EXECUTION COPY
NOTE PURCHASE AGREEMENT
dated as of November 6, 1996
by and between
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
and
PROSPECT STREET NYC DISCOVERY FUND, L.P.
TABLE OF CONTENTS
ARTICLE I
SALE OF NOTE; CLOSING
1.1 Purchase and Sale ......................................... 1
1.2 Purchase Price ............................................ 1
1.3 Closing ................................................... 1
1.4 Exchange of Notes ......................................... 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization of the Company ............................... 2
2.2 Power and Authority ....................................... 2
2.3 Capital Stock ............................................. 3
2.4 Subsidiaries .............................................. 3
2.5 No Conflicts .............................................. 4
2.6 Governmental Approvals and Filings ........................ 4
2.7 SEC Documents ............................................. 4
2.8 Absence of Changes ........................................ 5
2.9 No Undisclosed Liabilities ................................ 7
2.10 Taxes ..................................................... 7
2.11 Legal Proceedings ......................................... 8
2.12 Brokers ................................................... 9
2.13 New York City Advanced Technology Company;
Small Business Matters .................................... 9
2.14 Exemption from Registration; Restrictions
on Offer and Sale of Same or
Similar Securities ........................................ 9
2.15 Disclosure ................................................ 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization .............................................. 10
3.2 Power and Authority ....................................... 10
3.3 Governmental Approvals and Fi1ings ........................ 10
3.4 Legal Proceedings ......................................... 10
3.5 Purchase for Investment ................................... 11
3.6 Brokers ................................................... 11
ARTICLE IV
COVENANTS OF THE COMPANY
4.1 SBA Matters; Use of Proceeds .............................. 11
4.2 Certain Expenses .......................................... 12
4.3 Economic Impact Information ............................... 12
4.4 Financial Statements and Reports; Inspection .............. 12
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ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
5.1 Representations and Warranties ............................ 13
5.2 Performance ............................................... 13
5.3 Officers' Certificates .................................... 13
5.4 Orders and Laws ........................................... 13
5.5 Regulatory Consents and Approvals ......................... 14
5.6 Third Party Consents ...................................... 14
5.7 Opinion of Counsel ........................................ 14
5.8 Good Standing Certificates ................................ 14
5.9 Operative Agreements ...................................... 15
5.10 Guarantee ................................................. 15
5.11 Proceedings ............................................... 15
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
6.1 Representations and Warranties ............................ 15
6.2 Performance ............................................... 15
6.3 Officers' Certificates .................................... 15
6.4 Orders and Laws ........................................... 16
6.5 Regulatory Consents and Approvals ......................... 16
6.6 Third Party Consents ...................................... 16
6.7 Operative Agreements ...................................... 16
6.8 Proceedings ............................................... 16
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.1 Survival of Representations, Warranties,
Covenants and Agreements................................... 16
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification ........................................... 17
8.2 Method of Asserting Claims ................................ 18
ARTICLE IX
DEFINITIONS
9.1 Definitions ............................................... 19
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ARTICLE X
MISCELLANEOUS
10.1 Notices ................................................... 26
10.2 Entire Agreement .......................................... 27
10.3 Expenses .................................................. 27
10.4 Public Announcements ...................................... 27
10.5 Confidentiality ........................................... 28
10.6 Further Assurances; Post-Closing Cooperation .............. 28
10.7 Waiver .................................................... 28
10.8 Amendment ................................................. 29
10.9 No Third Party Beneficiary ................................ 29
10.10 No Assignment; Binding Effect ............................. 29
10.11 Headings .................................................. 29
10.12 Invalid Provisions ........................................ 29
10.14 Counterparts .............................................. 30
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NOTE PURCHASE AGREEMENT, dated as of November 6, 1996, between PROSPECT
STREET NYC DISCOVERY FUND, L.P., a Delaware limited partnership ("Purchaser"),
and SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York corporation (the
"Company").
WHEREAS, the Company wishes to obtain financing and Purchaser desires to
provide such financing to the Company; and
WHEREAS, capitalized terms not otherwise defined herein have the meanings
set forth in Section 9.1,
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
SALE OF NOTE; CLOSING
1.1 Purchase and Sale. The Company agrees to sell to Purchaser, and
Purchaser agrees to purchase from the Company, a Demand Promissory Note in the
form attached as Exhibit A hereto (the "Note") in the initial principal amount
of $1,500,000 at the Closing on the terms and subject to the conditions set
forth in this Agreement.
