing
the Indebtedness of the Borrowers to such Lender resulting from each Loan made
by such Lender from time to time, including the amounts of principal and
interest payable and paid such Lender from time to time under this Agreement.
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(d) The entries made in the accounts maintained pursuant to
paragraph (c) above shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided, however, that the failure of any
Lender to maintain such accounts or any error therein shall not in any manner
affect the obligations of any Borrower to repay the Loans in accordance with
their terms.
2.5 Interest on Loans.
(a) Subject to the provisions of Section 2.6, the Loans shall
bear interest (computed on the basis of the actual number of days elapsed over a
year of 360 days) at a rate per annum of 14%.
(b) Interest on each Loan shall be payable on the Final Maturity
Date.
2.6 Default Interest. Upon the occurrence and during the
continuance of an Event of Default, interest will accrue on the unpaid principal
amount of all Loans, all unpaid interest on any Loan and any other amounts
payable hereunder, to the extent permitted by law, at a rate per annum of 21%.
2.7 Termination of Commitments. The Initial Loan Commitments
shall automatically terminate at 5:00 p.m., New York City time, on the Closing
Date. The Additional Loan Commitments shall automatically terminate at 5:00
p.m., New York City time, on the Additional Loan Commitment Termination Date.
2.8 Optional Prepayment.
(a) The Borrowers shall have the right at any time and from time
to time to prepay any Borrowing, in whole or in part, upon at least thirty (30)
days' prior notice to each Lender given by telephone (promptly confirmed by
written or telecopy notice) before 11:00 a.m., New York City time; provided,
however, that each partial prepayment shall be in an amount that is an integral
multiple of $50,000 and not less than $250,000.
(b) Optional prepayments of Loans shall be allocated pro rata
between the then outstanding Loans, and shall be accompanied by the cash payment
of all accrued and unpaid interest on the portion of the principal then being
prepaid plus, if any such prepayment is made prior to December 20, 2001, a
premium equal to the applicable percentage of the principal amount being
prepaid, determined as follows:
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20
During the 12-Month Period
Beginning December 20 Applicable Percentage
-------------------------- ---------------------
1996 5%
1997 4%
1998 3%
1999 2%
2000 1%
(c) Each notice of prepayment shall specify the prepayment date
and the principal amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrowers to prepay such Borrowing by
the amount stated therein on the date stated therein.
2.9 Pro Rata Treatment.
Each payment or prepayment of principal, interest or premium with
respect to any Loan shall be allocated pro rata among the Lenders in accordance
with their respective applicable outstanding Loans.
2.10 Sharing of Setoffs.
Each Lender agrees that if it shall, through the exercise of a
right of lien, setoff or counterclaim against any Borrower or any Subsidiary
Guarantor, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans as a result
of which the unpaid principal portion of its Loans shall be proportionately less
than the unpaid principal portion of the Loans of any other Lender, it shall be
deemed simultaneously to have purchased from such other Lender at face value,
and shall promptly pay to such other Lender the purchase price for, a
participation or interest in the Loans as the case may be, of such other Lender,
so that the aggregate unpaid principal amount of the Loans and participations or
interests in Loans held by each Lender shall be in the same proportion to the
aggregate unpaid principal amount of all Loans then outstanding as the principal
amount of its Loans prior to such exercise of lien, setoff or counterclaim or
other event was to the principal amount of all Loans outstanding prior to such
exercise of lien, setoff or counterclaim or other event; provided, however, that
if any such purchase or purchases or adjustments shall be made pursuant to this
Section 2.10 and the payment giving rise thereto shall thereafter be recovered,
such purchase or purchases or adjustments shall be rescinded to the extent of
such recovery and the purchase price or prices or adjustment restored without
interest. Each Borrower and each Subsidiary Guarantor expressly consents to the
foregoing arrangements and agrees that any Lender holding a participation or
interest in a Loan deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to
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any and all moneys owing by any Borrower to such Lender by reason thereof as
fully as if such Lender had made a Loan directly to such Borrower in the amount
of such participation.
2.11 Payments.
(a) The Borrowers (and, if applicable, any Subsidiary Guarantor)
shall make each payment (including principal of, interest on and prepayment
premium with respect to, any Borrowing, and any fees or expenses or other
amounts) hereunder and under any Operative Agreement not later than 11:00 a.m.,
New York City time, on the date when due in immediately available United States
Dollars, without setoff or counterclaim. Each such payment shall be made to the
Lenders at their respective offices set forth on Annex 2.11 hereto.
(b) Whenever any payment (including principal of, interest on and
premium with respect to, any Loan, and any fees or expenses or other amounts)
hereunder or under any Operative Agreement shall become due, or otherwise would
occur, on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest, prepayment premiums or fees or
expenses, if applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
Each Borrower hereby represents and warrants, jointly and
severally, to each Lender as follows:
3.1 Organization. Each Borrower is a corporation duly organized,
validly existing and in good standing under the Laws of the State of its
jurisdiction of organization. Section 3.1 of the Disclosure Schedule lists all
lines of business in which any Borrower is participating or engaged. Each
Borrower is duly qualified, licensed or admitted to do business and is in good
standing in those jurisdictions in which the ownership, use or leasing of its
Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted will not have a material adverse effect on
the Business or Condition of such Borrower. Each Borrower has, prior to the
execution of this Agreement, delivered to each Lender true and complete copies
of the certificate of incorporation and by-laws of such Borrower as in effect on
the date hereof.
3.2 Power and Authority. Each Borrower has the full corporate
power and authority to execute and deliver this Agreement and the Operative
Agreements and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including without
limitation to issue and sell (pursuant to this Agreement), on the Closing Date
and on the date of each Additional Borrowing, the Senior Notes and, in the case
of
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the Company, the Warrants and the Common Stock and any other securities issuable
upon exercise of any Warrant. The execution and delivery by each Borrower of
this Agreement and the Operative Agreements to which it is a party, and the
performance by such Borrower of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary action of the board of
directors of such Borrower, which action of the board of directors is the only
corporate action necessary to authorize the execution, delivery and performance
by such Borrower of this Agreement and the Operative Agreements. This Agreement
has been duly and validly executed and delivered by each Borrower and
constitutes, and upon the execution and delivery by such Borrower of the
Operative Agreements to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of such Borrower enforceable
against such Borrower in accordance with their respective terms.
3.3 Capital Stock. The authorized capital stock of the Company
consists of 19,000,000 shares of Common Stock, par value $.001 per share
("Common Stock"), 1,000,000 shares of Class A Common Stock, par value $.001 per
share ("Class A Common Stock") and 5,000,000 shares of Series A Convertible
Participating Preferred Stock, par value $.001 per share ("Preferred Stock"), of
which 1,495,000 shares, 960,000 shares and 1,090,909 shares, respectively, are
duly authorized, validly issued, outstanding, fully paid and nonassessable, free
and clear of all Liens, and have been issued in compliance with applicable
federal and state securities laws. Section 3.3 of the Disclosure Schedule lists
for each Borrower (other than the Company) the amount of its authorized and
outstanding capital stock, all of which are duly authorized, validly issued,
fully paid and non-assessable, owned, beneficially and of record, by the Company
free and clear of all Liens, and have been issued in compliance with applicable
federal and state securities laws. Except for this Agreement, as disclosed in
Section 3.3 of the Disclosure Schedule and as disclosed in Note I to the audited
financial statements for the Company's fiscal year ended June 30, 1996 included
in the SEC Documents, there are no outstanding Options with respect to any
Borrower. With respect to each Option, Section 3.3 of the Disclosure Schedule or
Note I to the audited financial statements for the Company's fiscal year ended
June 30, 1996 included in the SEC Documents sets forth the number of securities
issuable thereunder and the current exercise price therefor. There are no
preemptive rights or agreements, arrangements or understandings to issue
pre-emptive rights with respect to the issuance or sale of any Borrower's
capital stock. On the Closing Date and on the date of each Additional Borrowing,
the delivery of the Senior Notes and the Warrants to the Lenders, and on each
date of any issuance of Common Stock or other securities issuable upon exercise
of any Warrant, the issuance of such Common Stock or other securities, will
transfer to the Lenders good and valid title to the Senior Notes, the Warrants
and such Common Stock or other securities, free and clear of all Liens. Neither
the execution, delivery or performance by any Borrower of this Agreement nor the
issuance of the Senior Notes, the Warrants, or the Common Stock or other
securities issuable upon exercise of any Warrant will give rise to or result in
(with or without notice, lapse of time, or both) any antidilution adjustment,
acceleration of vesting or other change under or to any Option, except as
disclosed in Section 3.3 of the Disclosure Schedule.
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3.4 Subsidiaries. Except for other Borrowers and except as
disclosed in Section 3.4 of the Disclosure Schedule, no Borrower owns, nor has
any Borrower heretofore owned, directly or indirectly, any equity or similar
interest in, or any interest convertible into or exchangeable for any equity or
similar interest in, any Person.
3.5 No Conflicts. The execution and delivery by the Borrowers of
this Agreement do not, and the execution and delivery by the Borrowers of the
Operative Agreements to which any of them is a party, the performance by the
Borrowers of their respective obligations under this Agreement and such
Operative Agreements and the consummation of the transactions contemplated
hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
any Borrower or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.6 of the
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to any Borrower or any
Subsidiary or any of their respective Assets and Properties;
(c) except as disclosed in Section 3.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any Borrower or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, any Contract or
License to which any Borrower or any Subsidiary is a party or by which any of
their respective Assets and Properties is bound; or
(d) except as disclosed in Section 3.5 of the Disclosure
Schedule, result in the creation or imposition of any Lien upon any Borrower or
any Subsidiary or any of their respective Assets and Properties.
