BRIDGE FINANCING AGREEMENT
Dated as of August 26, 1997
by and among
THE MARQUEE GROUP, INC.,
THE SUBSIDIARY GUARANTORS
and
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..............................................................................................1
1.1 Definitions...................................................................................1
1.2 Accounting Terms..............................................................................6
1.3 Section References............................................................................6
ARTICLE II
AMOUNT AND TERMS OF THE LOAN; FEES; OPTION AGREEMENT.....................................................6
2.1 The Loan......................................................................................6
2.2 Fees..........................................................................................6
2.3 Bridge Financing Note; Interest and Maturity; Payment of Interest in Kind.....................7
2.4 Payments and Computations.....................................................................7
2.5 Payment on Non-Business Days..................................................................7
2.6 Use of Proceeds...............................................................................7
ARTICLE III
CLOSING; CONDITIONS TO CLOSING...........................................................................8
3.1 Closing.......................................................................................8
3.2 Conditions Precedent to Loan..................................................................8
(a) Documents Delivered...................................................................8
(b) Representations and Warranties True...................................................9
(c) No Default...........................................................................10
(d) Performance..........................................................................10
(e) No Material Adverse Change...........................................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SUBSIDIARY GUARANTORS...................................................................................10
Representations and Warranties of the Company and the Subsidiary Guarantors.............................10
4.1 Organization, Good Standing and Qualification................................................10
4.2 Capitalization...............................................................................11
4.3 Subsidiaries.................................................................................11
4.4 Authorization................................................................................11
4.5 Valid Issuance of Securities.................................................................12
4.6 Governmental Consents........................................................................12
4.7 Litigation...................................................................................12
4.8 Compliance with Other Instruments............................................................13
4.9 Disclosure...................................................................................13
4.10 SEC Documents................................................................................13
4.11 No Material Adverse Changes..................................................................14
4.12 Prior Registration Rights....................................................................14
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4.13 Financial Statements.........................................................................14
4.14 Compliance with Laws.........................................................................14
4.15 Insurance....................................................................................15
4.16 Transactions with Affiliates.................................................................15
4.17 Solvency.....................................................................................15
4.18 No Defaults..................................................................................15
4.19 Margin Regulations...........................................................................15
4.20 Contemplated Public Offering.................................................................15
4.21 Compliance with ERISA........................................................................15
4.22 Taxes........................................................................................16
4.23 Not an Investment Company....................................................................16
4.24 Leases.......................................................................................16
4.25 Environmental Matters........................................................................16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE FUND..............................................................16
5.1 Authorization................................................................................16
5.2 Investment Intent............................................................................17
ARTICLE VI
COVENANTS...............................................................................................17
6.1 Affirmative Covenants........................................................................17
(a) Corporate Existence..................................................................17
(b) Maintenance of Property; Insurance...................................................17
(c) Compliance with Law..................................................................17
(d) Further Assurances...................................................................17
(e) Keeping of Books.....................................................................18
(f) Payment of Taxes, etc................................................................18
(g) Access to Records; Financial Statements..............................................18
(h) Notice of Certain Events.............................................................18
(i) Future Direct and Indirect Subsidiaries of the Company...............................19
(j) Consummation of the Acquisition and the Contemplated Public Offering
....................................................................................19
6.2 Negative Covenants...........................................................................19
(a) Operate Other Than in Ordinary Course................................................19
(b) Additional Indebtedness..............................................................19
(c) Investments, Loans and Advances......................................................19
(d) Dividends, Prepayments, etc..........................................................20
(e) Issuance of Capital Stock............................................................20
(f) Merger, Consolidation, Sale or Purchase of Assets....................................20
(g) Limitation on Payment Restrictions Affecting Subsidiaries............................20
(h) Liens................................................................................20
(i) Transactions with Affiliates and Officers............................................20
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ARTICLE VII
EVENTS OF DEFAULT.......................................................................................21
7.1 Events of Default............................................................................21
ARTICLE VIII
MISCELLANEOUS...........................................................................................22
8.1 Amendments, etc..............................................................................22
8.2 No Waiver; Remedies..........................................................................23
8.3 Indemnification..............................................................................23
8.4 Termination..................................................................................23
8.5 Survival of Warranties.......................................................................24
8.6 Successors and Assigns.......................................................................24
8.7 Governing Law................................................................................24
8.8 Counterparts.................................................................................25
8.9 Titles and Subtitles.........................................................................25
8.10 Notices......................................................................................25
8.11 [Intentionally omitted.].....................................................................26
8.12 Expenses.....................................................................................26
8.13 Severability................................................................................26
8.14 Entire Agreement.............................................................................26
8.15 Submission to Jurisdiction...................................................................26
8.16 Waiver of Jury Trial.........................................................................26
Exhibits
Exhibit A: Bridge Financing Note
Exhibit B-1: Option Agreement
Exhibit B-2: Additional Option Agreement
Exhibit C: Guarantee, Pledge and Security Agreement
Exhibit D: Registration Rights Agreement
Exhibit E: Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Exhibit F: Disclosure Schedule
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BRIDGE FINANCING AGREEMENT, dated as of August 26, 1997, by
and among THE MARQUEE GROUP, INC., a Delaware corporation (the "Company"),
each of the Subsidiaries of the Company identified under the caption
"SUBSIDIARY GUARANTORS" on the signature pages hereof (individually a
"Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors"), and
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P., a Delaware limited partnership (the
"Fund").
WITNESSETH:
WHEREAS, the Company desires to make the Tender Offer (as
hereinafter defined) for up to all of its outstanding Warrants (the
"Warrants") to purchase shares of the Company's Common Stock, par value $.01
per share (the "Common Stock");
WHEREAS, for the purpose of financing the Tender Offer on a
short term basis, the Company desires to borrow from the Fund, and the Fund
has agreed to provide financing to the Company, on the terms and subject to
the conditions set forth herein and in the Bridge Financing Note (as
hereinafter defined);
WHEREAS, the obligations of the Company under the Bridge
Financing Note and the other Loan Documents (as hereinafter defined) are to be
secured pursuant to the Guarantee, Pledge and Security Agreement (as
hereinafter defined);
WHEREAS, simultaneously herewith, in consideration of the
Fund's agreement to provide financing on the terms set forth herein, the
Company is paying to the Fund the Commitment Fee (as hereinafter defined) and
issuing the Options (as hereinafter defined) to the Fund pursuant to the
Option Agreement (as hereinafter defined) and the Company and the Fund are
entering into the Option Agreement and the Registration Rights Agreement (as
hereinafter defined);
WHEREAS, if the initial principal amount of the Loan exceeds
$10,000,000, the Company has agreed to issue, an additional option pursuant to
the Additional Option Agreement (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms shall have the following meanings, whether or not such terms are also
defined elsewhere in this Agreement:
Acquisition: the purchase of the Warrants pursuant
to the Tender Offer.
Additional Option: an option to purchase, on the
terms set forth in the Additional Option Agreement, up to a number of shares
of Common Stock equal to 1% of the excess of (a) the amount of the Loan over
(b) $10,000,000.
Additional Option Agreement: the Additional Option
Agreement, dated as of the Closing Date, from the Company to the Fund, in the
form of Exhibit B-2 hereto, to be entered into if the initial principal amount
of the Loan exceeds $10,000,000.
Additional SEC Documents: all documents filed by
the Company with the SEC after the date of this Agreement, including any
amendments to the 1997 SB-2 or the Schedule 13e-4.
Affiliate: with respect to any Person, any other
Person controlling, controlled by, or under common control with, such Person.
"Affiliate" with respect to the Company shall specifically include, without
limitation, Sillerman Communications Management Corporation, ▇▇▇▇▇▇ F.X.
Sillerman ("Sillerman") and any Person more than 5% owned by Sillerman
directly or indirectly.