1.2 Purchase Price. The aggregate purchase price for the Note being
purchased hereunder is $1,500,000 (the "Purchase Price"), payable in cash in the
manner provided in Section 1.3.
1.3 Closing. The Closing will take place contemporaneously with the
execution and delivery hereof at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as Purchaser and
the Company mutually agree, at 10:00 A.M. local time, on the Closing Date. At
the Closing, Purchaser will pay the Purchase Price by wire transfer of
immediately available funds to such account as the Company may reasonably direct
by written notice delivered to Purchaser by the Company at least two (2)
Business Days before the Closing Date. Simultaneously, the Company will issue to
Purchaser the Note, registered in the name of Purchaser or any designee thereof,
free and clear of all Liens. At the Closing, there shall also be delivered to
the Company and Purchaser the opinions, certificates and other Contracts,
documents and instruments to be delivered under Articles V and VI.
1.4 Exchange of Notes. In the event that the Company and Purchaser
consummate, within sixty (60) days of the Closing hereunder, the Subordinated
Note Commitment financing referred to in Section 1 of the letter of intent,
dated October 23, 1996, between the Company and Purchaser, the principal amount
of the Note then outstanding will be exchanged for the same principal amount of
Senior Subordinated Notes and Warrants contemplated by such letter of intent,
all as may be provided in any definitive documentation entered into by Purchaser
and the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
New York. Section 2.1 of the Disclosure Schedule lists all lines of business in
which the Company is participating or engaged. The Company 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 the Company. The Company has prior to the execution of this
Agreement delivered to Purchaser true and complete copies of the certificate of
incorporation and by-laws of the Company as in effect on the date hereof.
2.2 Power and Authority. The Company 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) the Note. The execution and delivery
by the Company of this Agreement and the Operative Agreements to which it is a
party, and the performance by the Company of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary action of the
Board of Directors of the Company, which action of the Board of Directors is the
only corporate action necessary to authorize the execution, delivery and
performance by the Company of this Agreement and the Operative Agreements. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes, and upon the execution and delivery by the Company of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
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2.3 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 Preferred Stock, par value $.00l 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, and have been issued in compliance
with applicable federal and state securities laws. Except for this Agreement, as
disclosed in Section 2.3 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 the Company. With respect to each Option, Section 2.3 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 the Company's capital stock. On the Closing Date, the delivery of the Note to
the Purchaser will transfer to Purchaser good and valid title to the Note, free
and clear of all Liens. Neither the execution, delivery or performance by the
Company of this Agreement nor the issuance of the Note, 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 2.3 of the Disclosure Schedule.
2.4 Subsidiaries. Section 2.4 of the Disclosure Schedule lists the name
of each Subsidiary and all lines of business in which each Subsidiary is
participating or engaged. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
incorporation and has full corporate power and authority to conduct its business
as and to the extent now conducted and to own, use and lease its Assets and
Properties. Except as listed in Section 2.4 of the Disclosure Schedule, each
Subsidiary 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 such
Subsidiary's 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 the Company. Section 2.4 of the
Disclosure Schedule lists for each Subsidiary the amount of its authorized and
outstanding capital stock. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned, beneficially and of record, by the Company or
Subsidiaries wholly owned by the Company free and clear of all Liens. Except as
disclosed in Section 2.4 of the Disclosure Schedule, there are no outstanding
Options with respect to any Subsidiary. The name of each director and officer of
each Subsidiary on the date hereof, and the position with such Subsidiary held
by each, are listed in Section 2.4 of the Disclosure Schedule. The Company has
prior to the execution of this Agreement delivered to Purchaser true and
complete copies of the certificate or articles of incorporation and by-laws (or
other comparable corporate charter documents) of each of the Subsidiaries as in
effect on the date hereof. Except for the Subsidiaries and as listed in Section
2.4 of the Disclosure Schedule, the Company does not own,
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and has not 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.
2.5 No Conflicts. The execution and delivery by the Company of this
Agreement do not, and the execution and delivery by the Company of the Operative
Agreements to which it is a party, the performance by the Company of its
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 the Company or any
Subsidiary;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.6 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 the Company or any Subsidiary or any
of their respective Assets and Properties;
(c) except as disclosed in Section 2.5 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 the
Company 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 the
Company 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 2.5 of the Disclosure Schedule, result
in creation or imposition of any Lien upon the Company or any Subsidiary or any
of their respective Assets and Properties.
2.6 Governmental Approvals and Filings. Except as disclosed in Section 2.6
of the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of the Company 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.
