[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
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
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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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
-21-
fiscal year ended 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.
-22-
(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;
-23-
(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
-24-
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.
-25-
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
-26-
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
-27-
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, Section 121.401), is a "Small Business" within the meaning
of the SBA Regulations, including 13 CFR Section 121.103. 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 Section 107.804 and Section 107.901. 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
-28-
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 Finacial 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 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 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 Judgements 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: Xxxxxx Xxxxxx
Title: President and CEO
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:
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XXXXXXX XXX XXXXX, 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:
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Annex 2.1
Lender Initial Loan Commitment Additional Loan Commitment
------ ----------------------- --------------------------
Prospect Street NYC (1)$1,500,000 None
Discovery Fund, L.P.
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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