Bridge Financing Note: the Note of the Company,
substantially in the form of Exhibit A hereto, to be issued to evidence the
Loan.
Business Day: any day other than a Saturday, Sunday
or any other day on which commercial banks are required by law or authorized
to close in New York City.
Closing: has the meaning provided in Section 3.1.
Closing Date: has the meaning provided in Section
3.1.
Code: the Internal Revenue Code of 1986, as in
effect from time to time, and any successor thereto.
Commitment Fee: has the meaning provided in Section
2.2(a).
Common Stock: the common stock, par value $.01 per
share, of the Company.
Companies: the Company and each of its
Subsidiaries.
Company: The Marquee Group, Inc., a Delaware
corporation, and its successors and assigns.
Contemplated Public Offering: the proposed offering
of shares of Common Stock contemplated by the 1997 SB-2, the proceeds of which
will be used in part to repay the Loan, if not theretofore repaid.
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Default: any event or condition that, with notice
or lapse of time or both, would become an Event of Default.
Disclosure Schedule: has the meaning provided in
Article IV.
Environmental Laws: any federal, state, local or
foreign laws (including common law), statutes, codes, ordinances, rules,
regulations or other requirements relating to the environment, natural
resources, or public or employee health and safety and includes but is not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. ss.1801 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss.6901 et seq., the Clean Water Act, 33 U.S.C.
ss.1251 et seq., the Clean Air Act, 33 U.S.C. ss.2601 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss.2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. ss.136 et seq., the Oil Pollution Act
of 1990, 33 U.S.C. ss.2701 et seq., Federal Safe Drinking Water Act, 42 U.S.C.
ss.300 F et seq., and the Occupational Safety and Health Act, 29 U.S.C. ss.651
et seq., as such laws have been amended or supplemented, and the regulations
promulgated thereto, and all analogous state or local statutes.
ERISA: the Employee Retirement Income Security Act
of 1974, as in effect from time to time, and any successor thereto.
ERISA Affiliate: each of the Companies, and any
other Person that, together with any of the Companies, would be treated as a
single employer under Section 414 of the Code.
Event of Default: any of the events specified as
such, and during the periods specified, in Article VII.
Funding Fee: has the meaning provided in Section
2.2(b).
Exchange Act: has the meaning provided in Section
4.10.
Financial Statements: has the meaning provided in
Section 4.13.
Fund: The ▇▇▇▇ Alternative Income Fund, L.P., a
Delaware limited partnership.
Future Subsidiaries: has the meaning provided in
Section 6.1(i).
GAAP: generally accepted accounting principles in
the United States as in effect from time to time, applied on a consistent
basis.
Guarantee, Pledge and Security Agreement: the
Guarantee, Pledge and Security Agreement, dated as of the Closing Date, by and
among the Company, the Subsidiary Guarantors and the Fund, in substantially
the form of Exhibit C hereto.
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Indebtedness: without duplication (a) any liability
of any Person (i) for borrowed money, or for the deferred purchase price of
any property or services, including, without limitation, all obligations,
contingent or otherwise in connection with any reimbursement obligation
relating to a letter of credit, or (ii) evidenced by a bond, note, debenture
or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any businesses, properties or assets of any
kind (other than a trade payable or other current liability arising in the
ordinary course of business) or (iii) for the payment of money relating to a
lease of real or personal property that is required to be classified and
accounted for as a capital lease obligation under GAAP; (b) any liability of
others described in the preceding clause (a) that the Person has guaranteed or
that is otherwise its legal liability, contingent or otherwise; and (c) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) and (b) above.
Indemnified Parties: has the meaning provided in
Section 8.3.
Knowledge of the Company or Known to the Company:
anything actually known or which reasonably should have been expected to have
been known by an executive officer, director, shareholder, managerial employee
or Affiliate of the Company or any of the Subsidiary Guarantors.
Laws: federal, state, local and foreign statutes,
laws, ordinances, case law, license requirements, zoning requirements, rules,
regulations, directives and policies.
Lien: any lien, charge, claim, mortgage, security
interest or other similar encumbrance of any kind.
Loan: the loan to the Company provided for in
Section 2.1.
Loan Documents: this Agreement, the Bridge
Financing Note, the Option Agreement, the Additional Option Agreement (if the
amount of the Loan exceeds $10,000,000), the Guarantee, Pledge and Security
Agreement and the Registration Rights Agreement.
Multiemployer Plan: has the meaning given in ERISA
Section 3(37)(A).
Offering: the public or private offering of Common
Stock or other capital stock or securities of the Company.
Option Agreement: the Option Agreement, dated as of
the date hereof, from the Company to the Fund, in the form of Exhibit B-1
hereto.
Options: the options to purchase shares of Common
Stock on the terms set forth in the Option Agreement, and the Additional
Option Agreement..
Option Shares: has the meaning provided in Section
4.4.
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PBGC: the Pension Benefit Guaranty Corporation, or
any successor thereto.
Permitted Indebtedness: has the meaning provided in
Section 6.2(b).
Person: Any individual, corporation, partnership,
business trust, joint venture, association, joint stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof.
Plan: has the meaning given in ERISA Section 3(3).
Registration Rights Agreement: the Registration
Rights Agreement, dated as of the date hereof, between the Company and the
Fund, in the form of Exhibit D hereto.
Schedule 13e-4: the Schedule 13e-4 filed by the
Company with respect to the Tender Offer.
SEC: the Securities and Exchange Commission.
SEC Documents: has the meaning provided in Section
4.10.
Securities Act: the Securities Act of 1933, as amended.
Solvent and Solvency: with respect to any Person on
a particular date, that on such date (i) the fair value of the property of
such Person is greater than the total amount of liabilities (including
contingent liabilities) of such Person, (ii) the present fair salable value of
the property of such Person is greater than the amount that will be required
to pay the probable liabilities of such Person on its debts as they become
absolute and matured, (iii) such Person is able to realize upon its assets and
pay its debts and other liabilities, including contingent liabilities, as they
mature and (iv) such Person does not have, and will not be left with, an
unreasonably small capital.
Subsidiary: with respect to any Person, means (i) a
corporation at least fifty percent of whose capital stock with voting power,
under ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such Person, by such Person and one or more Subsidiaries
of such Person or by one or more Subsidiaries of such Person, (ii) a
partnership in which such Person or a Subsidiary of such Person is, at the
time, a general partner of such partnership, or (iii) any Person in which such
Person, one or more Subsidiaries of such Person, or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has (x) at least a fifty percent ownership interest or
(y) the power to elect or direct the election of the directors or other
governing body of such Person.
Subsidiary Guarantors: each of the Subsidiaries of
the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereof and each
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Future Subsidiary that the Company is obligated to make a Subsidiary Guarantor
under the terms of Section 6.1(i).
Tender Offer: the offer by the Company to purchase
up to all of its outstanding Warrants to purchase shares of its Common Stock.
Warrants: the warrants issued pursuant to the
Warrant Agreement, dated as of December 5, 1996, among the Company,
Continental Stock Transfer and Trust Company, Royce Investment Group, Inc. and
Continental Broker-Dealer Corporation.
1997 SB-2: has the meaning provided in Section 4.1.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be constituted in accordance with GAAP.
1.3 Section References. All Section references are to
Sections of this Bridge Financing Agreement unless otherwise expressly provided.