2.7 SEC Documents. The Company has made available to Purchaser a true and
complete copy of each report, schedule, form, statement and other document filed
by the
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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 1933 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 2.7 of the Disclosure Schedule, the financial
condition and results of operations of each Subsidiary are, and for all periods
referred to in this Section 2.7 have been, consolidated with those of the
Company.
2.8 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 the Company. 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 2.8 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 not wholly owned by the Company, or any direct or indirect
redemption, purchase or other acquisition by the Company or any Subsidiary
of any such capital stock of or any Option with respect to the Company or
any Subsidiary not wholly owned by the Company;
(ii) any authorization, issuance, sale or other disposition by the Company
or any Subsidiary of any shares of capital stock of or Option with respect
to the Company or any Subsidiary, or any modification or amendment of any
right of any holder of any outstanding shares of capital stock of or Option
with respect to the Company or any Subsidiary;
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(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 the Company or any Subsidiary 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 the Company or any of the Subsidiaries of
Indebtedness in an aggregate principal amount 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 the
Company or any Subsidiary under, any Indebtedness of or owing to the Company
or any Subsidiary (in either case other than any Indebtedness of the Company
or a Subsidiary owing to the Company or a 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 the Company or any Subsidiary in an aggregate amount 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 the Company or any Subsidiary in an
aggregate amount 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 the Company 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 material Contract or material License to which the Company or any
Subsidiaries is a party held by the Company or any Subsidiary;
(ix) any capital expenditures or commitments for additions to property,
plant or equipment of the Company and the Subsidiaries constituting capital
assets in an aggregate amount exceeding $50,000.00;
(x) any commencement or termination by the Company or any Subsidiary of
any line of business;
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(xi) any transaction by the Company or any Subsidiary with any officer,
director, Affiliate or Associate of the Company, 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 the Company
or any other transaction involving or development affecting the Company or
any Subsidiary outside the ordinary course of business consistent with past
practice.
2.9 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 2.9 of the Disclosure Schedule, there are no Liabilities of, relating to
or affecting the Company 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 the Company and
are not for tort or for breach of contract.
2.10 Taxes. (a) Except as disclosed in Section 2.10 of the Disclosure
Schedule, all Tax Returns required to have been filed by or with respect to the
Company 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 2.10 of the Disclosure
Schedule, all Taxes owed by the Company or any Subsidiary have been paid.
(b) Except as disclosed in Section 2.10 of the Disclosure Schedule, the
provisions for Taxes due by the Company or any Subsidiary in the audited
financial statements for the Company's 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 the Company and its
Subsidiaries.
(c) Neither the Company 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 the Company or any Subsidiary does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
(d) The Company and its Subsidiaries have 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.
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(e) There is no dispute or claim concerning any Tax liability of the
Company or any Subsidiary either (i) claimed or raised by any taxing authority
or (ii) otherwise known to the Company. Section 2.10 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. The Company has delivered to
Purchaser 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, the Company or any of its
Subsidiaries since the incorporation of the Company.
(f) Neither the Company 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 2.10 of the Disclosure Schedule,
neither the Company 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 the Company nor any Subsidiary has liability for Taxes of any
person other than the Company 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 2.10 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 the
Company ("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.l502-2l and Section 1.1502-21A of the Treasury regulations, in each
case treating any proposed provision as if it were currently in effect.
(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.
2.11 Legal Proceedings. Except as disclosed in Section 2.11 of the
Disclosure Schedule, there are no Actions or Proceedings pending or, to the
knowledge of the Company and the Subsidiaries, threatened against, relating to
or affecting the Company 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
Purchaser, or (ii) if determined adversely to the Company or a Subsidiary, could
reasonably be expected to result in (x) any injunction or other equitable relief
against the Company or any Subsidiary that would interfere in any material
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respect with its business or operations or (y) Losses by the Company or any
Subsidiary, individually, or in the aggregate with Losses in respect of other
such Actions or Proceedings, exceeding $50,000.00.
2.12 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Company directly
with Purchaser without the intervention of any Person on behalf of the Company
in such manner as to give rise to any valid claim by any Person against
Purchaser, the Company or any Subsidiary for a finder's fee, brokerage
commission or similar payment.