3.6 Governmental Approvals and Filings. Except as disclosed in
Section 3.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
any Borrower or any Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements to
which it is a party or the consummation of the transactions contemplated hereby
or thereby, including, without limitation, for purposes of maintaining the
listing of the Company's securities on the National Association of Securities
Dealers Automated Quotation System.
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3.7 Books and Records. The minute books and other similar records
of each Borrower as made available to each Lender prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of such Borrower.
3.8 SEC Documents. The Company has made available to each Lender
a true and complete copy of each report, schedule, form, statement and other
document filed by the Company with the SEC (as such documents have since the
time of their filing been amended, the "SEC Documents") which are all the
documents that the Company was required to file with the SEC through the date
hereof. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded by
a later-filed SEC Document, none of the SEC Documents currently contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and with the rules and
regulations of the SEC with respect thereto. Except as set forth in the notes
thereto, all such financial statements were prepared in accordance with GAAP
(except, in the case of the unaudited statements, for the omission of normal
year end adjustments and footnote disclosures) consistently applied throughout
the periods involved, are true and correct in all material respects, and fairly
present the consolidated financial condition, results of operations, changes in
stockholders' equity and cash flow of the Company and its consolidated
Subsidiaries as of the respective dates thereof and for the respective periods
covered thereby. Except for those Subsidiaries listed in Section 3.8 of the
Disclosure Schedule, the financial condition and results of operations of each
Subsidiary are, and for all periods referred to in this Section 3.8 have been,
consolidated with those of the Company.
3.9 Absence of Changes. Since June 30, 1996 there has not been
any material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change in the Business or Condition of any Borrower. None of
the other representations or warranties set forth in this Agreement shall be
deemed to limit the foregoing. In addition, without limiting the foregoing,
except as disclosed in Section 3.9 of the Disclosure Schedule or the SEC
Documents, there has not occurred since June 30, 1996:
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company or any
Subsidiary of the Company not wholly owned by the Company, or any direct
or indirect redemption,
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purchase or other acquisition by the Company or any Subsidiary of the
Company of any such capital stock of or any Option with respect to the
Company or any Subsidiary of the Company not wholly owned by the
Company;
(ii) any authorization, issuance, sale or other disposition by
any Borrower of any shares of capital stock of or Option with respect to
any Borrower, or any modification or amendment of any right of any
holder of any outstanding shares of capital stock of or Option with
respect to any Borrower;
(iii) other than pursuant to the terms of existing employment
contracts (x) any increase in the salary, wages or other compensation of
any officer, employee or consultant of any Borrower whose annual salary
is, or after giving effect to such change would be, $50,000.00 or more;
(y) any establishment or modification of (A) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan,
employment Contract or other employee compensation arrangement or (B)
salary ranges, increase guidelines or similar provisions in respect of
any Benefit Plan, employment Contract or other employee compensation
arrangement; or (z) any adoption, entering into, amendment, modification
or termination (partial or complete) of any Benefit Plan;
(iv) (A) incurrences by any Borrower or any Subsidiary of
Indebtedness in an aggregate principal amount for all Borrowers and
Subsidiaries taken together exceeding $50,000.00 (net of any amounts
discharged during such period), or (B) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of
a scheduled payment date with respect to, or waiver of any right of any
Borrower or any Subsidiary under, any Indebtedness of or owing to any
Borrower or any Subsidiary (in either case other than any Indebtedness
of any Borrower or any Subsidiary owing to any other Borrower or any
other wholly-owned Subsidiary);
(v) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or
personal property or equipment of any Borrower or any Subsidiary in an
aggregate amount for all Borrowers and Subsidiaries taken together
exceeding $50,000.00;
(vi) any write-off or write-down of or any determination to write
off or down any of the Assets and Properties of any Borrower or any
Subsidiary in an aggregate amount for all Borrowers and Subsidiaries
taken together exceeding $50,000.00;
(vii) any acquisition of any Assets and Properties of any Person
or disposition of, or incurrence of a Lien (other than a Permitted Lien)
on, any Assets and Properties of any Borrower or any Subsidiary;
(viii) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to any
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Contract with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed in the Disclosure Schedule pursuant to Section 3.18(a) or (B)
any material License held by any Borrower;
(ix) any capital expenditures or commitments for additions to
property, plant or equipment of any Borrower or any Subsidiary
constituting capital assets in an aggregate amount for all Borrowers and
Subsidiaries taken together exceeding $50,000.00;
(x) any commencement or termination by any Borrower or any
Subsidiary of any line of business;
(xi) any transaction by any Borrower or any Subsidiary with any
officer, director, Affiliate or Associate of such Borrower or such
Subsidiary, other than pursuant to any Contract in effect on June 30,
1996 or other than pursuant to any contract of employment;
(xii) any entering into of an agreement to do or engage in any of
the foregoing, including without limitation with respect to any Business
Combination not otherwise restricted by the foregoing paragraphs; or
(xiii) any change in the accounting methods or procedures of any
Borrower or any Subsidiary or any other transaction involving or
development affecting any Borrower or any Subsidiary outside the
ordinary course of business consistent with past practice.
3.10 No Undisclosed Liabilities. Except as reflected or reserved
against in the audited financial statements for the Company's fiscal year ended
June 30, 1996 included in the SEC Documents or in the notes thereto or as
disclosed in Section 3.10 of the Disclosure Schedule, there are no Liabilities
of, relating to or affecting any Borrower or any Subsidiary or any of their
respective Assets and Properties, other than Liabilities incurred in the
ordinary course of business consistent with past practice since June 30, 1996
and other Liabilities which in the aggregate are not material to the Business or
Condition of any Borrower or any Subsidiary and are not for tort or for breach
of contract.
3.11 Taxes. (a) Except as disclosed in Section 3.11 of the
Disclosure Schedule, all Tax Returns required to have been filed by or with
respect to any Borrower or any Subsidiary have been duly filed, and each such
Tax Return correctly and completely reflects, in all material respects, the
income, franchise or other Tax liability and all other information required to
be reported thereon. Except as disclosed in Section 3.11 of the Disclosure
Schedule, all Taxes owed by any Borrower or any Subsidiary have been paid.
(b) Except as disclosed in Section 3.11 of the Disclosure
Schedule, the provisions for Taxes due by each Borrower in the audited financial
statements for the Company's
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fiscal year ended June 30, 1996 included in the SEC Documents are sufficient for
all unpaid Taxes, being current Taxes not yet due and payable, whether or not
disputed, of each Borrower.
(c) Neither any Borrower nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by a jurisdiction in which any Borrower or any Subsidiary does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(d) Each Borrower and each Subsidiary has withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party.
(e) There is no dispute or claim concerning any Tax liability of
any Borrower or any Subsidiary either (i) claimed or raised by any taxing
authority or (ii) otherwise known to any Borrower or any Subsidiary. Section
3.11 of the Disclosure Schedule indicates those Tax Returns, if any, that have
been audited, and indicates those Returns that currently are the subject of
audit. Each Borrower has delivered to each Lender complete and correct copies of
all federal, state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or agreed to
by, such Borrower or any of its Subsidiaries since the incorporation of such
Borrower.
(f) Neither any Borrower nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Tax assessment or deficiency.
(g) Except as disclosed in Section 3.11 of the Disclosure
Schedule, neither any Borrower nor any Subsidiary has received any written
ruling related to Taxes or entered into any written and legally binding
agreement with a taxing authority relating to Taxes.
(h) Neither any Borrower nor any Subsidiary has liability for
Taxes of any Person other than itself or its Subsidiaries (i) under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
(i) Except as disclosed in Section 3.11 of the Disclosure
Schedule, there currently are no limitations on the utilization of the net
operating losses, built-in losses, capital losses, tax credits or other similar
items of any Borrower or any Subsidiary ("Tax Losses") under (i) Section 382 of
the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv)
Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A of the
Treasury regulations or (vi) Section 1.1502-21 and Section 1.1502-21A of the
Treasury regulations, in each case treating any proposed provision as if it were
currently in effect.
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(j) At June 30, 1996, the Company had aggregate Tax Losses for
federal income Tax purposes with expiration dates as disclosed in the SEC
Documents.
3.12 Legal Proceedings. Except as disclosed in Section 3.12 of
the Disclosure Schedule, there are no Actions or Proceedings pending or, to the
knowledge of any Borrower and the Subsidiaries, threatened against, relating to
or affecting any Borrower or any Subsidiary or any of their respective Assets
and Properties which (i) could reasonably be expected to result in the issuance
of an Order restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the Operative Agreements or otherwise result in a material diminution of
the benefits contemplated by this Agreement or any of the Operative Agreements
to any Lender, or (ii) if determined adversely to any Borrower or any
Subsidiary, could reasonably be expected to result in (x) any injunction or
other equitable relief against any Borrower or any Subsidiary that would
interfere in any material respect with its business or operations or (y) Losses
by any Borrower or any Subsidiary, individually, or in the aggregate with Losses
in respect of other such Actions or Proceedings, in an amount, for all Borrowers
and Subsidiaries taken together exceeding $50,000.00.