ARTICLE II
AMOUNT AND TERMS OF THE LOAN; FEES; OPTION AGREEMENT
2.1 The Loan. The Fund agrees, upon the terms and conditions
hereinafter set forth and in reliance on the representations and warranties
made herein and in the other Loan Documents, to lend on a single occasion no
less than $5,000,000 nor more than $11,500,000 to the Company on the Closing
Date for the purpose of financing the Acquisition, including paying certain
fees and expenses incurred in connection with the Acquisition and documented
in such detail as may be reasonably requested by the Fund. No more than one
Loan will be made hereunder. No later than 10 calendar days prior to the
Closing Date, the Company will notify the Fund in writing of the Closing
Date and no later than two Business Days prior to the Closing Date the
Company will notify the Fund in writing of the exact amount of the Loan
(but no less than $5,000,000 nor more than $11,500,000). No later than
1:30 p.m. (New York City time) on the Closing Date, if the applicable
conditions set forth in Article III have been completely fulfilled (without
regard to materiality) or waived in the sole discretion of the Fund, the Fund
shall cause the proceeds of the Loan (less the fees payable to described in
Section 2.2(b)) to be made available to the Company by wire transfer of
immediately available funds to the Company's bank account at The Chase
Manhattan Bank, N.A..
2.2 Fees. (a) Concurrently with the execution hereof, the
Company has paid to the Fund a commitment fee of $112,500 (the "Commitment
Fee") and the Company and the Fund have entered into the Option Agreement and
the Registration Rights Agreement, all in consideration of the Fund's
agreement to provide financing on the terms set forth herein. The Commitment
Fee is non-refundable under any circumstances.
(b) Upon funding, the Company agrees to pay the Fund: (i)
through a deduction from the amount of the proceeds of the Loan, a funding fee
(the "Funding Fee") equal
6
to the excess of (A) three percent (3%) of the total amount of the Loan, over
(B) $112,500; provided that the Funding Fee will not be less than $37,500; and
(ii) the Additional Option (if the initial amount of the Loan exceeds
$10,000,000).
(c) In the event that this Agreement is terminated pursuant
to Section 8.4, the Company will pay to the Fund a termination fee equal to
$112,500 in immediately available funds no later than the earlier of: (i) the
date the Company and the Fund terminate this Agreement pursuant to Section
8.4(a)(i); (ii) the date the Fund gives written notice to the Company pursuant
to Section 8.4(a)(ii) or 8.4(a)(iii); or (iii) the date the Company gives
written notice to the Fund pursuant to Section 8.4(a)(iv).
2.3 Bridge Financing Note; Interest and Maturity; Payment of
Interest in Kind. The Loan will be evidenced by the Bridge Financing Note. The
Company shall repay, and pay interest on, the principal amount of the Bridge
Financing Note as provided in the Bridge Financing Note. In the event that the
Company elects to pay interest in kind under the circumstances permitted in
the Bridge Financing Note, the Company will issue additional notes to the Fund
in the form of the Bridge Financing Note but in the amount of each interest
payment paid in kind.
2.4 Payments and Computations. The Company shall make each
payment under the Bridge Financing Note not later than 12:00 noon (New York
City time) on the day when due (subject to Section 2.5), in United States
dollars by wire transfer of immediately available funds to Summit Bank (ABA
021 202162) for the account of The ▇▇▇▇ Alternative Income Fund L.P., account
number 0035257969 (except for interest paid-in-kind under the circumstances
contemplated by the Bridge Financing Note) to the holder of the Bridge
Financing Note. All computations of interest under the Bridge Financing Note
shall be made on the basis of a year of 360 days for the actual number of days
(including the first day and the last day) elapsed.
2.5 Payment on Non-Business Days. Whenever any payment to be
made under the Bridge Financing Note shall be stated to be due on any day
other than a Business Day, such payment shall be due on the following Business
Day; provided that such extension of time shall in such cases be included in
the computation of interest due on such date.
2.6 Use of Proceeds. The Company agrees that the proceeds of
the Loan shall be used only for the purpose of financing the Acquisition,
including paying certain fees and expenses incurred in connection with the
Acquisition and documented in such detail as may be reasonably requested by
the Fund.
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ARTICLE III
CLOSING; CONDITIONS TO CLOSING
3.1 Closing. The closing of the Loan and the other
transactions contemplated by the Loan Documents to take place on the Closing
Date (the "Closing") shall take place at the offices of Proskauer Rose LLP,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on the closing date of the
Acquisition, or at such other time as the Company and the Fund may mutually
agree in writing (the "Closing Date"). No later than the tenth calendar day
prior to the Closing Date, the Company will give the Fund written notice of
such anticipated Closing Date.
3.2 Conditions Precedent to Loan. The obligation of the Fund
to make the Loan at the Closing is subject to the following conditions
precedent (unless and to the extent expressly waived in writing by the Fund):
(a) Documents Delivered. The Fund shall have received the
following documents, in each case in form and substance reasonably
satisfactory to it:
(i) The Bridge Financing Note, executed by the
Company, and the other Loan Documents, executed by the
parties thereto other than the Fund, including the
Additional Option Agreement (if the amount of the Loan
exceeds $10,000,000).
(ii) All documents required under the Guarantee,
Pledge and Security Agreement, including without limitation
(A) evidence of the establishment of the Collateral Account
(as defined in the Guarantee, Pledge and Security Agreement)
and irrevocable instructions with respect to such account in
accordance with the Guarantee, Pledge and Security
Agreement, (B) all UCC-1 financing statements called for by
the Guarantee, Pledge and Security Agreement and (C) stock
certificates (together with stock powers executed in blank)
evidencing all issued and outstanding shares of capital
stock of the Company's Subsidiaries.
(iii) An opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, as
independent legal counsel to the Company and the Subsidiary
Guarantors, substantially in the form of Exhibit E hereto,
and as to such other matters as the Fund may reasonably
request.
(iv) A secretary's certificate of each of the
Company and the Subsidiary Guarantors, signed, respectively,
by its Secretary and its President or one of its Vice
Presidents, as to (A) its Certificate of Incorporation and
By-laws; (B) the resolutions of its Board of Directors
adopting and approving any agreements relating to the
Acquisition, the Contemplated Public Offering and the
transactions contemplated by this Agreement and the other
Loan Documents; and (C) the names, offices and signatures of
its officers executing any documents in
8
connection with the Acquisition or the transactions
contemplated by this Agreement and the other Loan Documents.
(v) An officers' certificate or certificates signed
by the President or any Vice President and the chief
financial officer of each of the Company and the Subsidiary
Guarantors, with respect to the matters set forth in
Sections 3.2(b), 3.2(c) and 3.2(d) and stating that, to the
knowledge of such officers, no event or condition has
occurred since the date of this Agreement that materially
and adversely affects the likelihood that the Contemplated
Public Offering will occur.
(vi) An officer's certificate or certificates,
signed by the chief financial officer of each of the Company
and the Subsidiary Guarantors, confirming the Solvency of
the Company and each of the Subsidiary Guarantors upon the
making of the Loan and upon consummation of the Acquisition
and the transactions contemplated by this Agreement and the
other Loan Documents, setting forth in detail the
calculations on which such determination of Solvency is
based.
(vii) An opinion of Sillerman Communications
Management Corporation ("SCMC"), as financial advisor to the
Company, stating that SCMC has reviewed the calculations
used in the certificate or certificates referred to in
Section 3.2(a)(vi) and that SCMC is in agreement with such
calculations and the determinations set forth in such
certificate.
(viii) Copies of all authorizations, consents and
approvals of, evidence of other actions by, and notices and
filings with, all governmental authorities and regulatory
bodies that have theretofore been obtained in connection
with the Acquisition and the Contemplated Public Offering.
(ix) An officers' certificate or certificates,
signed by the President or any Vice President and the chief
financial officer of each of the Company and the Subsidiary
Guarantors, certifying that to such officers' knowledge,
there has not been, since December 31, 1996, a material
adverse change in the business, operations, properties,
prospects or condition (financial or otherwise) of the
Company and its Subsidiaries, considered as one enterprise.
(x) Such other financial statements, projections,
approvals, opinions or documents as the Fund may reasonably
request, in form and substance satisfactory to the Fund.