2.13 New York City Advanced Technology Company; Small Business Matters.
The Company is a New York City Advanced Technology Company. The Company,
together with its "affiliates" (as that term is defined in 13 CFR, ss.121.401),
is a "Small Business" within the meaning of the SBA Regulations, including 13
CFR ss.121.103. The Standard Industrial Classification Code of the Company is
______. The information regarding the Company 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 Company and delivered to
Purchaser at the Closing. Neither the Company nor any Subsidiary presently
engages in any activities for which an SBIC is prohibited from providing funds
by SBA Regulations, including 13 CFR ss.107.804 and ss.107.901. The Company has
not received any "Financing" (as defined in the SBA Regulations) from any SBIC,
other than Purchaser.
2.14 Exemption from Registration; Restrictions on Offer and Sale of Same
or Similar Securities. Assuming the representations and warranties of the
Purchaser set forth in Section 3.5 hereof are true and correct in all material
respects, the offer and sale of the Note made pursuant to this Agreement is
exempt from the registration requirements of the 1933 Act. Neither the Company
nor any Person authorized to act on its behalf has, in connection with the
offering of the Note, 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
1933 Act), (B) any action involving a public offering within the meaning of
section 4(2) of the 1933 Act, or (C) any action that would require the
registration under the 1933 Act of the offering and sale of the Note pursuant to
this Agreement or that would violate applicable state securities or "blue sky"
laws. The Company has not made and will not prior to the Closing make, directly
or indirectly, any offer or sale of the Note or of securities of the same or a
similar class as the Note if as a result the offer and sale of the Note
contemplated hereby could fail to be entitled to exemption from the registration
requirements of the 1933 Act. As used herein, the terms "offer" and "sale" have
the meanings specified in Section 2(3) of the 0000 Xxx.
2.15 Disclosure. To the knowledge of the Company, all material facts
regarding the Business or Condition of the Company have been disclosed to
Purchaser 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 Purchaser
pursuant to any provision of this Agreement (including without limitation
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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 III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
3.1 Organization. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
3.2 Power and Authority. The Purchaser has the full partnership power and
authority to execute and deliver this Agreement and the Operative Agreements to
which it is a party and to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Purchaser of this Agreement and the Operative Agreements to
which it is a party, and the performance by Purchaser of its obligations
hereunder and thereunder, have been duly and validly authorized by the Board of
Directors of the General Partner of Purchaser, no other partnership action on
the part of Purchaser being necessary. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes, and upon the execution and
delivery by Purchaser of the Operative Agreements to which it is a party, such
Operative Agreements will constitute, legal, valid and binding obligations of
Purchaser enforceable against Purchaser in accordance with their respective
terms.
3.3 Governmental Approvals and Filings. Except for such filings as are
required under the SBA Act or SBA Regulations, or under the Exchange Act, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Purchaser is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
3.4 Legal Proceedings. There are no Actions or Proceedings pending or, to
the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which 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.
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3.5 Purchase for Investment. The Note will be acquired by Purchaser for
its own account for the purpose of investment and not with a view to the resale
or distribution of all or any part of the Note in violation of the 1933 Act, it
being understood that the right to dispose of the Note shall be entirely within
the discretion of Purchaser. Purchaser represents and warrants that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D of the
1933 Act. Purchaser will refrain from transferring or otherwise disposing of the
Note, or any interest therein, in such manner as to cause the Company to be in
violation of the registration requirements of the 1933 Act or applicable state
securities or blue sky laws. The Purchaser understands that the Notes have not
been registered under the 1933 Act in reliance on an exemption therefrom under
Section 4(2) of the 1933 Act and Regulation D thereunder and that the Note shall
bear the following legend:
"THIS SECURITY MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS."
The Company shall remove such legend upon receipt of an opinion from
counsel to the Purchaser, reasonably satisfactory in form and substance to
counsel to the Company, that the requirements for such legend have terminated.
3.6 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with the Company without the intervention of any Person on behalf of Purchaser
in such manner as to give rise to any valid claim by any Person against the
Company or any Subsidiary for a finder's fee, brokerage commission or similar
payment.
ARTICLE IV
COVENANTS OF THE COMPANY
4.1 SBA Matters; Use of Proceeds. The Company agrees to cooperate with
Purchaser in the preparation and filing of any documentation required pursuant
to the SBA Act and the SBA Regulations including, but not limited to, SBA Forms
480, 652 and 1031 and a list of (a) the name of each of the directors of the
Company as of the Closing, (b) the name and title of each of the officers of the
Company as of the Closing and (c) after giving effect to the transactions
contemplated by this Agreement, the name of each of the record holders of the
Company setting forth the number and class of shares held. The Company shall
not, directly or indirectly, use any of the proceeds received from the Purchaser
hereunder to engage in any
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activities with respect to which an SBIC is prohibited from providing funds by
the SBA Act or the SBA Regulations including without limitation 13 CFR Section
107.720.