3.13 Compliance With Laws and Orders. Except as disclosed in
Section 3.13 of the Disclosure Schedule, neither any Borrower nor any Subsidiary
is or has at any time since its incorporation been, or has received any notice
that it is or has been, in violation of or in default under, in any material
respect, any Law or Order applicable to such Borrower or such Subsidiary or any
of its Assets and Properties.
3.14 Benefit Plans; ERISA. No Borrower nor any Subsidiary
maintains or contributes to any Defined Benefit Plans. Except as disclosed in
Section 3.14 of the Disclosure Schedule:
(a) each Benefit Plan and the administration thereof complies,
and has at all times complied, in all material respects with the requirements of
all applicable Law, including ERISA and the Code;
(b) no Benefit Plan is intended to qualify under section 401(a)
of the Code;
(c) no Borrower nor any Subsidiary is now, nor has it at any time
been, a member of a controlled group, as defined in Section 412(n)(6)(B) of the
Code, with any other enterprise;
(d) no Borrower nor any Subsidiary presently maintains or
contributes to, nor has it at any time maintained or contributed to, any
single-employer plan (within the meaning of section 3(41) of ERISA) or any
multiemployer plan (within the meaning of section 3(37) of ERISA) subject to
Title IV of ERISA, and no Borrower nor any Subsidiary is aware of any
circumstances pursuant to which any Borrower or any Subsidiary could have
liability to any party under Title IV of ERISA;
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(e) no Borrower nor any Subsidiary has incurred any liability for
any tax imposed under section 4971 through 4980B of the Code or civil liability
under section 502(i) or (l) of ERISA which could have a material adverse effect
on the Business or Condition of such Borrower or such Subsidiary;
(f) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part 6
of Subtitle B of Title I of ERISA or section 4980B of the Code;
(g) no suit, actions or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) have been brought
against or with respect to any Benefit Plan; and
(h) all contributions to Benefit Plans that were required to be
made under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with GAAP and each Borrower and each Subsidiary has performed all
material obligations required to be performed under all Benefit Plans.
3.15 Real Property. Neither any Borrower nor any Subsidiary owns
any real property. Subject to the terms of the respective leases under which any
Borrower or Subsidiary leases any parcel of real property, each Borrower and
each Subsidiary has a valid and subsisting leasehold estate in and the right to
quiet enjoyment of the real properties leased by it for the full term of the
lease thereof. Each such lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of a Borrower or a Subsidiary and of
each other Person that is a party thereto, and except as set forth in Section
3.15(c) of the Disclosure Schedule, there is no, and neither any Borrower nor
any Subsidiary has received notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. Neither any Borrower nor any Subsidiary owes any brokerage
commissions with respect to any such leased space. Except as disclosed in
Section 3.15 of the Disclosure Schedule, the improvements on the real property
leased by any Borrower or any Subsidiary are in good operating condition and in
a state of good maintenance and repair, ordinary wear and tear excepted, are
adequate and suitable for the purposes for which they are presently being used
and, to the knowledge of the Borrowers and the Subsidiaries, there are no
condemnation or appropriation proceedings pending or threatened against any of
such real property or the improvements thereon.
3.16 Tangible Personal Property. Each Borrower and each
Subsidiary is in possession of and has good and marketable title to, or has
valid leasehold interests in or valid rights under Contract to use, all tangible
personal property used in the conduct of its business, including all tangible
personal property reflected on the audited financial statements for the
Company's fiscal year ended June 30, 1996 included in the SEC Documents or in
the notes thereto and tangible personal property acquired since June 30, 1996
other than property disposed of since such date in the ordinary course of
business consistent with past practice. All such
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tangible personal property is free and clear of all Liens, other than Permitted
Liens and Liens disclosed in Section 3.16 of the Disclosure Schedule, and is
adequate and suitable for the conduct by each Borrower and each Subsidiary of
the business presently conducted by each of them, and is in good working order
and condition, ordinary wear and tear excepted, and its use complies in all
material respects with all applicable Laws.
3.17 Intellectual Property Rights. Except as disclosed in Section
3.17 of the Disclosure Schedule, (i) a Borrower or a Subsidiary, as the case may
be, has the right to use all Intellectual Property used in its business, (ii)
all registrations, on behalf of such Borrower or such Subsidiary with, and
applications to, Governmental or Regulatory Authorities in respect of such
Intellectual Property are valid and in full force and effect and are not subject
to the payment of any Taxes or maintenance fees or the taking of any other
actions by such Borrower or such Subsidiary, as the case may be, to maintain
their validity or effectiveness, (iii) there are no restrictions on the direct
or indirect transfer of any license, or any interest therein, held by such
Borrower or such Subsidiary, as the case may be, in respect of such Intellectual
Property, (iv) the Borrowers have delivered to each Lender documentation with
respect to any invention, process, design, computer program or other know-how or
trade secret included in such Intellectual Property, which documentation is
accurate in all material respects and reasonably sufficient in detail and
content to identify and explain such invention, process, design, computer
program or other know-how or trade secret, (v) the Borrowers and the
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their trade secrets, (vi) neither any Borrower nor
any Subsidiary is, or has received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property and (vii) neither any Borrower nor any
Subsidiary has any knowledge that such Intellectual Property is being infringed
by any other Person. Neither any Borrower nor any Subsidiary has received notice
that any Borrower or any Subsidiary is infringing any Intellectual Property of
any other Person, no claim is pending or, to the knowledge of the Borrowers and
the Subsidiaries, has been made to such effect and, to the knowledge of the
Borrowers and the Subsidiaries, neither any Borrower nor any Subsidiary is
infringing any Intellectual Property Rights of any other Person.
3.18 Contracts. (a) Each Contract material to the business of any
Borrower is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of each party thereto; and
except as disclosed in Section 3.18(a) of the Disclosure Schedule neither any
Borrower, any Subsidiary nor, to the knowledge of the Borrowers and the
Subsidiaries, any other party to such Contract is, or has received notice that
it is, in violation or breach of or default under any such Contract (or with
notice or lapse of time or both, would be in violation or breach of or default
under any such Contract).
(b) Except as disclosed in Section 3.18(b) of the Disclosure
Schedule, neither any Borrower nor any Subsidiary is a party to or bound by any
Contract that has been or could reasonably be expected to be, individually or in
the aggregate with any other such Contracts, materially adverse to the Business
or Condition of such Borrower or such Subsidiary.
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3.19 Licenses. Each Borrower and each Subsidiary owns or validly
holds all Licenses that are material to its business or operations, each of
which is valid, binding and in full force and effect. Neither any Borrower nor
any Subsidiary is, or has received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
such License.
3.20 Insurance. The insurance policies of each Borrower and each
Subsidiary, in light of the respective business, operations and Assets and
Properties of the Borrowers and the Subsidiaries, are in amounts and have
coverages that are reasonable and customary for Persons engaged in such
businesses and operations and having such Assets and Properties. Neither any
Borrower nor any Subsidiary has received notice that any insurer under any
policy referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.
3.21 Affiliate Transactions. (a) Except as disclosed in the SEC
Documents or in Section 3.21(a) of the Disclosure Schedule, (i) there are no
Liabilities between any Borrower or any Subsidiary, on the one hand, and any
officer, director, Affiliate or Associate of any Borrower or any Subsidiary or
any Associate of any such officer, director or Affiliate (other than any
Borrower or any Subsidiary), on the other, (ii) no such officer, director,
Affiliate or Associate provides or causes to be provided any assets, services or
facilities to any Borrower or any Subsidiary, (iii) neither any Borrower nor any
Subsidiary provides or causes to be provided any assets, services or facilities
to any such officer, director, Affiliate or Associate and (iv) neither any
Borrower nor any Subsidiary beneficially owns, directly or indirectly, any
Investment Assets of any such officer, director, Affiliate or Associate.
(b) Except as disclosed in Section 3.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 3.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
3.22 Employees; Labor Relations. Except as disclosed in Section
3.22 of the Disclosure Schedule, (i) no employee of any Borrower or any
Subsidiary is presently a member of a collective bargaining unit and, to the
knowledge of the Borrowers and the Subsidiaries, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
employees of any Borrower or any Subsidiary, and (ii) no unfair labor practice
complaint or sex or age discrimination claim has been brought against any
Borrower or any Subsidiary before the National Labor Relations Board or any
other Governmental or Regulatory Authority. There has been no work stoppage,
strike or other concerted action by employees of any Borrower or any Subsidiary.
Each Borrower and each Subsidiary has complied in all material respects with all
applicable Laws relating to the employment of labor, including without
limitation those relating to wages, hours and collective bargaining.
3.23 Environmental Matters. Each Borrower and each Subsidiary has
obtained all Licenses which are required in respect of its business, operations
or Assets and Properties
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under applicable Environmental Laws. Each Borrower and each Subsidiary, and its
operations and properties, is and has been in compliance in all material
respects with the terms and conditions of all such Licenses and with any
applicable Environmental Law. Except as set forth in Section 3.23 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
knowledge of the Borrowers and the Subsidiaries, threatened by any Governmental
or Regulatory Authority with respect to any alleged failure by any Borrower or
any Subsidiary to have any License under Environmental Laws required in
connection with the conduct of the business or operations of any Borrower or any
Subsidiary or with respect to any treatment, storage, recycling, transportation,
disposal or "release" as defined in 42 U.S.C. Section 9601(22) ("Release"), of
any Hazardous Material, and neither any Borrower nor any Subsidiary is aware of
any facts or circumstances which could reasonably be expected to form the basis
for any such Order, complaint, penalty or investigation.