(b) Representations and Warranties True. The representations
and warranties made by the Company and each of the Subsidiary Guarantors
herein and in the other Loan Documents shall be true and correct in all
material respects at the Closing (except to the extent any such representation
or warranty was expressly made as of any other date, in which case such
representation or warranty shall have been true and correct at such date).
9
(c) No Default. No Event of Default or Default shall have
occurred and be continuing; there shall not exist any event of default, or any
event that with notice or lapse of time or both would constitute an event of
default, under any material mortgage, deed of trust, indenture or other
instrument or agreement to which any of the Companies is a party or by which
it or they may be bound or any of its or their property or assets may be
subject to; and none of the foregoing shall occur as a result of the Loan, the
Acquisition, the Contemplated Public Offering or any of the transactions
contemplated by the Loan Documents.
(d) Performance. Each of the Company and the Subsidiary
Guarantors shall have performed and complied with all agreements, covenants,
obligations and conditions contained in this Agreement and the other Loan
Documents.
(e) No Material Adverse Change. In the reasonable judgment
of the Fund, (i) no material adverse change shall have occurred since December
31, 1996 in the business, operations, properties, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, considered as
one enterprise, and (ii) no event or condition has occurred which materially
and adversely affects the likelihood that the Contemplated Public Offering
will be consummated.
(f) The Company shall have paid all fees of the Fund due at
or prior to Closing as provided in Section 2.2 (and in accordance with Section
8.12) and all expenses of the Fund through the Closing Date.
(g) The Company shall have caused all Liens, with the
exception of those Liens expressly permitted in Section 6.2(h), to be
canceled.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SUBSIDIARY GUARANTORS
Representations and Warranties of the Company and the
Subsidiary Guarantors. Each of the Company and the Subsidiary Guarantors
hereby jointly and severally represents and warrants to, and agrees with, the
Fund that, except as set forth on the Disclosure Schedule furnished to the
Fund and attached hereto as Exhibit F (the "Disclosure Schedule"),
specifically identifying the relevant subsection hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
4.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of the Companies has all
requisite power and authority to own, lease, license and use its properties
and assets and to carry on its business as now conducted and as proposed to be
conducted as described in the Company's Registration Statement on Form SB-2
filed with the SEC on July 23, 1997 (the "1997 SB-2").
10
The Company and each of the Subsidiaries has all requisite power and authority
to enter into and perform this Agreement and the other Loan Documents to which
it is a party and the transactions contemplated hereby and thereby. Each of
the Companies is duly qualified to transact business and is in good standing
as a foreign corporation in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its business, properties or
assets.
4.2 Capitalization. The authorized capital of the Company
consists of 25,000,000 shares of Common Stock, of which 8,769,162 shares are
issued and outstanding, 4,519,162 shares are reserved for issuance on the
exercise of the Warrants, 800,000 shares are reserved for issuance under the
Company's 1996 and 1997 Stock Option Plans, and 100,000 shares are reserved
for issuance on the exercise of the Options. Except for the 5,419,162 shares
authorized for the issuance under the Warrants, the 1996 and 1997 Stock Option
Plans and the Options and the 8,625,000 shares (including the over-allotment
option) which the Company plans to issue in the Contemplated Public Offering,
there are not outstanding (and the Company does not have any plan to, and will
not, issue, grant or enter into) any options, warrants, rights (including
conversion or preemptive rights), subscription or agreements for the purchase
or capital stock. There are no voting agreements, voting trust agreements,
shareholder agreements or other agreements relating to the capital stock of
the Company. No outstanding options, warrants or other securities exercisable
for or convertible into Common Stock require anti-dilution adjustments by
reason of the consummation of the transactions contemplated hereby.
4.3 Subsidiaries. The Disclosure Schedule correctly sets
forth all of the Subsidiaries of the Company, the place of incorporation of
each Subsidiary and its authorized capitalization, its shares of capital stock
outstanding, and the record and beneficial owner of those shares. There are
not outstanding (and neither the Company nor any Subsidiary has any plan to,
and will not, issue, grant or enter into) any options, warrants, rights
(including conversion or preemptive rights), subscriptions or agreements for
the purchase or acquisition from or by the Company or any Subsidiary of any
shares of capital stock of any Subsidiary. There are no voting agreements,
voting trust agreements, shareholder agreements or other agreements relating
to the capital stock of any of the Subsidiaries. Except for the Subsidiaries,
the Company does not presently own or control, or have the right to own or
control, directly or indirectly, any interest in any other corporation,
association, partnership, limited liability company or other entity.
4.4 Authorization. All corporate action on the part of the
Company, the Subsidiary Guarantors and their respective officers, directors
and shareholders necessary for the authorization, execution and delivery of
this Agreement and the other Loan Documents, the performance of all
obligations of the Company and the Subsidiary Guarantors hereunder and
thereunder and the authorization, sale, issuance (or reservation for issuance)
and delivery of the shares of Common Stock issuable pursuant to the Options
(the "Option Shares") has been taken. This Agreement, the Option Agreement and
the Registration Rights Agreement each constitute, and when executed and
delivered by the Company and the Subsidiary Guarantors, the other Loan
Documents will constitute, valid and legally binding obligations of the
Company and the Subsidiary Guarantors, enforceable in accordance with their
respective terms, except (i) as enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance,
11
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as enforceability may be
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Registration Rights Agreement may
be limited by applicable federal or state securities laws.
4.5 Valid Issuance of Securities. (a) The Options have been,
and the Option Shares, when issued, sold and delivered in accordance with the
terms of the Option Agreement and, if applicable, the Additional Option
Agreement, will be, (i) duly and validly issued and fully paid and
nonassessable, (ii) free of any pledges, liens, security interests, claims or
other encumbrances of any kind, (iii) issued in compliance with all applicable
federal and state securities laws, and (iv) not issued in violation of any
preemptive rights of shareholders. The Option Shares have been duly and
validly reserved for issuance.
(b) The outstanding shares of Common Stock of the Company
and the capital stock of each Subsidiary are all duly and validly authorized
and issued, fully paid and nonassessable, and were issued in compliance with
all applicable federal and state securities laws.
4.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, designation, declaration or filing with,
any federal, state, local or foreign governmental authority on the part of any
of the Companies is required in connection with the consummation of the
Acquisition, the Contemplated Public Offering or any of the transactions
contemplated by this Agreement or the other Loan Documents.
4.7 Litigation. There is no action, suit, proceeding claim
or investigation pending or, to the Knowledge of the Company, currently
threatened against any of the Companies or their officers and directors (in
connection with their duties as officers and directors) (i) which questions
the validity of this Agreement, the other Loan Documents, the Acquisition or
the Contemplated Public Offering, or the right of the Company or any of the
Subsidiary Guarantors to enter into them, or to consummate the transactions
contemplated hereby, and thereby, (ii) which relates to any material violation
or alleged violation of any of the Laws or otherwise arises out of or relates
to services rendered to any customer or former customer of the Company or any
of the Subsidiaries, or (iii) which might result, either individually or in
the aggregate, in any material adverse change in the assets, condition,
affairs or prospects of any of the Companies, financially or otherwise, or any
change in the current equity ownership of any of the Companies, nor is the
Company or any of the Subsidiary Guarantors aware that there is any basis for
any of the foregoing. The foregoing includes, without limitation, actions
pending or, to the Knowledge of the Company, threatened (or any basis therefor
Known to the Company) involving the employment or prior employment of any of
the Companies' employees, their use in connection with the Companies'
businesses of any information or techniques allegedly proprietary to any of
their former employers, or their obligations under any agreements with prior
employers. None of the Companies is a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or
12
instrumentality. There is no material action, suit, proceeding or
investigation by any of the Companies currently pending or which any of the
Companies intends to initiate.