4.2 Certain Expenses. (a) The Company has paid to Purchaser a $15,000
application fee, to be refunded only to the extent that the fees and expenses of
Purchaser incurred in connection herewith are less than such amount and then
only in the event that the Closing hereunder fails to occur.
(b) At the Closing, the Company will pay the Purchaser a nonrefundable
$30,000 closing fee.
(c) At the Closing, the Company will pay any out-of-pocket expenses
(including, without limitation, legal fees and expenses) incurred by Purchaser
in connection with this Agreement and the transactions contemplated hereby. The
Company shall not be obligated to pay the costs and expenses of Purchaser's
counsel incurred in connection with the negotiation, execution and delivery
hereof in excess of $40,000 in the aggregate.
4.3 Economic Impact Information. For so long as the Purchaser holds any
Preferred Stock, Common Stock, Notes or other securities of the Company,
promptly after the end of each fiscal year (but in any event prior to January 31
of each year) the Company shall deliver to the Purchaser a written assessment of
the economic impact of the Purchaser's investment in the Company, specifying the
full-time equivalent jobs created or retained in connection with the investment,
the impact of such investment on the business of the Company in terms of revenue
and profits of the Company's business and on taxes paid by the Company and its
employees.
4.4 Financial Statements and Reports; Inspection. For so long as the
Purchaser holds any Preferred Stock, Common Stock, Notes or other securities of
the Company, 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
or any Subsidiary relating to the business or operations of the Company or any
Subsidiary or as Purchaser may otherwise reasonably request. For so long as the
Purchaser holds any Preferred Stock, Common Stock, Notes or other securities of
the Company, the Company will furnish the Purchaser with the following
information certified by the Company's chief executive officer, president,
treasurer or chief financial officer within 120 days after and as at the close
of each fiscal year of the Company: (i) a statement that the Company and its
"affiliates" (within the meaning ascribed thereto in 13 CFR Section 121.103) 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 Company and its Subsidiaries.
At the request of the Purchaser, the Company will permit the Purchaser and/or
the SBA and/or any Person
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designated by the Purchaser to inspect any of the properties, corporate books
and financial records of the Company and its Subsidiaries, to discuss their
respective affairs and finances with the responsible officers of the Company and
its Subsidiaries and to make extracts from the copies of such books and records,
all at such time as the Purchaser may reasonably request, including, but not
limited to, for purpose of verifying information provided to the Purchaser and
required by the SBA.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser 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 Purchaser in its sole discretion):
5.1 Representations and Warranties. Each of the representations and
warranties made by the Company 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 on and as of such earlier date.
5.2 Performance. The Company shall have performed and complied with, in
all material respects, each agreement, covenant and obligation required by this
Agreement to be performed or complied with by the Company at or before the
Closing.
5.3 Officers' Certificates. The Company shall have delivered to Purchaser
a certficate, dated the Closing Date and executed by the Chairman of the Board,
the President or any Vice President of the Company, substantially in the form
and to the effect of Exhibit B hereto, and a certificate, dated the Closing Date
and executed by the Secretary or any Assistant Secretary of the Company,
substantially in the form and to the effect of Exhibit C hereto.
5.4 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 Purchaser,
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
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any such Order or the enactment, promulgation or deemed applicability to
Purchaser, the Company, any Subsidiary 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 the Purchaser.
5.5 Regulatory Consents and Approvals. All consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and the Company to perform their 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 Purchaser,
(c) shall not impose any limitations or restrictions on Purchaser, (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.
5.6 Third Party Consents. The consents (or in lieu thereof waivers)
disclosed in Section 5.6 of the Disclosure Schedule, and all other consents (or
in lieu thereof waivers) to the performance by Purchaser and the Company of
their 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 Purchaser, the Company or any Subsidiary 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 Purchaser or the Business or Condition
of the Company or otherwise result in a material diminution of the benefits of
the transactions contemplated by this Agreement and the Operative Agreements to
Purchaser, (a) shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to Purchaser, (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.
5.7 Opinion of Counsel. Purchaser shall have received the opinion of
Rosenman & Colin, counsel to the Company, dated the Closing Date, which opinion
shall be reasonably satisfactory in all respects to Purchaser.