(b) There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to their knowledge, threatened
against any Borrower or any Subsidiary pursuant to Environmental Laws which
could reasonably be expected to result in a fine, penalty or other obligation,
cost or expense.
(c) Neither any Borrower, any Subsidiary nor, to the knowledge of
the Borrowers and the Subsidiaries, any prior owner or lessee of any property
now or previously owned or leased by any Borrower or any Subsidiary has handled
any Hazardous Material on any property now or previously owned or leased by any
Borrower or any Subsidiary.
(d) Neither any Borrower nor any Subsidiary has transported or
arranged for the transportation of any Hazardous Material to any location which
is the subject of any Action or Proceeding that could lead to claims against any
Lender, any Borrower or any Subsidiary for clean-up costs, remedial work,
damages to natural resources or personal injury claims, including, but not
limited to, claims under CERCLA.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of any Borrower or any Subsidiary and,
to the knowledge of the Borrowers and the Subsidiaries, no property now or
previously owned or leased by any Borrower or any Subsidiary is listed or
proposed for listing on the National Priorities List promulgated pursuant to
CERCLA or on any similar state list of sites requiring investigation or
clean-up.
3.24 Suppliers. Section 3.24 of the Disclosure Schedule lists the
ten (10) largest suppliers of the Borrowers and the Subsidiaries, on the basis
of cost of goods or services purchased for the most recent fiscal year. Except
as disclosed in Section 3.24 of the Disclosure Schedule, no such supplier has
ceased or materially reduced its sales or provision of services to
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any Borrower or any Subsidiary since June 30, 1996, or to the knowledge of the
Borrowers and the Subsidiaries, has threatened to cease or materially reduce
such sales or provision of services after the date hereof. Except as disclosed
in Section 3.24 of the Disclosure Schedule, to the knowledge of the Borrowers
and the Subsidiaries, no such supplier is threatened with bankruptcy or
insolvency.
3.25 Inventory. All items included in the inventory of the
Borrowers and the Subsidiaries are the property of the Borrowers and the
Subsidiaries, free and clear of any Lien other than Permitted Liens, have not
been pledged as collateral, are not held by the Borrowers or any Subsidiary on
consignment from others in any material amount and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by Governmental or Regulatory Authorities.
3.26 Registration Rights. Except for the Registration Rights
Agreement, no Borrower and no Subsidiary has granted registration rights to any
holder of any of the securities of such Borrower or such Subsidiary.
3.27 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Borrowers directly
with the Lenders without the intervention of any Person on behalf of the
Borrowers in such manner as to give rise to any valid claim by any Person
against any Lender, any Borrower or any Subsidiary for a finder's fee, brokerage
commission or similar payment.
3.28 New York City Advanced Technology Company; Small Business
Matters. Each of the Borrowers as a group is a New York City Advanced Technology
Company. Each Borrower, together with its "affiliates" (as that term is defined
in 13 CFR, Section121.401), is a "Small Business" within the meaning of the SBA
Regulations, including 13 CFR Section121.103. The Standard Industrial
Classification Code of each Borrower is 7999. The information regarding each
Borrower and its affiliates set forth in the SBA Form 480, Form 652 and Section
A of Form 1031 is accurate and complete. Copies of such forms shall have been
completed by the Borrowers and delivered to Prospect at the Closing. No Borrower
nor any Subsidiary presently engages in any activities for which an SBIC is
prohibited from providing funds by SBA Regulations, including 13 CFR
Section107.804 and Section107.901. No Borrower has received any "Financing" (as
defined in the SBA Regulations) from any SBIC, other than Prospect.
3.29 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities. The offer and sale of the Senior Notes and the
Warrants (and any shares of Common Stock issuable upon exercise of the Warrants)
made pursuant to this Agreement is exempt from the registration requirements of
the Securities Act. No Borrower nor any Person authorized to act on its behalf
has, in connection with the offering of the Senior Notes or Warrants (and any
shares of Common Stock issuable upon exercise of the Warrants), engaged in (A)
any form of general solicitation or general advertising (as those terms are used
within the meaning of Rule 501(c) under the Securities Act, (B) any action
involving a public offering
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within the meaning of section 4(2) of the Securities Act, or (C) any action that
would require the registration under the Securities Act of the offering and sale
of the Senior Notes or Warrants (and any shares of Common Stock issuable upon
exercise of the Warrants) pursuant to this Agreement or that would violate
applicable state securities or "blue sky" laws. No Borrower has made, nor will
it make, directly or indirectly, any offer or sale of Senior Notes or Warrants
(or any shares of Common Stock) or of securities of the same or a similar class
as the Senior Notes or the Warrants (or Common Stock) if as a result the offer
and sale of the Senior Notes or the Warrants (or Common Stock) contemplated
hereby could fail to be entitled to exemption from the registration requirements
of the Securities Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
3.30 No Default. No event has occurred and is continuing which
constitutes a Potential Event of Default or an Event of Default.
3.31 Use of Proceeds; Margin Stock. The proceeds of the Loans
will be used solely for the purposes specified in Section 3.31 of the Disclosure
Schedule. None of such proceeds will be used to, or to reduce or retire any
Indebtedness which was originally incurred to, purchase or carry a Margin Stock,
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulations G, T or X. No Borrower has taken or
will take any action which might cause this Agreement or any of the Operative
Agreements to violate Regulations G, T or X, or any other regulations of the
Board of Governors of the Federal Reserve System or to violate Section 8 of the
Exchange Act or any rule or regulation thereunder, in each case as now in effect
or as the same may hereafter be in effect.
3.32 Investment Company Act. No Borrower is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.33 Public Utility Holding Company Act. No Borrower is a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
3.34 Financial Condition. No Borrower is entering into the
arrangements contemplated by this Agreement and the other Operative Agreements
with actual intent to hinder, delay or defraud either present or future
creditors. On and as of the Closing Date and on and as of the date of each
Additional Borrowing, after giving effect to all debts incurred or to be created
in connection herewith:
(a) The present fair salable value of the assets of each Borrower
and each Subsidiary (on a going concern basis) will exceed the probable
respective Liabilities of such Borrower and such Subsidiary;
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(b) No Borrower or Subsidiary has incurred, nor does it intend to
or believe that it will incur, Liabilities beyond its ability to pay such
Liabilities as such Liabilities mature (taking into account the timing and
amounts of cash to be received from any source, and of amounts to be payable on
or in respect of Liabilities), and the amount of cash available to such Borrower
or Subsidiary after taking into account all other anticipated uses of funds is
anticipated to be sufficient to pay all such amounts on or in respect of
Liabilities, when such amounts are required to be paid; and
(c) Each Borrower and each Subsidiary will have sufficient
capital with which to conduct its present and proposed business and the
respective property of such Borrower and Subsidiary does not constitute
unreasonably small capital with which to conduct its present or proposed
business.
3.35 Senior Credit Documents. The Borrowers have delivered to the
each Lender true and correct copies of the Senior Credit Documents as in effect
on the date hereof. The representations and warranties of the Borrowers
contained in the Senior Credit Agreement are true and correct in all material
respects. There exists no defaults with respect to the Senior Credit Agreement
nor any basis for the exercise by any party thereto of any rights of
acceleration, cancellation, or recession or any rights of offset.
3.36 Disclosure. To the knowledge of each Borrower and each
Subsidiary, all material facts regarding the Business or Condition of each
Borrower and each Subsidiary have been disclosed to the Lenders in or in
connection with this Agreement. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to any Lenders pursuant to any
provision of this Agreement (including without limitation the SEC Documents and
the financial statements contained therein), contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE IV
CONDITIONS TO INITIAL LOANS
The obligations of each Lender to make Initial Loans hereunder
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
the Lenders in their sole discretion):
4.1 Borrowing Certificate. Each Lender shall have received a
Borrowing Certificate as required by Section 2.3.
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4.2 Representations and Warranties. Each of the representations
and warranties made by any Borrower in this Agreement (other than those made as
of a specified date earlier than the Closing Date) shall be true and correct in
all material respects (if not qualified by materiality or material adverse
effect) and in all respects (if qualified by materiality or material adverse
effect) on and as of the Closing Date as though such representation or warranty
was made on and as of the Closing Date, and any representation or warranty made
as of a specified date earlier than the Closing Date shall also have been true
and correct in all material respects (if not qualified by materiality or
material adverse effect) and in all respects (if qualified by materiality or
material adverse effect) on and as of such earlier date.
4.3 Performance. Each Borrower shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by such Borrower at or
before the Closing.
4.4 Secretary's Certificate. Each Borrower shall have delivered
to each Lender a certificate, dated the Closing Date and executed by the
Secretary or any Assistant Secretary of such Borrower, substantially in the form
and to the effect of Exhibit G hereto.
4.5 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to any Lender, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action (i) which could reasonably be
expected to result in the issuance of any such Order or the enactment,
promulgation or deemed applicability to, any Lender, any Borrower, or the
transactions contemplated by this Agreement or any of the Operative Agreements
of any such Law; or (ii) wherein an unfavorable judgment, decree or Order would
prevent the carrying out of this Agreement or any of the transactions or events
contemplated hereby, declare unlawful the transactions or events contemplated by
this Agreement or present a risk of damages to any Lender.
4.6 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit any Lender or any Borrower to perform its
obligations under this Agreement and the Operative Agreements and to consummate
the transactions contemplated hereby and thereby (a) shall have been duly
obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to each Lender, (c) shall not impose any limitations or
restrictions on any Lender, (d) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (e) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
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4.7 Third Party Consents. The consents (or in lieu thereof
waivers) disclosed in Section 4.6 of the Disclosure Schedule, and all other
consents (or in lieu thereof waivers) to the performance by any Lender or any
Borrower of its obligations under this Agreement and the Operative Agreements or
to the consummation of the transactions contemplated hereby and thereby as are
required under any Contract to which any Lender or any Borrower is a party or by
which any of their respective Assets and Properties are bound and where the
failure to obtain any such consent (or in lieu thereof waiver) could reasonably
be expected, individually or in the aggregate with other such failures, to
materially adversely affect any Lender or the Business or Condition of any
Borrower or otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement and the Operative Agreements to any
Lender, (a) shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to each Lender, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect.
4.8 Opinion of Counsel. The Lenders shall have received the
opinion of Rosenman & Colin, counsel to the Borrowers, dated the Closing Date,
substantially in the form of Exhibit H hereto.
4.9 Good Standing Certificates. The Borrowers shall have
delivered to each Lender (a) copies of the certificates or articles of
incorporation (or other comparable corporate charter documents), including all
amendments thereto, of each Borrower certified by the Secretary of State or
other appropriate official of the jurisdiction of incorporation of such
Borrower, (b) certificates from the Secretary of State or other appropriate
official of the respective jurisdictions of incorporation to the effect that
each of the Borrowers is in good standing or subsisting in such jurisdiction,
listing all charter documents of each Borrower on file, and (c) a certificate
from the Secretary of State or other appropriate official in each jurisdiction
in which any Borrower is qualified or admitted to do business to the effect that
such Borrower is duly qualified or admitted and in good standing in such
jurisdiction.
4.10 UCC Filing Searches. The Borrowers shall have delivered to
the Lenders the results of Uniform Commercial Code filing searches made with
respect to each Borrower in the jurisdictions in which any Assets and Properties
of any Borrower are located, together with copies of financing statements
disclosed by such searches and such searches shall disclose no Liens on any such
Assets and Properties other than Permitted Liens.
4.11 Operative Agreements. Each Operative Agreement shall have
been duly executed and delivered by the respective parties thereto other than
the Lenders and shall be in full force and effect.
4.12 Issuance of Notes. Each Borrower shall have issued Senior
Notes to each Lender as required by Section 2.4(a).
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4.13 Issuance of Warrants; Listing of Common Stock. The Company
shall have issued Warrants to each Lender to purchase shares of Company Common
Stock at the rate of one (1) share of Company Common Stock for each $10.25 in
aggregate principal amount of Senior Notes issued by the Borrowers to such
Lender hereunder (subject to appropriate adjustment for stock splits, stock
dividends, recapitalizations, reorganizations and similar events). The Company
shall have received approval for the listing of all shares of Common Stock
issuable upon exercise of the maximum number of Warrants issuable hereunder on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ").
4.14 Interest on Demand Note. All accrued and unpaid interest on
the Demand Note shall have been paid in full in cash to Prospect as provided in
Section 2.2(b).
4.15 Certain Expenses. Prospect shall have received from the
Borrowers a nonrefundable $60,000 closing fee. The Lenders shall have received
from the Borrowers payment of all out-of-pocket expenses incurred by any Lender
in connection with this Agreement and the Note Purchase Agreement and the
transactions contemplated hereby and thereby. The Borrowers shall not be
obligated to pay the costs and expenses of Lenders' counsel in connection with
the negotiation, execution and delivery of this Agreement and the Note Purchase
Agreement in excess of $40,000 in the aggregate.
4.16 Potential Event of Default; Event of Default. No event shall
have occurred and be continuing or would result from the consummation of the
Borrowing contemplated by the Borrowing Certificate which would constitute a
Potential Event of Default or an Event of Default.
4.17 Additional Matters. All corporate and other proceedings to
be taken on the part of any Borrower in connection with the transactions
contemplated by this Agreement and the Operative Agreements and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Lender, and each Lender shall have received copies of all such documents, legal
opinions and other evidences in respect of any aspect or consequence of any
transaction contemplated hereby or thereby as it shall reasonably request.
ARTICLE V
CONDITIONS TO EACH ADDITIONAL LOAN
The obligations of the Additional Lenders to make Additional
Loans hereunder are subject to the fulfillment of each of the following
conditions on each respective Additional Borrowing Date (all or any of which may
be waived in whole or in part by the Additional Lenders in their sole
discretion):
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5.1 Borrowing Certificate. Each Additional Lender shall have
received a Borrowing Certificate as required by Section 2.3.
5.2 Representations and Warranties. Each of the representations
and warranties made by any Borrower in this Agreement (other than those made as
of a specified date earlier than the Additional Borrowing Date) shall be true
and correct in all material respects (if not qualified by materiality or
material adverse effect) and in all respects (if qualified by materiality or
material adverse effect) on and as of the Additional Borrowing Date as though
each representation or warranty was made on and as of such date, and any
representation or warranty made as of a specified date earlier than the
Additional Borrowing Date shall also have been true and correct in all material
respects (if not qualified by materiality or material adverse effect) and in all
respects (if qualified by materiality or material adverse effect) on and as of
such earlier date.
5.3 Issuance of Notes. Each Borrower shall have issued Senior
Notes to each Additional Lender as required by Section 2.4(a).
5.4 Issuance of Warrants; Listing of Common Stock. The Company
shall have issued Warrants to each Additional Lender to purchase shares of
Company Common Stock at the rate of one (1) share of Company Common Stock for
each $10.25 in aggregate principal amount of Senior Notes issued by the
Borrowers to such Additional Lender hereunder (subject to appropriate adjustment
for stock splits, stock dividends, recapitalizations, reorganizations and
similar events). The Common Stock required to be listed pursuant to Section 4.13
shall continue to be listed on the NASDAQ.
5.5 Compliance; No Default. Each Borrower and each Subsidiary
shall be in compliance with all the terms and provisions set forth herein and in
each other Operative Agreements on its part to be observed or performed, and at
the time of and immediately after the Additional Borrowing, no Potential Event
of Default or Event of Default shall have occurred and be continuing.
5.6 Effect of Each Additional Borrowing. Each Additional
Borrowing shall be deemed to constitute a representation and warranty by each
Borrower on the Additional Borrowing Date as to the matters specified in
Sections 5.2 and 5.5.
5.7 Additional Matters. All corporate and other proceedings to be
taken on the part of any Borrower and any Subsidiary in connection with the
transactions contemplated by this Agreement and the Operative Agreements and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Additional Lender and each Additional Lender shall have
received copies of all such documents, legal opinions and other evidences in
respect of any aspect or consequence of any transactions contemplated hereby or
thereby as it shall reasonably request.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees with each Lender that, with
respect to Sections 6.1 through 6.9 and Section 6.11, at all times during the
Investment Period and, with respect to Section 6.10, at all times during the
Loan Period, each Borrower will, and will cause each of its Subsidiaries to,
comply with each of the covenants and agreements contained in this Article VI.
6.1 Financial Statements and Reports; Inspection. As promptly as
practicable, and in no event later than the presentation of the following
materials to the Company's management or the filing thereof with the SEC, the
Company will deliver to the Purchaser true and complete copies of all reports
filed with the SEC and all such other financial statements, reports and analyses
as may be prepared or received by the Company, any Borrower or any Subsidiary
relating to the business or operations of the Company, any Borrower or any
Subsidiary or as any Lender may otherwise reasonably request. Each Borrower will
furnish Prospect with the following information certified by such Borrower's
chief executive officer, president, treasurer or chief financial officer within
120 days after and as at the close of each fiscal year of such Borrower: (i) a
statement that such Borrower and its "affiliates" (within the meaning ascribed
thereto in 13 CFR Section121.103) is eligible for Financing under the SBIC
Regulations and (ii) a statement verifying the use of the proceeds received
hereunder (including the intended use of any such unused proceeds as of the date
of such certification), until all of the proceeds received hereunder have been
used by the Borrowers. At the request of Prospect, each Borrower will permit
Prospect and/or the SBA and/or any Person designated by Prospect to inspect any
of the properties, corporate books and financial records of any Borrower and its
Subsidiaries, to discuss their respective affairs and finances with the
responsible officers of such Borrower and its Subsidiaries and to make extracts
from the copies of such books and records, all at such time as Prospect may
reasonably request, including, but not limited to, for purpose of verifying
information provided to Prospect and required by the SBA.
6.2 Corporate Existence; Compliance. Each Borrower shall cause to
be done all things necessary to preserve and keep in full force and effect the
corporate existence of such Borrower and each of its Subsidiaries and all
necessary approvals and licenses of any Governmental or Regulatory Authority and
comply with all Laws applicable to such Borrower or any such Subsidiary and
comply with all agreements to which any Borrower or any such Subsidiary is a
party, the violation of which could reasonably be expected to result in a
material adverse change in the Business or Condition of such Borrower or such
Subsidiary.
6.3 Payment of Liabilities. Each Borrower shall, and shall cause
each of its Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all Liabilities
(including Taxes) of such Borrower and such Subsidiaries, except where the
amount or validity thereof is currently being contested in good
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faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of such Borrower. The Borrowers
shall also pay any New York State Real Estate Transfer Tax, New York City Real
Property Transfer Tax and New York Stock Transfer Tax ("Transfer Tax") and any
similar Taxes imposed by any other state (and any penalties or interest relating
to such Transfer Taxes), which become payable in connection with the
transactions contemplated by this Agreement, the Note Purchase Agreement, any
Operative Agreement, the Senior Notes, the Demand Notes or the Warrants and
cooperate with the Lenders in the preparation, execution and filing of any
required returns with respect to any Transfer Tax and in the determination of
the portion of the consideration allocable to real property in New York State or
New York City (or in any other jurisdiction, if applicable).
6.4 Insurance; Maintenance of Properties. Each Borrower shall
keep adequately insured by duly licensed insurers all Assets and Properties of
such Borrower and each Subsidiary of such Borrower, and also keep such Borrower
or such Subsidiary, as the case may be, adequately insured at all times with
responsible insurance carriers against liability on account of damage to persons
or property and under all applicable workers' compensation laws. All such
insurance shall be in such amounts and with such coverage as is consistent with
coverage usually carried by corporations of a similar size engaged in the same
or similar business similarly situated and as is reasonably satisfactory to each
Lender. Each Borrower shall maintain and preserve all of the Assets and
Properties of such Borrower and any Subsidiary of such Borrower necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
6.5 Notice of Certain Events. Each Borrower shall promptly notify
each Lender in writing (i) of the commencement of any Action or Proceeding to
which such Borrower or any Subsidiary of such Borrower is a party where the
amount in controversy is in excess of $100,000, singularly or cumulatively, for
all claims arising from a single incident, to which such Borrower or any such
Subsidiary may be a party and (ii) of any Potential Event of Default or Event of
Default specifying the nature and extent thereof and the action (if any) which
is proposed to be taken with respect thereto.
6.6 Economic Impact Information. Promptly after the end of each
fiscal year (but in any event prior to January 31 of each year), each Borrower
shall deliver to Prospect a written assessment of the economic impact of
Prospect's investment in such Borrower, specifying the full-time equivalent jobs
created or retained in connection with the investment, the impact of such
investment on the businesses of such Borrower and its Subsidiaries in terms of
revenue and profits of such Borrower's and such Subsidiaries' business and on
taxes paid by such Borrower and its Subsidiaries and their respective employees.
6.7 New York City Advanced Technology Company. The Borrower shall
remain qualified as a New York City Advanced Technology Company; provided that a
Borrower shall not be required to comply with this Section 6.7 at any time (i)
after twenty-four (24) months from the date of the Closing if such Borrower
determines in its reasonable judgment that such
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continued compliance would materially adversely affect the Business or Condition
of such Borrower, and has given thirty (30) days prior written notice of such
determination to Prospect, (ii) after any class of securities of such Borrower
have become publicly traded securities, or (iii) that a written request by such
Borrower to Prospect to permit such Borrower to cease to comply with this
section shall have been approved by a majority of the members of Prospect's
Advisory Board.
6.8 Reservation of Shares; Exchange of Securities. The Company
will, for so long as any Lender has any rights to exercise any Warrant, keep
reserved the full number of shares of Common Stock issuable upon exercise of the
Warrants. In the event that Prospect determines, in its sole discretion, that a
Regulatory Problem may otherwise exist, Prospect shall have the right to require
the Company to take all steps as may be necessary to permit, as soon as
practicable, all or part of any voting securities held by Prospect to be
converted into non-voting securities of the Company, which securities, at the
option of Prospect, would be convertible into such voting securities originally
held by Prospect.
6.9 Venture Capital Operating Company Status. Each Lender shall
have the right to consult with and advise the management of each Borrower and to
receive all materials provided to members of the board of directors of each
Borrower so long as may be required to enable each Lender to qualify as a
"venture capital operating company" within the meaning of Section 2510.3-101 of
the plan asset regulations promulgated by the United States Department of Labor
("VCOC"). In addition, in the event that (i) any Lender is not entitled to
designate at least one (1) member for election to the board of directors of each
Borrower, or (ii) the United States Department of Labor through formal or
informal rules, regulations or interpretations provides, or it is otherwise
established through governmental or court action, that such representation does
not constitute the exercise of management rights of the kind necessary to enable
such Investor to continue to qualify as a VCOC, then the Borrowers and such
Lender shall in good faith negotiate provisions to enable such Lender to
exercise the minimum amount of such management rights in order to continue to
qualify as a VCOC.
6.10 Subsidiaries. Each Borrower shall cause each Subsidiary of
such Borrower not a Borrower hereunder, immediately upon becoming a Subsidiary,
to enter into a Subsidiary Guarantee as Guarantor thereunder. Each Borrower
shall, and shall cause each Subsidiary of such Borrower to, enter into an
Indemnity, Subrogation and Contribution Agreement will respect to each
Subsidiary Guarantor.
6.11 Further Assurances. Each Borrower shall, and shall cause
each Subsidiary to, take such further actions and otherwise assist and cooperate
with each Lender required to make any filings or obtain any approvals with or
from any Governmental or Regulatory Authority, including obtaining any approval
as may be necessary in order to effect the exercise of any Warrant.
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ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees with each Lender that, with
respect to Sections 7.14 and 7.15, at all times during the Investment Period
and, with respect to Sections 7.1 through 7.13, at all times during the Loan
Period, each Borrower will, and will cause each of its Subsidiaries to, comply
with each of the covenants and agreements contained in this Article VII.
7.1 Indebtedness. No Borrower shall, nor shall it permit any of
its Subsidiaries to, directly or indirectly create, incur, assume, extend the
maturity of, or otherwise become directly or indirectly liable with respect to,
any Indebtedness other than, without duplication:
(i) Indebtedness under this Agreement;
(ii) Indebtedness under the Independent Credit Agreement
in an aggregate amount not to exceed $4,000,000 at any one time outstanding;
(iii) Indebtedness constituting Capital Lease Obligations;
and
(iv) as an endorser of negotiable instruments for the
payment of money deposited to such Borrower's or such Subsidiary's bank account
for collection in the ordinary course of business.
7.2 Liens. Other than Permitted Liens, no Borrower shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume or permit to exist any Lien upon or with respect to any of its
Assets and Properties, whether now owned hereafter acquired or any income or
profits therefrom, or assign or otherwise convey any right to receive income to
secure any Indebtedness, except for Liens (other than Permitted Liens) securing
Indebtedness of up to an aggregate amount of $250,000 at any time outstanding
for all Borrowers and Subsidiaries taken together.
7.3 Merger, Consolidation, Sale of Assets. No Borrower will, nor
will it permit any of its Subsidiaries to, voluntarily liquidate or dissolve, or
consolidate or merge with or into any other Person, or permit any other Person
to consolidate with or merge with or into it or participate in a share exchange
with or sell, lease, transfer, contribute or otherwise dispose of any of its
Assets and Properties to any other Person (other than sales of inventory and
worn out and obsolete assets in the ordinary course of business as such business
is conducted in compliance with Section 7.14), except that, subject in any event
to compliance with the last paragraph of this Section:
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(a) any Borrower (other than the Company) may consolidate with or
merge into any other Borrower; any Subsidiary Guarantor may consolidate with or
merge into any other wholly-owned Subsidiary Guarantor if a wholly-owned
Subsidiary Guarantor shall be the continuing or surviving corporation; any
Subsidiary Guarantor may consolidate with or merge into any Borrower if such
Borrower shall be the continuing or surviving corporation; and
(b) any Borrower (other than the Company) may sell, lease,
transfer, contribute or otherwise dispose of its Assets and Properties in whole
or in part to any other Borrower; any Subsidiary Guarantor may sell, lease,
transfer, contribute or otherwise dispose of its Assets and Properties in whole
or in part to any other wholly-owned Subsidiary Guarantor or to any Borrower,
and may, following any such disposition in whole, liquidate and dissolve.
No liquidation, dissolution, consolidation, merger, sale, lease,
transfer, contribution or other disposition referred to in clauses (a) and (b)
of this Section 7.3 shall be permitted unless at the time of and immediately
after giving effect to any such transaction no Potential Event of Default or
Event of Default shall have occurred.
7.4 Lease Obligations. No Borrower shall, except for real
property leases requiring annual lease payments not exceeding $250,000 in the
aggregate, create or suffer to exist or permit any Subsidiary to create or
suffer to exist, any obligations for the payment of rental for any property
under leases or agreements to lease having a term of one year or more.
7.5 Loans and Investments. No Borrower shall, nor shall it permit
any of its Subsidiaries to, hold any Investment Assets, or make or keep
outstanding any advance or loans, except that (i) the Borrowers and the
Subsidiaries may invest in (i) direct obligations of, obligations fully
guaranteed by, and repurchase agreements fully secured by, the United States of
America or any agency thereof, (ii) certificates of deposit of any commercial
bank which is a member of the Federal Reserve System, (iii) money market
accounts or other similar low-risk, liquid investments approved by the board of
directors of such Borrower or such Subsidiary, as the case may be, and (iv) any
Borrower and any Subsidiary may make loans or advances to any wholly-owned
Subsidiary of such Borrower or such Subsidiary, provided, that such Subsidiary
is either a Borrower or a Subsidiary Guarantor at the time of such loan.
7.6 Dividends, Etc. Except for the contemplated repurchase by the
Company of up to 300,000 shares of Common Stock pursuant to the plan adopted by
the Company on March 21, 1996, no Borrower shall, nor shall it permit any of its
Subsidiaries to, declare or pay any cash or asset dividend on any of its shares
or make any other distribution or disposition of any Assets and Properties to
stockholders in respect of its shares (or otherwise), or make, or commit to
make, any payment on account of the purchase, redemption or other retirement of
any of its shares or warrants or options therefor, except that any wholly-owned
Subsidiary of any Borrower or any Subsidiary may declare and pay dividends to
such Borrower or such Subsidiary.
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7.7 Subsidiaries. No Borrower shall, nor shall it permit any of
its Subsidiaries to, unless prior written notice has been given to the Required
Lenders, organize or cause to exist any Subsidiary.
7.8 Sale and Leaseback. No Borrower shall, nor shall it permit
any of its Subsidiaries to, enter into any arrangement with any Person providing
for the leasing by such Borrower or such Subsidiary of real or personal property
which has been or is to be sold or transferred by such Borrower or such
Subsidiary to such Person.
7.9 Charter Documents; Directors. No Borrower shall, nor shall it
permit any of its Subsidiaries to, amend the certificate of incorporation or
by-laws of such Borrower or such Subsidiary as in effect on the date hereof (or,
in the case of any future Subsidiary, the date of incorporation of such
Subsidiary) or change the size or composition of such Borrower's or such
Subsidiary's board of directors, except as permitted pursuant to the Stock
Purchase Agreement and the certificate of incorporation of the Company.
7.10 Certain Limitations. No Borrower shall, nor shall it permit
any of its Subsidiaries to, directly or indirectly, create or otherwise cause or
allow to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary to (i) pay dividends or make any other
distributions on its capital stock or any other interest or participation in, or
measured by, its profits owned by, or pay any Indebtedness owed to, such
Borrower or such Subsidiary, (ii) make loans or advances to such Borrower or
such Subsidiary or (iii) transfer any of its Assets and Properties to such
Borrower or such Subsidiary. No Borrower shall, nor shall it permit any of its
Subsidiaries to, enter into any agreement with any Person other than (i) the
Lenders pursuant to this Agreement or any Operative Agreement and (ii) the
Senior Lender pursuant to the Senior Credit Documents, which prohibits or limits
the ability of such Borrower or such Subsidiary to create, incur, assume or
suffer to exist any Lien upon any of the Assets and Properties or revenues of
such Borrower or such Subsidiary, whether now owned or hereafter acquired.
7.11 Conflicting Agreements. No Borrower shall, nor shall it
permit any of its Subsidiaries to, enter into any agreements or arrangements
which by their terms or reasonably foreseeable effect restricts or adversely
affects such Borrower's or such Subsidiary's right and ability to meet its
obligations to any Lender hereunder or under any of the Operative Agreements to
which it is a party.
7.12 Use of Proceeds. No Borrower shall, directly or indirectly,
use any of the proceeds received from the Lenders hereunder to engage in any
activities with respect to which an SBIC is prohibited from providing funds by
SBA Regulations, including without limitation 13 CFR Section 107.720.
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7.13 Affiliate Transactions. Except for loans at market interest
rates made by any Borrower or any Subsidiary to officers and directors of such
Borrower or Subsidiary in an aggregate principal amount not to exceed $250,000
(unless a higher amount is approved in writing by the Required Lenders) for all
Borrowers and Subsidiaries taken together, no Borrower shall, nor shall it
permit any of its Subsidiaries to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate (other than any Lender), unless
such transaction is (i) otherwise permitted under this Agreement, (ii) in the
ordinary course of such Borrower's or such Subsidiary's business and (iii) upon
fair and reasonable terms no less favorable to such Borrower or such Subsidiary
than it would obtain in a comparable arm's length transaction with a Person that
is not an Affiliate.
7.14 Change in Nature of Business. No Borrower shall engage, nor
shall it permit any of its Subsidiaries to engage, in any business other than
the business currently conducted by such Borrower or such Subsidiary and
activities reasonably related thereto.
ARTICLE VIII
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing:
8.1 Failure To Make Payments When Due. Failure to pay any
installment of principal or interest of any Loan when due, whether at stated
maturity, by acceleration, by notice of prepayment, or otherwise; or
8.2 Default in Other Agreements. Any event or condition occurs
that results in any Indebtedness of any Borrower or any Subsidiary in excess of
$100,000 in the aggregate for all Borrowers and Subsidiaries taken together
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of such Indebtedness or any trustee or agent on its or their behalf to cause any
such Indebtedness to become due, or to require the prepayment repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; or
8.3 Breach of Certain Covenants and Agreements. Failure of any
Borrower to perform or comply with (i) any term or condition contained in
Section 6.1, Section 6.6 or Article VII, or (ii) any other term contained in
this Agreement or the Operative Agreements and, in the case of clause (ii), such
failure shall not have been remedied or waived within thirty (30) days after
receipt of written notice from the Required Lenders of such default; or
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8.4 Breach of Warranty. Any representation or warranty made (or
deemed made) by any Borrower or any Subsidiary in this Agreement or any
Operative Agreement or in any statement or certificate at any time given by such
Borrower or such Subsidiary pursuant hereto or thereto or in connection herewith
or therewith shall be false in any material respect (if not qualified by
materiality or material adverse effect) and in any respect (if qualified by
materiality or material adverse effect) on the date as of when made; or
8.5 Involuntary Bankruptcy; Appointment of Receiver, Etc. (a) A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of any Borrower or any of its Subsidiaries in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted and remain unstayed under any applicable federal or
state law; or (b) an involuntary case is commenced against any Borrower or any
of its Subsidiaries under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over any
Borrower or any of its Subsidiaries or over all or a substantial part of any of
their respective Assets and Properties, shall have been entered; or an interim
receiver, trustee or other custodian of any Borrower or any of its Subsidiaries
for all or a substantial part of their respective Assets and Properties is
involuntarily appointed; or a warrant of attachment, execution or similar
process is issued against any substantial part of the Assets and Properties of
any Borrower or any of its Subsidiaries, and the continuance of any such events
in this clause (b) for sixty (60) days unless dismissed, bonded, stayed, vacated
or discharged; or
8.6 Voluntary Bankruptcy; Appointment of Receiver, Etc. Any
Borrower or any of its Subsidiaries shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion of
an involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or making possession by a receiver, trustee or other
custodian for all or a possession by a receiver, trustee or other custodian for
all or a substantial part of its Assets and Properties; the making by any
Borrower or any of its Subsidiaries of any assignment for the benefit of
creditors the admission by any Borrower or any of its Subsidiaries in writing of
its inability to pay its debts as such debts become due; or the board of
directors of any Borrower or any of its Subsidiaries (or any committee thereof)
adopts any resolution or otherwise authorizes action to approve any of the
foregoing; or
8.7 Judgments and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving in any individual case or in
the aggregate at any time an amount in excess of $100,000 (not covered by
insurance) shall be entered or filed against any Borrower or any of its
Subsidiaries or any of their respective Assets and Properties and shall remain
undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days
or in any event later than five (5) days prior to the date of any proposed sale
thereunder; or
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8.8 Other Agreements. Any material provision of this Agreement or
any other Operative Agreement shall cease to be a valid and binding obligation
against each Borrower and each Subsidiary, as the case may be, except in
accordance with its terms or any Borrower or any Subsidiary, as the case may be,
shall so state in writing;
8.9 Change of Control. A Change of Control shall occur; or
8.10 Public Warrant Redemption or Exercise. (a) An aggregate of
1% or more of the Public Warrants are redeemed by the Company in one or more
transactions; or (b) fifty percent (50%) or more of the total number of Public
Warrants are exercised by the holders thereof in one or more transactions.
THEN, (i) upon the occurrence of any Event of Default described
in the foregoing Section 8.5 or 8.6, the unpaid principal amount of and accrued
interest on each Loan shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by each Borrower and each Subsidiary, and the
obligations of the Lenders hereunder shall thereupon terminate and (ii) upon the
occurrence of any other Event of Default, the Required Lenders may, by written
notice to the Borrowers, declare the Loans to be, and the same shall forthwith
become, due and payable, as specified below, together with accrued interest
thereon, and if such Event of Default results from a failure to comply with
Section 2.8, together with the prepayment premium applicable thereto, if any,
and the obligations of the Lenders hereunder shall thereupon terminate.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
If to Prospect, to:
Prospect Street NYC Discovery Fund, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
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with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxx Xxxxx, Esq.
If to Bug, to
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
c/o The Brooklyn Union Gas Company
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxx
If to the Borrowers, to:
Skyline Multimedia Entertainment, Inc.
Empire State Building
000 Xxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxx
with a copy to:
Rosenman & Colin
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, (iii) if delivered by
mail in the manner described above to the address as provided in this Section,
be deemed given on the earlier of the third Business Day following mailing or
upon receipt and (iv) if delivered by overnight courier to the address as
provided in this Section, be deemed given
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on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.
9.2 Participations in Loans and Senior Notes.
(a) Each Lender shall have the right at any time, to sell,
assign, transfer or negotiate all or any part of any Loan or Senior Note to one
or more Persons. In the case of any sale, assignment, transfer or negotiation of
all or part of the Loan or Senior Note authorized under this Section 9.2(a), the
assignee, transferee or recipient shall have, to the extent of such sale,
assignment, transfer or negotiation, the same rights, benefits and obligations
as it would if it were a Lender with respect to such Loan or Senior Note,
including, without limitation, the right to approve or disapprove actions which,
in accordance with the terms hereof, require the approval of a Lender.
(b) Each Lender may grant participations in all or any part of
any Loan or Senior Note to one or more Persons.
(c) In connection with any sales, assignments or transfers of any
Loan or Senior Note referred to in Section 9.2(a), the applicable Lender shall
give notice to the Borrowers of such sale, assignment, or transfer and the
identity of the purchasers, assignees and transferees, as the case may be, and
obtain agreements from the purchasers, assignees and transferees, as the case
may be, that all information given to such parties will be held in strict
confidence subject to customary exceptions.
(d) In the event of an assignment by any Lender, or any
subsequent assignment, the term "Lender" herein shall be deemed to refer to each
such Lender.
9.3 New Additional Lender. Upon the consent of the Required
Lenders, one (1) additional Person (the "New Additional Lender") shall be made a
party to this Agreement by executing a counterpart of this Agreement. The New
Additional Lender shall have an Additional Loan Commitment of up to $1,100,000
as shall be set forth on the counterpart of this Agreement executed by such
Additional Lender. In the event that the New Additional Lender is made a party
to this Agreement pursuant to this Section 9.3, Bug shall not, from and after
such time, make any Additional Loan pursuant to any Borrowing Request until such
time as the unused Additional Commitment of such New Additional Lender bears the
same relationship to its Commitment as the unused Additional Commitment of Bug
bears to Bug's Commitment. In the event that the New Additional Lender is made a
party to this Agreement, the terms "Additional Lender" and "Lender" herein shall
be deemed to refer to such New Additional Lender.
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9.4 Indemnity. In addition to the payment of expenses pursuant to
Section 4.15 and Section 9.6, whether or not the transactions contemplated
hereby shall be consummated, each of the Borrowers and each of their respective
Subsidiaries (as "Indemnitor") agrees, jointly and severally, to indemnify each
Lender, each holder of any Loan or, Senior Note and any Warrant and any
stockholder, general partner, limited partner, officer, director, agent and
Affiliate of any such Lender or holder (collectively called the "Indemnitees"),
in respect of, and hold them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, in any manner arising out of or relating to this Agreement, the
Operative Agreements, the Lenders' agreements to make the Loans or the use or
intended use of the proceeds of any of the Loans hereunder (the "Indemnified
Liabilities"); provided, that the Indemnitor shall not have any obligation to an
Indemnitee hereunder with respect to an Indemnified Liability to the extent that
such Indemnified Liability arises solely from the gross negligence or willful
misconduct of that Indemnitee. Each Indemnitee shall give the Indemnitor prompt
written notice of any claim that might give rise to Indemnified Liabilities
setting forth a description of those elements of such claim of which such
Indemnitee has knowledge; provided, that any failure to give such notice shall
not affect the obligations of the Indemnitor unless (and then solely to the
extent) the ability of the Indemnitor to provide such indemnification is
prejudiced thereby. The Indemnitor shall have the right at any time during which
such claim is pending to select counsel to defend and control the defense
thereof and settle any claims for which it is responsible for indemnification
hereunder (provided that no Indemnitor will settle any such claim without (i)
the appropriate Indemnitee's prior written consent which consent shall not be
unreasonably withheld or (ii) obtaining an unconditional release of the
appropriate Indemnitee from all claims arising out of or in any way relating to
the circumstances involving such claim) so long as in any such event, the
Indemnitor shall have stated in a writing delivered to the Indemnitee that, as
between the Indemnitor and the Indemnitee, the Indemnitor is responsible to the
Indemnitee with respect to such claim to the extent and subject to the
limitations set forth herein; provided, however, that the Indemnitor shall not
be entitled to control the defense of any claim in the event that in the
reasonable opinion of counsel for the Indemnitee there are one or more defenses
available to the Indemnitee which are not available to the Indemnitor; provided,
further, that with respect to any claim as to which the Indemnitee is
controlling the defense, the Indemnitor will not be liable to any Indemnitee for
any settlement of any claim pursuant to this Section 9.4 that is effected
without its prior written consent. To the extent that the undertaking to
indemnify and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any Law or public policy, the Company
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable Law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitee for any of them.
9.5 Entire Agreement. This Agreement, the Operative Agreements
and Article VIII of the Note Purchase Agreement supersede all prior discussions
and agreements between the parties with respect to the subject matter hereof and
thereof and contain the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
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9.6 Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Borrowers shall pay all out-of-pocket expenses
incurred by any Lender in connection with this Agreement and the Note Purchase
Agreement and the transactions contemplated hereby and thereby; provided,
however, that the Borrowers shall not be obligated to pay the costs and expenses
of Lenders' counsel in connection with the negotiation, execution and delivery
of this Agreement and the Note Purchase Agreement in excess of $40,000. Except
as otherwise expressly provided in this Agreement (including without limitation
as provided in this Section 9.6 and in Section 4.15), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses.
9.7 Consideration for Warrants. The Lenders and the Borrowers
acknowledge and agree that, for all purposes (including tax and accounting), the
fair market value of the Warrants to be issued hereunder is $.50 for each
Warrant Share (as defined in the Warrants) issuable thereunder (subject to
adjustment for stock splits, stock dividends, recapitalization, reorganizations
and similar events which occur on or after the Closing Date). Each Lender and
each Borrower shall file their respective Tax Returns in a manner which is
consistent with such valuation and shall not take any contrary position with any
taxing authority.
9.8 Further Assurances; Post-Closing Cooperation. At any time or
from time to time after the Closing, each Borrower shall, and shall cause each
of its Subsidiaries to, execute and deliver to any Lender such other documents
and instruments, provide such materials and information and take such other
actions as such Lender may reasonably request more effectively to vest title to
the Senior Notes and the Warrants in such Lender and otherwise to cause such
Borrower or such Subsidiaries to fulfill their respective obligations under this
Agreement and the Operative Agreements to which it is a party.
9.9 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of any Senior Note,
or consent to any departure by any Borrower therefrom, shall in any event be
effective without the written concurrence of the Required Lenders and each
Borrower and an opinion of counsel of the Borrowers to the effect that such
amendment, modification, termination, or waiver does not violate the Senior
Credit Agreement; provided, that no amendment, modification, waiver or consent
shall, unless in writing and signed by each Lender, do any of the following: (a)
reduce the principal of, or interest on any Loan or any fees, premiums or other
amounts payable hereunder; (b) postpone any date fixed for any payment of
principal of, or premium or interest on, any Loan or any fees or other amounts
payable hereunder; or (c) amend this Section 9.8; provided, further, however,
that no Lender shall be subject to any additional or increased obligations
without the written consent of such Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on any Borrower in any case shall entitle
such Borrower or any other Borrower to any further notice or demand in similar
or other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 9.8 shall be binding upon each
holder of any Loan and any Senior Note at the time outstanding and each future
holder of any Loan and any Senior Note.
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9.10 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
9.11 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Section 9.4.
9.12 No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any Borrower
without the prior written consent of each Lender and any attempt to do so will
be void, except for assignments and transfers by operation of Law. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.
9.13 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.14 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.15 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
9.16 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY BORROWER WITH RESPECT TO THIS AGREEMENT, ANY
OPERATIVE AGREEMENT, ANY LOAN, ANY SENIOR NOTE OR
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ANY WARRANT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT EACH BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY LOAN, ANY SENIOR NOTE AND ANY
WARRANT. EACH BORROWER DESIGNATES AND APPOINTS THE CORPORATION TRUST COMPANY AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY ANY OF THEM IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY EACH OF THEM TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
EACH BORROWER AT ITS ADDRESS PROVIDED IN SECTION 9.1, EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY
BORROWER REFUSES TO ACCEPT SERVICE, SUCH BORROWER HEREBY AGREES THAT SERVICE
UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION.
9.17 Waiver of Jury Trial. EACH BORROWER HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, ANY
OPERATIVE AGREEMENT, ANY LOAN, ANY SENIOR NOTE OR ANY WARRANT OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF; AND EACH BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO INTERPOSE
ANY SET-OFF OR COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH
LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SET-OFF, COUNTERCLAIM OR
CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO ASSERT ANY SUCH SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE THE PROSECUTION OF OR
RECOVERY UPON SAME. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, NO CLAIM MAY BE MADE BY ANY BORROWER AGAINST ANY LENDER FOR ANY LOST
PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL
FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO
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THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT, OR ANY
ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; EACH BORROWER HEREBY
WAIVES, RELEASES AND AGREES NOT TO XXX UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES.
EACH BORROWER AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND ACKNOWLEDGES THAT THE LENDERS WOULD NOT EXTEND TO ANY BORROWER ANY
LOAN HEREUNDER IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
9.18 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:_________________________________________
Name:
Title:
NEW YORK SKYLINE, INC.
By:_________________________________________
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:_________________________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:_________________________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:_________________________________________
Name:
Title:
57
SKYLINE LAS VEGAS, INC.
By:_________________________________________
Name:
Title:
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund, Inc., its
General Partner
By:_________________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice President
BANK OF NEW YORK, as Trustee for the
Employees Retirement Plan of the Brooklyn
Union Gas Company
By:__________________________________
Name:
Title:
58
ANNEX 2.1
Lender Initial Loan Commitment Additional Loan Commitment
------ ----------------------- --------------------------
Prospect Street NYC (1)$1,500,000
Discovery Fund, L.P. None
Bank of New York, as Trustee
for the Employees Retirement
Plan of the Brooklyn Union
Gas Company $1,000,000 $500,000
------------
(1) Loan to be made by surrender of $1,500,000 Demand Promissory Note as
provided in Section 2.2(b).
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ANNEX 2.12
Lenders' Offices
Prospect Street NYC Discovery Fund, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
c/o The Brooklyn Union Gas Company
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
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