4.8 Compliance with Other Instruments. None of the Companies
is in violation or default of, nor has any event occurred that with notice or
lapse of time or both would constitute an event of default under, (i) any
provisions of its certificate of incorporation, as amended, or by-laws, as
amended, or similar organizational documents (true and correct copies of each
of which have been furnished to the Fund), (ii) any judgment, order, writ or
decree or (iii) any contract or instrument to which any of the Companies is a
party or by which any of the Companies is or may become bound or to which any
of their properties or assets may become subject, if in the case of any
contract or instrument identified in this clause (iii), such violation,
default or other event could result in a material adverse change in the
assets, properties, business operations, condition (financial or otherwise) or
prospects of the Company or any of the Subsidiaries. The execution, delivery
and performance of this Agreement and the other Loan Documents, the
consummation of the transactions contemplated hereby and thereby and the
consummation of the Acquisition and the Contemplated Public Offering will not
result in a violation of, or be in conflict with, or constitute, with or
without the passage of time or the giving of notice or both, either a default
or event of default under any such provision, any applicable Laws or any
judgment, order, writ or decree or any contract or instrument, or require any
consent, waiver or approval thereunder, or give rise to a right to terminate
or accelerate the performance required by, or constitute an event which
results in the creation of any Lien, charge or encumbrance upon any asset of
any of the Companies. Each of the Company and the Subsidiary Guarantors
represents that it is not, and will not be, obligated for any finder's fee or
commission in connection with this transaction, except as disclosed in item
4.8 of the Disclosure Schedule.
The Fund will not be responsible for any finder's fee or commission.
4.9 Disclosure. The Company has fully provided the Fund or
its counsel with all the information which the Fund has requested for
evaluating an investment in the Company and all information which the Company
believes is reasonably necessary to enable the Fund to make such evaluation.
Neither this Agreement nor any other statements or certificates made or
delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
4.10 SEC Documents. The Company has provided the Fund with
copies of its Annual Report on Form 10-KSB for the year ended December 31,
1996, its Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1997 and June 30, 1997, the Schedule 13e-4 and the 1997 SB-2 (collectively,
the "SEC Documents"), each as filed with the SEC. As of the date of this
Agreement, such documents constitute all documents filed by the Company with
the SEC since December 31, 1996. The Company will promptly file with the SEC
all amendments to the SEC Documents, and any additional reports or other
documents that may be required under the rules and regulations promulgated by
the SEC. The Company will provide the Fund with copies of each Additional SEC
Document promptly upon the filing thereof. On the date of their respective
filings, the SEC Documents complied, and each Additional SEC Document will
comply, in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). None of the SEC
Documents contained, and none of the
13
Additional SEC Documents will contain, any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
In addition, the 1997 SB-2 complied in all material respects with the
requirements of the Securities Act on the date it was filed, and each
amendment filed thereto will comply in all material respects with the
requirements of the Securities Act on the date such amendment is filed. The
Company has complied, and will continue to comply, with all applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, with respect to the Tender Offer, and all applicable requirements
of the Exchange Act and the Securities Act with respect to the Contemplated
Public Offering.
4.11 No Material Adverse Changes. Since December 31, 1996,
there has been no material adverse change in the assets, properties, business,
operations, condition (financial or otherwise) or prospects of the Company or
any of the Subsidiaries and no event which is likely to result in any such
change is Known to the Company.
4.12 Prior Registration Rights. Except as provided on the
Disclosure Schedule and in the Registration Rights Agreement, the Company has
not granted or agreed to grant any registration rights, including piggyback
rights, to any person or entity.
4.13 Financial Statements. The Company has delivered to the
Fund its audited consolidated financial statements (consolidated balance sheet
and consolidated statements of operations, changes in stockholders' equity and
cash flows) at December 31, 1996 and for the year then ended and its unaudited
financial statements (consolidated balance sheet and consolidated statement of
operations) at and for the six-month period ended June 30, 1997 (collectively
the "Financial Statements"). The Financial Statements are complete and correct
in all material respects and have been prepared in conformity with GAAP, as in
effect at the date thereof, applied on a consistent basis throughout the
periods indicated. The Financial Statements accurately describe the financial
condition and operating results of the Companies as of the dates, and for the
periods, indicated therein, subject, in the case of the unaudited financial
statements, to normal year-end audit adjustments which will not in the
aggregate be material. Except as set forth in the Financial Statements, the
Companies have no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to June 30,
1997 that are listed in item 4.13 of the Disclosure Schedule or that do not,
individually, exceed $50,000 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, individually and in
the aggregate, are not material to the financial condition or operating
results of the Companies. The Companies maintain and will continue to maintain
a standard system of accounting established and administered in accordance
with GAAP.
4.14 Compliance with Laws. The Companies have been and are
maintained and operated (and all operations thereof have been conducted) in
conformity with all applicable Laws, except for such minor violations as could
not, in the aggregate, result in a material adverse change in the assets,
properties, business, operations, condition (financial or otherwise) or
prospects of the Company or any of the Subsidiaries. Each of the Company and
its Subsidiaries
14
holds all material licenses, franchises, permits and authorizations necessary
for the lawful conduct of its business. Each material license, franchise,
permit or authorization held by the Company or any of its Subsidiaries is
valid, and neither the Company nor any of its Subsidiaries has received any
notice that any federal, state, local or foreign governmental authority
intends to modify, suspend, cancel, terminate or not renew any such material
license, franchise, permit or authorization.
4.15 Insurance. The Disclosure Schedule attached hereto sets
forth a true and correct list of all insurance coverage maintained by or for
the benefit of the Companies, including, without limitation, with respect to
their operations or any incident, event or thing arising therefrom or relating
thereto, setting forth (a) the name of the carrier, (b) the nature and dollar
limits of the coverage, (c) the policy number and scheduled expiration date,
(d) the premium rate and date through which paid, (e) the named insureds
thereunder, and (f) the beneficiary, if any, named thereunder. All such
policies are in full force and effect; no notice of default or termination has
been given thereunder; and no event, occurrence or thing has occurred which,
with notice or the passage of time or both, could result in the early
termination thereof.
4.16 Transactions with Affiliates. Except for the agreements
listed in item 4.16 of the Disclosure Schedule, there are no agreements,
understandings, arrangements or proposed transactions between any of the
Companies and any director, officer or Affiliate thereof. Except as described
in item 4.16 of the Disclosure Schedule, no employment agreement or other
agreement with an Affiliate of the Companies contains any "change in control"
arrangement, or any other arrangement that would enable such employee or
Affiliate the right to compensation following voluntary or involuntary
termination of employment or the consummation of a change in control
transaction.
4.17 Solvency. The Company and its consolidated Subsidiaries
are, and immediately after the Closing will be, Solvent.
4.18 No Defaults. There does not exist any Event of Default
or Default.
4.19 Margin Regulations. No part of the proceeds of the Loan
will be used for any purpose that violates the provisions of any of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board of Governors.
4.20 Contemplated Public Offering. The Company has no reason
to believe that it will be unable to consummate the Contemplated Public
Offering. The Company has neither withdrawn the Contemplated Public Offering
nor received notification from the Underwriters (as defined in the 1997 SB-2)
of any event that could adversely affect the Contemplated Public Offering.
4.21 Compliance with ERISA. Each ERISA Affiliate has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No ERISA Affiliate has (i) sought a waiver of
15
the minimum funding standard under Section 412 of the Code with respect to any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any other benefit arrangement, or made any
amendment to any Plan or other benefit arrangement, which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code or (iii) incurred any liability under Title
IV of ERISA.
4.22 Taxes. All United States federal and state income tax
returns and all other material tax returns (including foreign tax returns)
which are required to be filed by or on behalf of any of the Companies have
been filed and all material taxes due pursuant to such returns or pursuant to
any assessment received by any of the Companies have been paid. The charges,
accruals and reserves on the books of the Companies in respect of taxes or
other governmental charges have been established in accordance with GAAP.