5.8 Good Standing Certificates. The Company shall have delivered to
Purchaser (a) copies of the certificates or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto, of
the Company and each Subsidiary certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation, (b) certificates from
the Secretary of State or other appropriate official of the respective
jurisdictions of incorporation to the effect that each of the Company and the
Subsidiaries is in good standing or subsisting in such jurisdiction, listing all
charter documents of the Company
-14-
and such Subsidiaries on file, and (c) a certificate from the Secretary of State
or other appropriate official in each jurisdiction in which the Company and the
Subsidiaries are qualified or admitted to do business to the effect that the
Company or the applicable Subsidiary is duly qualified or admitted and in good
standing in such jurisdiction.
5.9 Operative Agreements. Each Operative Agreement shall have been duly
executed and delivered by the respective parties thereto other than the
Purchaser and shall be in full force and effect.
5.10 Guarantee. The Purchaser shall have received a Guarantee, in the form
of Exhibit D, duly executed by Xx. Xxxxxx Xxxxxx, pursuant to which Xx. Xxxxxx
shall have guaranteed the obligations of the Company under this Agreement and
the Operative Documents.
5.11 Proceedings. All proceedings to be taken on the part of the Company
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all such
documents and other evidences as Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company 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 Company in its sole discretion):
6.1 Representations and Warranties. Each of the representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was on and as of the Closing Date.
6.2 Performance. Purchaser 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 Purchaser at or before the
Closing.
6.3 Officers' Certificates. Purchaser shall have delivered to the Company
a certificate, dated the Closing Date and executed by the Chairman of the Board,
the President or any Vice President of the General Partner of Purchaser,
substantially in the form and to the effect of Exhibit E hereto.
-15-
6.4 Orders and Laws. There shall not be in effect on the Closing Date any
Order or Law that became effective after the date of this Agreement 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.
6.5 Regulatory Consents and Approvals. All consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the Company and Purchaser to perform their 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 not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) 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.
6.6 Third Party Consents. All consents (or in lieu thereof waivers) to the
performance by the Company of its obligations hereunder and to the consummation
of the transactions contemplated hereby as are required under any Contract to
which the Company is a party (a) shall have been obtained, (b) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (c) shall be in full force and effect.
6.7 Operative Agreements. The Stockholders Operative Agreements to which
Purchaser is a party shall have been duly executed and delivered by the
Purchaser and shall be in full force and effect.
6.8 Proceedings. All proceedings to be taken on the part of Purchaser in
connection with the transactions contemplated by this Agreement and all
documents incident hereto shall be reasonably satisfactory in form and substance
to the Company, and the Company shall have received copies of all such documents
and other evidences as the Company may reasonably request in order to establish
the consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Purchaser (whether or not exercised) to investigate
the affairs of the Company and the Subsidiaries or any right of any party
(whether or not exercised) to investigate the accuracy of the representations
and warranties of the other party contained in this Agreement or the waiver of
any condition to Closing, the Company and Purchaser have the right to rely fully
-16-
upon the representations, warranties, covenants and agreements of the other
contained in this Agreement. The representations, warranties, covenants and
agreements of the Company and Purchaser contained in this Agreement will survive
the Closing (a) indefinitely with respect to the representations and warranties
contained in Sections 2.2, 2.3, 2.4 (but only insofar as it relates to the
capital stock of the Subsidiaries), 2.12, 2.13, 2.14, 2.15 (to the extent it
relates to the foregoing enumerated sections), 3.2 and 3.6, (b) until sixty (60)
calendar days after the expiration of all applicable statutes of limitation
(including all periods of extension, whether automatic or permissive) with
respect to matters covered by Section 2.10 and Section 2.15 (to the extent it
relates to Section 2.10), (c) until the second anniversary of the Closing Date
in the case of all other representations and warranties and any covenant or
agreement to be performed in whole or in part on or prior to the Closing or (d)
with respect to each other covenant or agreement contained in this Agreement;
for sixty (60) days following the last date on which such covenant or agreement
is to be performed or, if no such date is specified, indefinitely, except that
any representation, warranty, covenant or agreement that would otherwise
terminate in accordance with clause (b), (c) or (d) above will continue to
survive if a Claim Notice or Indemnity Notice (as applicable) shall have been
timely given under Article VIII on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved as
provided in Article VIII, but only with respect to matters described in the
Claim Notice or Indemnity Notice.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(a) The Company shall indemnify Purchaser and its general partner and
limited partners and the officers, directors, employees, agents and Affiliates
of each of them, in respect of, and hold each of 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, resulting from, arising out of, or relating to any
misrepresentation or breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Company contained in this
Agreement (provided that for any representation or warranty that is qualified by
"material", "materiality" or "material adverse effect", a breach of such
representation or warranty shall be determined as if the terms "material",
"materially" or "material adverse effect" were not included therein).
(b) Purchaser agrees to indemnify the Company and its officers, directors,
employees, agents and Affiliates in respect of, and hold each of 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, resulting from, arising out of or
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of
-17-
Purchaser contained in this Agreement (provided that for any representation or
warranty that is qualified by "material", "materiality" or "material adverse
effect", a breach of such representation or warranty shall be determined as if
the terms "material", "materially" or "material adverse effect" were not
included therein).
8.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 8.1 will be asserted and resolved as follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 8.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a Claim Notice to the Indemnifying Party within 30 Business Days
after receipt by such Indemnified Party of written notice of the Third Party
Claim; provided, however, that failure to give such Claim Notice shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof, but shall continue to pay for any
expenses of investigation or any Loss suffered. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Party. If (i) the Indemnifying Party
shall not assume the defense of a Third Party Claim with counsel satisfactory to
the Indemnified Party within five Business Days of any Claim Notice, or (ii)
legal counsel for the Indemnified Party notifies the Indemnifying Party that
there are or may be legal defenses available to the Indemnified Party or to
other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, which, if the Indemnified Party and the
Indemnifying Party were to be represented by the same counsel, would constitute
a conflict of interest for such counsel or prejudice prosecution of the defenses
available to such Indemnified Party, or (iii) if the Indemnifying Party shall
assume the defense of a Third Party Claim and fail to diligently prosecute such
defense, then in each such case the Indemnified Party, by notice to the
Indemnifying Party, may employ its own counsel and control the defense of the
Third Party Claim and the Indemnifying Party shall be liable for the reasonable
fees, charges and disbursements of counsel employed by the Indemnified Party;
and the Indemnified Party shall be promptly reimbursed for any such fees,
charges and disbursements, as and when incurred. Whether the Indemnifying Party
or the Indemnified Party control the defense of any Third Party Claim, the
parties hereto shall cooperate in the defense thereof. Such cooperation shall
include the retention and provision to the counsel of the controlling party of
records and information
-18-
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the Indemnifying
Party shall have assumed the defense of a Third Party Claim, the Indemnified
Party shall not settle, compromise or discharge such Third Party Claim without
the Indemnifying Party's prior written consent, which consent will not be
unreasonably withheld. The Indemnifying Party shall have the right to settle,
compromise or discharge a Third Party Claim without (other than any such Third
Party Claim in which criminal contact is alleged) the Indemnified Party's
consent if such settlement, compromise or discharge (i) constitutes a complete
and unconditional discharge and release of the Indemnified Party, and (ii)
provides for no relief other than the payment of monetary damages and such
monetary damages are paid in full by the Indemnifying Party.
(c) In the event any Indemnified Party should have a claim under Section
8.1 against any Indemnifying Party that does not involve a Third Party Claim,
the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 8.1 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by litigation in a court of competent jurisdiction.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at law or in equity,
under federal and state securities laws, by separate agreement (including
without limitation the Operative Agreements) or otherwise.
ARTICLE IX
DEFINITIONS
9.1 Definitions. (a) As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"1933 Act" means the Security Act of 1933, as amended, and the rules and
regulations thereunder.
-19-
"Actions or Proceedings" means any action, suit, proceeding, arbitration
or Governmental or Regulatory Authority investigation or audit.
"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 Note Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in accordance with Sections
5.3 and 6.3, 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 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 the Company or any
Subsidiary, or any predecessor or Affiliate of any of the foregoing, existing at
the Closing Date or prior thereto, to which the Company or any Subsidiary
contributes or has contributed, or under which any employee, former employee or
director of the Company 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 the Company, including
without limitation financial statements, Tax Returns and related work papers and
letters from accountants, budgets,
-20-
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.
"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.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company and the Subsidiaries taken as a whole.
"Claim Notice" means written notification pursuant to Section 8.2(a) of a
Third Party Claim as to which indemnity under Section 8.1 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, on the
Indemnified Parties and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim against the Indemnifying Party under
Section 8.1, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such Third Party Claim.
"Class A Common Stock" has the meaning ascribed thereto in Section 2.3.
"Closing" means the closing of the transactions contemplated by Section
1.3.