There are no examinations in progress or claims against the Company or any of
its Subsidiaries for any period or periods and no notice of any claim has been
received by any of the Companies. The federal tax returns of the Companies
have been audited through December 31, 1996, and no issues with respect to
such audits, or waivers of any statute of limitations, remain outstanding.
4.23 Not an Investment Company. None of the Companies is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.24 Leases. Except as disclosed on the Disclosure Schedule,
neither the Company nor any Subsidiary is a party to any lease of real or
personal property.
4.25 Environmental Matters. The costs and liabilities
associated with Environmental Laws (including the cost of compliance
therewith) have not had, and are unlikely in the future to have a material
adverse effect on the business, operations, properties, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, considered as
one enterprise. The Company and its Subsidiaries conduct their businesses in
compliance in all material respects with all applicable Environmental Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE FUND
5.1 Authorization. The Fund has all requisite power and
authority to enter into and perform this Agreement and the other Loan
Documents to which it is a party and the transactions contemplated hereby and
thereby. All organizational action on the part of the Fund necessary for the
authorization, execution and delivery of this Agreement and the other Loan
Documents to which the Fund is a party, and the performance of all obligations
of the Fund hereunder and thereunder have been taken. This Agreement and the
Registration Rights Agreement constitute, and when executed and delivered by
the Fund, the Guarantee, Pledge and Security Agreement will constitute, valid
and legally binding obligations of the Fund, enforceable in accordance with
their respective terms, except (i) as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws of general application affecting creditors' rights
generally, (ii) as enforceability may be
16
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification provisions in the Registration Rights Agreement may be limited
by applicable federal or state securities laws.
5.2 Investment Intent. The Fund is acquiring the Options to
be issued pursuant to the Option Agreement and, upon the Closing, will acquire
the Bridge Financing Note and any Additional Options for its own account, for
investment and not with a view to the distribution thereof. The Fund
understands that the Options, the Option Shares and the Bridge Financing Note
have not been registered under the Securities Act or any state securities law.
The Fund is an "accredited investor" as defined under the Securities Act.
ARTICLE VI
COVENANTS
6.1 Affirmative Covenants. So long as the Fund has any
obligation under Section 2.1, or any amount of principal or interest on the
Bridge Financing Note remains outstanding, or any fees payable and due under
Section 2.2, shall remain unpaid, each of the Company and the Subsidiary
Guarantors will:
(a) Corporate Existence. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, in full force and effect
its corporate existence and its rights (charter and statutory) and those of
each of its Subsidiaries.
(b) Maintenance of Property; Insurance. Except as provided
herein, preserve and maintain, and cause each of its Subsidiaries to preserve
and maintain, all of its properties, owned or leased, used or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted; and insure and keep insured, with financially sound and
reputable insurers, so much of its properties, in such amounts and against
such risks, as are usually and customarily insured by companies engaged in
similar businesses with respect to properties of similar character.
(c) Compliance with Law. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all Laws to which it is
subject.
(d) Further Assurances. Execute, acknowledge, deliver, file
and register at its own expense all such future agreements, instruments and
documents, and perform such acts, as the Fund shall reasonably deem necessary
or appropriate to effect the purposes of this Agreement and each other Loan
Document, and promptly obtain or make from time to time and maintain in full
force and effect at its own expense all licenses, permits, consents,
authorizations, approvals and filings as may be necessary or appropriate to
enable the Company to effect the Contemplated Public Offering as soon as
practicable and to comply with its other obligations hereunder and under each
other Loan Document.
17
(e) Keeping of Books. Keep proper books of record and
accounts, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Company and its Subsidiaries
in accordance with GAAP.
(f) Payment of Taxes, etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent (i) all taxes, assessments and governmental charges imposed upon it
or upon its property; (ii) all lawful claims which, if unpaid, might by law
become a Lien upon its property; provided, however, that neither the Company
nor any of its Subsidiaries shall be required to pay or discharge any such
tax, assessment, charge or claim that is being contested in good faith by
appropriate proceedings properly instituted and diligently conducted; and
(iii) maintain appropriate reserves in respect of taxes, assessments,
governmental charges and levies.
(g) Access to Records; Financial Statements. Provide the
Fund and its authorized representatives access to all books, records, offices
and other facilities and properties of the Company and its Subsidiaries, and
allow the Fund and such representatives to make such inspections thereof and
copies of and abstracts from such books and records, all during normal
business hours, as the Fund may request, and cause its officers to (i) make
themselves available to authorized representatives of the Fund to discuss the
business of the Company and its Subsidiaries and (ii) furnish the Fund and
such representatives with such financial and operating data, including all
monthly and quarterly financial statements used by the management of the
Company and its Subsidiaries, all reports and other information furnished to
members of the Company's Board of Directors and all other information with
respect to the financial condition, business and property of the Company and
its Subsidiaries, as the Fund may from time to time reasonably request. The
Company will provide the Fund with complete copies of all Additional SEC
Documents immediately upon the filing thereof.
(h) Notice of Certain Events. Promptly upon the Company
obtaining knowledge thereof, give notice to the Fund of (i) the occurrence of
any Default or Event of Default, (ii) any litigation, investigation or
proceeding affecting the Company or its Subsidiaries, or any default in any
obligation of the Company or any of its Subsidiaries, that in any such case
could reasonably be expected to have a material adverse effect either on the
Company's ability to perform any of its material obligations under this
Agreement or any of the Loan Documents or to consummate the Contemplated
Public Offering or on the business, operations, properties or condition
(financial or otherwise) of the Company and its Subsidiaries, considered as
one enterprise, or (iii) any event or matter that has resulted or may result
in a material adverse change either in the Company's ability to perform any of
its material obligations under this Agreement or any of the other Loan
Documents or to consummate the Contemplated Public Offering or in the
business, operations, properties or condition (financial or otherwise) of the
Company and its Subsidiaries, considered as one enterprise; and in each case
specified in clause (i), (ii) or (iii) promptly deliver an officers'
certificate, signed by the President or a Vice President and the Treasurer or
Secretary of the Company, specifying the nature of such event and the actions
that the Company has taken or proposes to take with respect thereto.
18
(i) Future Direct and Indirect Subsidiaries of the Company.
The Company shall cause each of its future direct and indirect Subsidiaries
(the "Future Subsidiaries") to become a party to this Agreement and the
Guarantee, Pledge and Security Agreement, such that each Future Subsidiary
will become a Subsidiary Guarantor under this Agreement and the Guarantee,
Pledge and Security Agreement and be subject to all the conditions of this
Agreement and the Guarantee, Pledge and Security Agreement applicable to
Subsidiary Guarantors.
(j) Consummation of the Acquisition and the Contemplated
Public Offering. The Company will (i) promptly file such amendments as may be
required to the Schedule 13e-4 to take into account the transactions
contemplated by this Agreement and the other Loan Documents; (ii) as promptly
as reasonably practicable, proceed to the purchase of the Warrants tendered in
the Tender Offer; (iii) immediately upon receipt of the proceeds of the Loan,
apply such proceeds to the purchase of the Warrants tendered in the Tender
Offer and, to the extent permitted by Section 2.6, any fees payable with
respect thereto; (iv) promptly file with the SEC an amendment to the 1997 SB-2
to take into account the transactions contemplated by this Agreement and the
other Loan Documents and any other developments required to be reflected in
1997 SB-2; and (v) use its best efforts to cause the 1997 SB-2, as so amended,
to become effective no later than November 1, 1997.
6.2 Negative Covenants. So long as the Fund has any
obligation under Section 2.1 or any amount of principal or interest of the
Bridge Financing Note remains outstanding, or any fees payable under Section
2.2 shall remain unpaid, neither the Company nor any of the Subsidiary
Guarantors will, except as expressly contemplated by the terms of this
Agreement:
(a) Operate Other Than in Ordinary Course. Operate its
business other than in the ordinary and usual course; or engage in any line of
business, or permit any of its Subsidiaries to engage in any line of business,
materially different from the lines of business carried on by the Company and
its Subsidiaries on the date hereof.
(b) Additional Indebtedness. Create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist, any Indebtedness
other than (i) Indebtedness under the Loan Documents and (ii) Indebtedness in
an amount not to exceed $750,000 in the aggregate, created or incurred on
terms reasonably acceptable to the Fund, so long as such Indebtedness
("Permitted Indebtedness") is (A) structurally subordinated and expressly
subordinated to the Bridge Financing Note and (B) the instrument or
instruments evidencing such Permitted Indebtedness expressly provide that such
Permitted Indebtedness will be converted into non-voting preferred stock of
the Company on any bankruptcy or reorganization of the Company.
(c) Investments, Loans and Advances. Make, or permit any of
its Subsidiaries to make, any advances or loans to, or investments (by way of
transfers of property, contributions to capital, acquisitions of stock,
securities or evidences of indebtedness or otherwise) in, any other Person
other than in the ordinary course of business, except that (i) direct and
indirect Subsidiaries of the Company may make loans, advances and other
transfers of assets to the Company and (ii) the Company and its Subsidiaries
may acquire and hold (A) securities issued or
19
directly and fully guaranteed or insured by the government of the United
States or any agency or instrumentality thereof having maturities of not more
than six months from the date of acquisition, and (B) commercial paper rated
A-1 or the equivalent thereof by Standard & Poor's Corporation or P-1 or the
equivalent thereof by ▇▇▇▇▇'▇ Funds Service, Inc. and in each case maturing
within six months after the date of acquisition.
(d) Dividends, Prepayments, etc. Declare or make any
dividend or other distribution on any shares of capital stock of the Company
or any class of capital stock of any direct or indirect Subsidiary of the
Company if less than a majority of the stock of such class is owned by the
Company or another Subsidiary of the Company; purchase, redeem, or otherwise
acquire for value (or permit any of its Subsidiaries to do so) any shares or
right to acquire shares of any capital stock of the Company (other than the
purchase of Warrants pursuant to the Tender Offer); make any voluntary
prepayment in respect of Indebtedness of the Company or any of its
Subsidiaries; or make any payment in respect of Indebtedness to an Affiliate,
including loans to the Company by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
(e) Issuance of Capital Stock. Issue, or permit any
Subsidiary to issue, any capital stock or any warrants, rights or options to
acquire any such stock, except pursuant to the Contemplated Public Offering
and the exercise of outstanding Warrants and outstanding stock options granted
under the 1996 and 1997 Stock Option Plans.
(f) Merger, Consolidation, Sale or Purchase of Assets. Merge
or consolidate with or into any other Person; dissolve or liquidate; convey,
transfer, lease or otherwise dispose of any of its property or assets other
than in the ordinary course of business; or acquire any property or assets of
any other Person other than in the ordinary course of business; or cause or
permit any of its Subsidiaries to do any of the foregoing.
(g) Limitation on Payment Restrictions Affecting
Subsidiaries. Except as set forth on the Disclosure Schedule, create or
otherwise cause or suffer to exist or become effective (or permit any of its
Subsidiaries to do so) any Lien or other encumbrance or restriction of any
kind on the ability of any Subsidiary to (i) pay dividends or make any other
distributions on such Subsidiary's capital stock or pay any Indebtedness owed
to the Company or any other Subsidiary, (ii) make loans or advances to the
Company or any other Subsidiary or (iii) transfer any of its property or
assets to the Company or any other Subsidiary.
(h) Liens. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien upon or with respect to any of its properties or assets, whether now
owned or hereafter acquired, other than (i) Liens arising by reason of (A)
taxes that are not yet due, or (B) security for payment of workmen's
compensation or insurance; and (ii) Liens of mechanics, materialmen, laborers,
employees or suppliers arising by operation of law incurred in the ordinary
course of business for sums that are not yet due.
(i) Transactions with Affiliates and Officers. Enter into,
or permit any of its Subsidiaries to enter into, any transaction or agreement
with any Affiliate or any officer or director of the Company or of any such
Affiliate; or enter into, renew or extend, or permit any of
20
its Subsidiaries to enter into, renew or extend, any agreement relating to the
sale, purchase or lease of any assets, property or services with any Affiliate
of the Company (other than a wholly-owned Subsidiary of the Company).
ARTICLE VII
EVENTS OF DEFAULT
7.1 Events of Default. If any of the following events (each
an "Event of Default") shall occur and be continuing:
(a) The Company shall fail to pay any amount of principal of
the Bridge Financing Note or shall fail to pay any fee provided for in Section
2.2, when each such payment is due; or shall fail to pay any amount of
interest on the due date thereof or within three calendar days after written
or oral notice thereof following such due date; or shall fail to pay any other
fees or other amounts payable under any Loan Document within five Business
Days after receipt of written notice of the amount and request for payment; or
(b) Any representation or warranty by the Company or any of
the Subsidiary Guarantors (or any of their respective officers) under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect when made or deemed made (i) after two calendar days' written
or oral notice thereof if such incorrect representation or warranty is of a
type that cannot be cured or (ii) after fifteen calendar days' written or oral
notice thereof if such incorrect representation or warranty is of a type that
can be cured but the Company or the Subsidiary Guarantor has failed to cure
such incorrect representation or warranty; or
(c) The Company or any Subsidiary Guarantor shall fail to
perform or observe any of their respective covenants, when such covenants are
in effect hereunder, contained in Section 6.1 or 6.2 (i) after two calendar
days' written or oral notice thereof if such failure to perform or observe a
covenant by its nature cannot be cured or (ii) after fifteen calendar days'
written notice if such failure to perform or observe a covenant by its nature
can be cured but the Company or the Subsidiary Guarantor has failed to do so;
or
(d) The Company or any Subsidiary shall fail (i) to pay any
Indebtedness in an aggregate outstanding principal amount of more than
$100,000, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) and such
failure shall continue uncured or unwaived after the applicable grace period,
if any, specified in the agreement or instrument relating to such Indebtedness
or (ii) to perform or observe any term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any
such Indebtedness when required to be performed or observed, and such failure
shall continue uncured or unwaived after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness shall be declared to
be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof; or
21
(e) The Company or any of its Subsidiaries shall become not
Solvent or generally fail to pay, or admit in writing its inability to pay,
debts as they become due; or the Company or any of its Subsidiaries shall
apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, sequestrator, or other custodian for the Company or such Subsidiary
or any property of any thereof, or make a general assignment for the benefit
of creditors; or, in the absence of such application, consent or acquiescence,
a trustee, receiver, sequestrator, or other custodian shall be appointed for
the Company or any such Subsidiary or for a substantial part of the property
of any thereof and not be discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up, or liquidation
proceeding, shall be commenced in respect of the Company or any Subsidiary,
and, if such case or proceeding is not commenced by the Company or such
Subsidiary, such case or proceeding shall be consented to or acquiesced in by
the Company or such Subsidiary or shall result in the entry of an order for
relief or shall remain for 60 days undismissed; or the Company or any
Subsidiary shall take any corporate action to authorize, or in furtherance of,
any of the foregoing; or
(f) A final judgment shall be rendered against the Company
or any Subsidiary which, in whole or in part, is not fully covered by
insurance, and such uninsured portion, together with all other uninsured
portions of all other outstanding final judgments rendered against the Company
or any Subsidiary exceeds an aggregate of $250,000, and either, within 60 days
after entry thereof, such judgment shall not have been discharged or execution
thereof stayed pending appeal, or, within 60 days after the expiration of any
such stay, such judgment shall not have been discharged;
then, (i) in any such event, other than an Event of Default specified in
Section 7.1(e), the Fund may by notice to the Company declare the Bridge
Financing Note, all interest thereon and all other payments payable thereunder
and under each other Loan Document to be forthwith due and payable, whereupon
the Bridge Financing Note, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by the
Company and each of the Subsidiary Guarantors and (ii) in any Event of Default
specified in Section 7.1(e), the Bridge Financing Note, all interest thereon
and all other payments thereunder and under each other Loan Document shall
ipso facto become and be forthwith due and payable without declaration or
other act on the part of the Fund.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments, etc. No amendment or waiver of any provision
of any Loan Document nor any consent to any departure by the Company or any of
the Subsidiary Guarantors therefrom shall in any event be effective unless the
same shall be in writing and signed by the Fund, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
22
8.2 No Waiver; Remedies. No failure on the part of the Fund
to exercise, and no delay in exercising, any right hereunder or under any
other Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder or under any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
8.3 Indemnification. Each of the Company and the Subsidiary
Guarantors hereby jointly and severally agrees to indemnify the Fund and its
general partner, and each officer, director, employee, partner, agent and
Affiliate of the Fund and its general partner (the "Indemnified Parties") for,
and hold each Indemnified Party harmless from and against: (i) any and all
damages, losses, claims and other liabilities of any and every kind,
including, without limitation, judgments and costs of settlement, and (ii) any
and all out-of-pocket costs and expenses of any and every kind, including,
without limitation, reasonable fees and disbursements of one counsel for such
Indemnified Parties (selected by the Fund) (all of which expenses shall be
advanced to the Fund at such times as the Fund is presented with such
expenses), in each case, arising out of or suffered or incurred in connection
ahead with (A) any investigative, administrative or judicial proceeding or
claim brought or threatened relating to or arising out of the Fund's making of
the Loan pursuant to the Bridge Financing Note, or relating to or arising out
of this Agreement, or the other Loan Documents or the transactions
contemplated hereby and thereby, or (B) any material inaccuracy or alleged
inaccuracy in any representation or warranty of the Company or any of the
Subsidiary Guarantors made or incorporated by reference in this Agreement or
the other Loan Documents or any material breach or alleged breach by the
Company or any of the Subsidiary Guarantors of any covenant or agreement made
or incorporated by reference in this Agreement or the other Loan Documents.
8.4 Termination.
(a) This Agreement may be terminated at any time prior to
the Closing:
(i) by the mutual consent of the Fund and the
Company;
(ii) by the giving of notice by the Fund at any
time after December 31, 1997 (or such later date as shall
have been agreed to in writing by the parties hereto), if at
the time notice of such termination is given the Closing
shall not have been consummated;
(iii) by the Fund, if there has been a material
misrepresentation or material breach on the part of the
Company or any of the Subsidiary Guarantors in any of the
representations, warranties, covenants or agreements of the
Company or any of the Subsidiary Guarantors set forth herein
or in any other Loan Document, or if there has been any
material failure on the part of the Company or any of the
Subsidiary Guarantors to comply with its obligations
hereunder or in any other Loan Document; provided that the
Company has received written notice of any such alleged
misrepresentation or breach at least three Business Days
prior to the date of termination by the Fund; or
23
(iv) by the Company if there has been a material
misrepresentation or material breach on the part of the Fund
in any of the representations, warranties, covenants or
agreements of the Fund set forth herein, or if there has
been any material failure on the part of the Fund to comply
with its obligations hereunder; provided that the Fund has
received written notice of any such alleged
misrepresentation or breach at least three Business Days
prior to the date of termination by the Company.
(b) In the event of termination of this Agreement pursuant
to Section 8.4 prior to the Closing, the Company and the Subsidiary Guarantors
will continue to be obligated to pay the fees provided for in Section 2.2(a)
and Section 2.2(c) and to pay the expenses of the Fund as provided in Section
8.12. The provisions of Section 8.3 of this Agreement will also survive any
termination pursuant to this Section 8.4.
8.5 Survival of Warranties. The warranties, representations,
covenants and agreements of the Company and the Subsidiary Guarantors and the
Fund contained in or made pursuant to this Agreement, including the provisions
of Section 8.3 and 8.12, shall survive the execution and delivery of this
Agreement and the Closing. The warranties, representations, covenants and
agreements of the Company and the Subsidiary Guarantors contained in Sections
4.4, 4.6, 4.8, 4.10, 4.17, 4.18, 4.19 and 4.23, the corresponding provisions
of any certificate or document delivered pursuant to Section 3.2(a) and the
provisions of Sections 8.3 and 8.12 shall survive the repayment of the Bridge
Financing Note and all amounts payable under this Agreement and the other Loan
Documents. Neither any investigation by or on behalf of the Fund nor the
receipt by the Fund of any data or information from the Company or any of the
Subsidiary Guarantors, shall in any way affect the right of the Fund to rely
on the representations, warranties, covenants and agreements of the Company or
any of the Subsidiary Guarantors or the right of the Fund to terminate this
Agreement as provided in Section 8.4(a)(iii).
8.6 Successors and Assigns. The Fund and each assignee of
the Fund may, without the consent of the Company or any of the Subsidiary
Guarantors, assign its rights under this Agreement, in whole or in part, in
connection with any sale or transfer to an affiliate or a partner, and,
following such assignment, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Neither the Company nor any of the Subsidiary
Guarantors may assign any of their rights or obligations under this Agreement.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.7 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements
among New York residents entered into and to be performed entirely within New
York.
24
8.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.10 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon receipt by the party to be notified or five days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified (i) if to the
Company or any of the Subsidiary Guarantors, at the following address:
The Marquee Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Fund, at the following address:
The ▇▇▇▇ Alternative Income Fund, L.P.
1776 On The Green
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Partner
(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
25
or at such other address as any of the parties may designate by 10 days'
advance written notice to the other parties.
8.11 [Intentionally omitted.]
8.12 Expenses. The Company agrees to pay upon presentation,
all out-of-pocket fees and reasonable expenses incurred by the Fund in
connection with this Agreement and the transactions contemplated hereby
(whether or not the transactions contemplated hereby are consummated)
including, without limitation, the reasonable fees and expenses of counsel for
the Fund incurred in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby (including the
reasonable fees and expenses of Proskauer Rose LLP; provided that such legal
fees are not to exceed $50,000). If the Fund shall employ attorneys, or incur
other costs and expenses for the collection of payments due or to become due,
or for the enforcement or performance or observance of any obligation or
agreement of the Company under this Agreement or the other Loan Documents, the
Company agrees that it will pay, on demand, the fees of such attorneys
together with all other costs and expenses incurred by the Fund in connection
with the collection of amounts due under this Agreement and the other Loan
Documents.
8.13 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
8.14 Entire Agreement. This Agreement, including the
Disclosure Schedule, Exhibits, and other documents referred to herein which
form a part hereof, constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
8.15 Submission to Jurisdiction. Each of the Company and the
Subsidiary Guarantors hereby irrevocably submits to the jurisdiction of any
state or federal court sitting in the County of New York, State of New York in
connection with any action or proceeding arising out of or relating to this
Agreement or any other Loan Document or the transactions contemplated hereby
or thereby.
8.16 Waiver of Jury Trial. Each of the Company and the
Subsidiary Guarantors hereby irrevocably waives all right to a trial by jury
in any action, proceeding or counterclaim arising out of or relating to this
Agreement or any other Loan Document or the transactions contemplated hereby
or thereby.
26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers there unto duly
authorized, as of the date first above written.
THE MARQUEE GROUP, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
and Treasurer
SUBSIDIARY GUARANTORS
ATHLETES AND ARTISTS, INC.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title:
SPORTS MARKETING & TELEVISION
INTERNATIONAL, INC.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title:
THE ▇▇▇▇ ALTERNATIVE INCOME
FUND, L.P.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Attorney in Fact