"Closing Date" means the date on which the Closing actually occurs which
date shall be (a) the fifth Business Day after the day on which the last of the
consents, approvals, actions, filings, notices or waiting periods described in
or related to the filings described in Sections 5.5 and 5.6 and Sections 6.5 and
6.6 has been obtained, made or given or has expired, as applicable, or (b) such
other date as Purchaser and Seller mutually agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Common Stock" has the meaning ascribed thereto in Section 2.3.
"Company" has the meaning ascribed to it in the forepart of this Agreement
(and, unless the context otherwise requires, any predecessor of the Company).
"Contract" means any agreement, lease, evidence of Indebtedness, mortgage,
indenture, security agreement or other contract (whether written or oral).
"Disclosure Schedule" means the schedules delivered to Purchaser by the
Company 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 Company pursuant to this Agreement.
-21-
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"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.
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article VIII.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision in Article VIII.
"Indemnity Notice" means written notification pursuant to Section 8.2(c)
of a claim for indemnity under Article VIII by an Indemnified Party, specifying
the nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"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.
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"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 the Company or
any Subsidiary (other than securities issued by any Subsidiary).
"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.
"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.
"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.
"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 Claims or (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 to Purchaser's investment hereunder resulting from payments pursuant to
Article VIII.
"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
-23-
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" has the meaning ascribed to it in Section 1.1.
"Operative Agreements" means the Note and any support or other agreements
to be 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
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent and (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 the Company or any Subsidiary and which do not secure obligations for money
borrowed.
"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.
"Preferred Stock" has the meaning ascribed to it in Section 2.3.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
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"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Representatives" means, with respect to any Person, such Person's
officers, employees, agents, counsel, accountants, financial advisors,
consultants and other representatives.
"Resolution Period" means the period ending thirty (30) calendar days
following receipt by an Indemnified Party of a Dispute Notice.
"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.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning ascribed to it in Section 2.7
"Subsidiary" means any Person in which the Company, directly or indirectly
through Subsidiaries or otherwise, beneficially owns more than fifty percent
(50%) of either the equity interests in, or the voting control of, such Person.
"Tax Losses" has the meaning ascribed to it in Section 2.10(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, sales, use,
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.
"Tax Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Third Party Claim" has the meaning ascribed to it in Section 8.2(a).
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(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 the Company or a Subsidiary. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
ARTICLE X
MISCELLANEOUS
10.1 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 Purchaser, 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
with a copy to:
Xxxxxx, Xxxxx & Bockius
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxx Xxxxx, Esq.
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If to Seller, 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 communcations 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 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.
10.2 Entire Agreement. This Agreement and the Operative Agreements
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.
10.3 Expenses. Except as otherwise expressly provided in this Agreement
(including without limitation as provided in Section 4.2), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses.
10.4 Public Announcements. At all times at or before the Closing, the
Company and Purchaser will not issue or make any statements or releases to the
public with respect to this Agreement or the transactions contemplated hereby
without the consent of the
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other, which consent shall not be unreasonably withheld. If either party is
unable to obtain the approval of its public statement or release from the other
party and such statement or release is, in the opinion of legal counsel to such
party, required by Law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required statement or
release and promptly furnish the other party with a copy thereof. The Company
and Purchaser will also obtain the other party's prior approval of any press
release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
10.5 Confidentiality. Each party hereto will hold, and will use its best
efforts to cause its Affiliates, and their respective Representatives to hold,
in strict confidence from any Person (other than any such Affiliate or
Representative or partner of the Purchaser), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential. In the
event the transactions contemplated hereby are not consummated, upon the request
of the other party, each party hereto will, and will cause its Affiliates and
their respective Representatives to, promptly redeliver or cause to be
redelivered all copies of documents and information furnished by the other party
in connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed a1l notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by the
party furnished such documents and information or its Representatives.
10.6 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the Company shall execute and deliver to
Purchaser such other documents and instruments, provide such materials and
information and take such other actions as Purchaser may reasonably request more
effectively to vest title to the Preferred Stock in Purchaser and otherwise to
cause the Company to fulfill its obligations under this Agreement and the
Operative Agreements to which it is a party.
10.7 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such
-28-
term or condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion. All remedies, either under this Agreement or by Law or
otherwise afforded, will be cumulative and not alternative.
10.8 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
10.9 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 Article VIII.
10.10 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other party hereto 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.
10.11 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit provisions hereof.
10.12 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.
10.13 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.
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10.14 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: /s/ Xxxxxx Xxxxxx
---------------------------------
Name:
Title:
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund, Inc.,
its General Partner
By:
----------------------------------
Name:
Title:
