As filed with the Securities and Exchange Commission on February 27, 1997.
Registration No. 33-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ILLUMINATED MEDIA INC.
(Name of Small Business Issuer in its Charter)
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Minnesota 7319 41-1744582
(State of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code Number) Identification No.)
15 South Fifth Street, Suite 715, Minneapolis, Minnesota 55402
Telephone 612/338-3554 FAX 612/370-0381
(Address and telephone number of principal executive offices,
and of intended principal place of business)
Robert H. Blank, Chief Executive Officer
Illuminated Media, Inc.
15 South Fifth Street, Suite 715, Minneapolis, Minnesota 55402
Telephone 612/338-3554 FAX 612/370-0381
(Name, address and telephone number of agent for service)
-----------------------
Copies to:
Richard P. Keller, Esq. Michael L. Berde, Esq./Kevin S. Spreng, Esq.
Keller & Lokken, P.A. Furber Timmer Zahn, PLLP
175 E. 5th Street, Suite 763 333 South Seventh St., Suite 2100
St. Paul, Minnesota 55101 Minneapolis, MN 55402
(612) 292-1001 (612) 338-3965
(612) 292-8912 (FAX) (612) 330-0959 (FAX)
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Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount Offering Aggregate Amount of
Securities to be Registered To Be Price Per Offering Registration
Registered Unit Price Fee
________________________________________________________________________________
Common Stock 1,500,000 $1.00 $ 1,500,000 $ 517.24
Warrants to Purchase
Common Stock 1,500,000 -- -- --
Common Stock (Underlying
Warrants) 3,000,000 2.75 8,250,000 2,844.83
Common Stock (Underlying
Underwriter's Warrant) 150,000 1.20 180,000 62.07
Warrants to Purchase Common
Stock (Underlying Underwriter's
Warrant) 150,000 -- -- --
Common Stock (Underlying
Warrants within Underwriter's
Warrant) 300,000 2.75 825,000 284.48
TOTAL: $10,755,000 $3,708.62
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ILLUMINATED MEDIA, INC.
ILLUMINATED MEDIA INC.
Registration Statement on Form SB-2
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Cross Reference Sheet Between Items of Form SB-2
and Prospectus as to 1,500,000 Units
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Item in Form SB-2
1. Front of Registration Statement and Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors
4. Use of Proceeds
5. Determination of Offering Price
6. Dilution
7. Selling Security Holders
8. Plan of Distribution
9. Legal Proceedings
10. Directors, Executive Officers, Promoters and Control Persons
11. Security Ownership of Certain Beneficial Owners and Management
12. Description of Securities
13. Interest of Named Experts and Counsel
14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
15. Organization Within Last Five Years
16. Description of Business
17. Management's Discussion and Analysis or Plan of Operation
18. Description of Property
19. Certain Relationships and Related Transactions
20. Market for Common Equity and Related Stockholder Matters
21. Executive Compensation
22. Financial Statements
23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Caption or Location in Prospectus
Front of Registration Statement; front cover page of Prospectus
Inside Front and outside back Cover Page
Summary of Offering; High Risk Factors
Use of Proceeds
Risk Factor No. 13; Description of Securities
Dilution
Not Applicable
Underwriting
Business - Legal Proceedings
Management
Principal Shareholders
Description of Securities
Not applicable
Management-Limitation of Directors' Liability; Item 28.c.
of Registration Statement
Certain Transactions
Business
Management's Discussion and Analysis
Business-Property
Certain Transactions
Cover Page of Prospectus; Description of Securities
Management - Executive Compensation
Financial Statements
Not Applicable.
Legend Required by Item 501(a)(8) of Regulation S-B:
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities
laws of any such State.
For the sake of clarity and because of the limitations inherent in the
type of binding used for the registration statement, the legend required by
Item 1 of Form SB-2 and Item 501(a)(8) of Regulation S-B is set forth above.
No copies of any of the Preliminary Prospectuses contained herein will be
delivered to any person without such legend appearing on the cover page
thereof in compliance with Item 501(a)(8) of Regulation S-B.
Should any copy of the Preliminary Prospectus be delivered to any person,
it will include on its cover the above legend and the following words:
Preliminary Prospectus, dated February 26, 1997
Subject to Completion
Preliminary Prospectus ILLUMINATED MEDIA INC.
Dated February 26, 1997
Subject to Completion Maximum Offering: l,500,000 Units
Minimum Offering: 550,000 Units
Each Unit Consists of One Share of Common Stock
and One Redeemable Warrant for the Purchase of Two Shares of Common Stock
Each warrant entitles the holder to purchase at any time for a period of
five years following the date of this Prospectus two shares of Common Stock at
an exercise price per share of $2.75 each. The warrants are subject to
redemption by the Company for $.01 per warrant, on 30 days written notice,
if the closing bid price of the Common Stock exceeds $3.25 per share, for
any 20 consecutive trading days prior thereto. See "Description of Securities".
Prior to this offering, there has been no market for the Company's
securities. The Warrants may not be exercised unless a current registration
statement is in effect with respect to the underlying shares of Common Stock.
THE UNITS OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK
FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Underwriting Proceeds
Public Commissions(1) to Company(2)
Per Unit $1.00 $.10 $.90
Total Minimum (3) $550,000 $55,000 $495,000
Total Maximum (3) $1,500,000 $150,000 $1,350,000
(1) In addition, the Company has agreed to (a) pay the Underwriter, a
non-accountable expense allowance equal to 3% of the total offering price of
Units sold in this offering (of which $5,000 has already been advanced);
(b) sell to the Underwriter, for nominal consideration, a five-year Warrant
to purchase up to 10% of the number of Units sold in this offering at $1.20
per Unit; and (c) indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933. See "Underwriting".
(2) Before deducting expenses of the offering, payable by the Company,
estimated at $70,000, not including the underwriter's non-accountable expense
allowance.
(3) The Units are being offered on a "best-efforts, minimum-maximum" basis
through the Underwriter and possibly a group of selected dealers. There is
no minimum investment requirement. All proceeds of this offering will be
deposited in an impoundment account with BankWindsor, Minneapolis, Minnesota
pending sale of a minimum of 550,000 Units on or before 60 days from the date
of this Prospectus (which period may be extended an additional 30 days upon
mutual consent of the Company and Underwriter), and if not sold within such
period, will be returned to purchasers without interest or deduction.
The Units are offered by the Company through its agent, the Underwriter,
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, and to certain other conditions.
TUSCHNER & COMPANY, INC.
The date of this Prospectus is March ____, 1997.
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[Photos of Skyway Ad platforms as installed and used in different locations-to
be added]
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SUMMARY OF OFFERING
This summary, which is intended for quick reference only and does not
contain all information needed for an investment decision, is qualified in
its entirety by the more detailed information and financial statements,
including notes, appearing elsewhere in this Prospectus.
The Company: Illuminated Media Inc. (the "Company") is an advertising media
company that sells a form of indoor, out-of-home, advertising called "SKYWAY
ADS", which is pictured on the inside front and rear covers of this
Prospectus. See "BUSINESS". The Company's principal executive offices are
located at 15 South 5th Street, Suite 715, Minneapolis, Minnesota 55402 and
its telephone number is (612) 338-3554, FAX (612) 370-0381.
The Offering: A minimum of 550,000 and a maximum of 1,500,000 Units at $1.00
per Unit. Each Unit consists of one share of Common Stock and one redeemable
warrant for the purchase of two shares of Common Stock, exercisable for five
years at $2.75 per share. The warrant is immediately exercisable and, 30
days after the date of this Prospectus, is transferable separately from the
Common Stock. The warrants are subject to redemption by the Company for $.01
per warrant, on 30 days written notice, if the closing bid price of the
Common Stock exceeds $3.25 per share for any 20 consecutive trading days
prior thereto. See "DESCRIPTION OF SECURITIES."
Common Stock Outstanding and To Be Outstanding: 220,000 shares of Common
Stock, and 204,999 shares of Convertible Preferred Stock (which automatically
convert to Common Stock in connection with this offering), are outstanding as
of January 31, 1997 (70,000 shares of Common Stock were outstanding as of
November 30, 1996); 770,000 shares and 1,720,000 shares (or 974,999 shares
and 1,924,999 shares after automatic conversion of preferred stock) will be
outstanding, respectively, if the minimum or the maximum number of Units offered
is sold, exclusive of the possible exercise of outstanding warrants for the
purchase of 155,000 shares (145,667 shares as of November 30, 1996), and the
possible conversion of convertible notes held by two former shareholders and
one current shareholder to acquire up to 435,210 and 19,345 shares (443,485
and 19,345 shares as of November 30, 1996), and the possible exercise of any
warrants included as part of the Units or the Underwriter's Unit Purchase
Option. See"CAPITALIZATION".
Use of Proceeds: Net proceeds of $408,500, if the minimum number of Units
offered is sold, and $1,235,000, if the maximum number of Units offered is
sold, will be used to repay indebtedness, develop products, and expand into
new geographic areas. See "USE OF PROCEEDS".
Risk Factors: This investment is highly speculative and very risky. See "HIGH
RISK FACTORS".
Selected Financial Information:
Nine Months Ended 11/30/96(Unaudited) As of 11/30/96 (Unaudited)
Revenues $ 181,012 Current Assets $ 51,606
Operating Expenses 274,152 Current Liabilities $ 478,638
Operating Loss ( 93,140) Shareholders Deficit $(631,589)
Other Expense 27,160 Working Capital $(427,032)
Net Loss $(120,300)
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HIGH RISK FACTORS
The proposed operations and business of the Company will be subject to a
high degree of risk, thereby making the securities offered hereby a highly
speculative investment. Stated below are, in the Company's view, the
principal risk factors affecting this offering, which must be considered
carefully by prospective investors prior to making an investment decision.
Prospective investors should be able to afford, without causing personal
financial difficulty, the entire loss of their investment in the Units.
1. Prior Operating Losses. The Company had operating losses of
$157,238 and $77,332, and net losses of $174,843 and $78,662, for its fiscal
years ended February 29, 1996, and February 28, 1995, respectively, and
operating losses of $93,140 and $40,365, and net losses of $120,300 and
$46,576, for its nine month fiscal periods ended November 30, 1996, and
November 30, 1995, respectively. Whether the Company can, even with the
proceeds of this offering, reverse these losses, cannot be known with
certainty at this time. See "BUSINESS-Corporate History" and "FINANCIAL
STATEMENTS".
2. Negative Net Worth and Negative Working Capital. At November 30,
1996, the Company had a negative net worth of $631,589 and a negative working
capital position of $427,032. As such, unless this offering or some other
type of financing is completed in the near future, the Company may be unable
to continue in business. See "FINANCIAL STATEMENTS" and "BUSINESS".
3. Auditor's Opinion Reflects Uncertainty as to Going Concern Status.
The report of the Company's independent auditor on the Company's financial
statements as of February 29, 1996, states that, "the Company's recurring
losses, negative cash flows from operations and net working capital
deficiency raise substantial doubt as to its ability to continue as a going
concern." The Company has an urgent need for additional capital in order to
continue its operations. See"FINANCIAL STATEMENTS".
4. Dependence Upon Key Person. The Company will be dependent upon the
services of its Chief Executive Officer, Robert H. Blank. The loss of Mr.
Blank's services would have a material adverse effect upon the Company's
operations. The Company does not have a key person life insurance policy on
the life of Mr. Blank, nor does it have an Employment and Non-Compete Agreement
with Mr. Blank. However, the Company expects to purchase a key person life
insurance policy on the life of Mr. Blank upon the completion of this
offering. See"MANAGEMENT".
5. Competition. In essence, the Company sells an advertising medium,
and, as such, competes for advertiser's dollars with all other advertising
media, whether broadcast and print media or "out-of-home." Although the
percentage of dollars received by out-of-home media (the smallest of all
advertising categories) has increased recently, this trend could easily
change.
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There are no significant barriers to competition by other companies
in the Company's advertising category. Competitors who enter this market are
likely to be larger, more strongly capitalized, and have stronger
relationships with building managers and national advertisers than the
Company. It will be difficult, expensive, and time consuming for the Company
to develop and expand its position in the marketplace. See "BUSINESS-Marketing"
and "BUSINESS-Competition".
6. Need to Create Sales Organization. In order to obtain advertising
from national accounts, the Company believes it will have to expand into
other markets and market venues. To do that, the Company will need to expand
its sales organization, and there can be no assurance that the Company will
be able to recruit, train, motivate, and retain effective sales people to
accomplish this goal.
7. Capital Requirements for Planned Expansion. The Company intends to
expand its advertising concept to other cities. The Company also expects to
spend a significant amount of capital on developing and implementing new
technologies (such as interactive touchscreen) for use in conjunction with
its SKYWAY ADS displays. Each of these proposed activities will require the
expenditure of substantial funds by the Company. Accordingly, additional
equity or debt financing may be required in the future. There can be no
assurance that additional capital from any source will be available in the
future, if and when needed by the Company, or that such capital will be
available on terms acceptable to the Company. In addition, the Company is in
immediate need of capital to meet its operating expenses and to undertake its
plans for expansion in the foreseeable future. See "USE OF PROCEEDS" and
"BUSINESS".
8. Sufficiency of Offering Proceeds/Need for Additional Financing. It
is anticipated that the proceeds of this offering will last approximately 12
months if the minimum of $550,000 is raised and 24 months if the maximum of
$1,500,000 is raised. Thereafter, the Company might require additional
capital to meet its needs either through borrowing or through additional sales
of the Company's securities. No assurances can be given that such sources of
capital will be available at all, or on terms acceptable to the Company .
See "USE OF PROCEEDS" and "BUSINESS-Competition".
9. Entry Into New Geographic Markets. Until recently, the Company
marketed its SKYWAY ADS displays almost exclusively in the Twin Cities area,
particularly downtown Minneapolis, downtown St. Paul, and at the Mall of
America in Bloomington, Minnesota. The Company intends to market in other
states and cities, which may not be as receptive to the SKYWAY ADS concept.
This will require familiarity with new markets and the development of new
techniques and tools, not previously used by the Company, for managing distant
locations.
10. Potential Inability to Manage Growth Effectively. The Company
hopes to significantly expand its business, in part with the proceeds of
this offering. Such anticipated expansion will likely place further demands
on the Company's existing management and operations. The Company's future
growth and profitability will depend, in part, on its ability to
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successfully manage a growing sales force and implement management and
operating systems which react efficiently and timely to short and long-term
trends or changes in its business. There can be no assurance that the
Company will be able to effectively manage any expansion of its business.
See "USE OF PROCEEDS" and "MANAGEMENT."
11. Current Registration Statement and State Registration Required to
Exercise Warrants. Purchasers of Units will be able to exercise the Warrants
only if a current Registration Statement relating to the shares of Common
Stock underlying the Warrants is then in effect and only if such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of Warrants
reside. The Warrants have no value without a current, effective Registration
Statement. Although the Company will use its best efforts to maintain the
effectiveness of a current Registration Statement covering the shares of Common
Stock underlying the Warrants, there can be no assurance that the Company
will be able to do so. The Company will be unable to issue shares of Common
Stock to those persons desiring to exercise their Warrants if a current
Registration Statement covering the securities issuable upon the exercise of
the Warrants is not kept effective or if such securities are not qualified or
exempt from qualification in the states in which the holders of the Warrants
reside.
12. Possible Redemption of Warrants. The Warrants are subject to
redemption at any time by the Company at $.01 per Warrant on 30 days prior
written notice if the closing bid price of the Common Stock exceeds $3.25 per
share for each of 20 consecutive trading days, at any time prior to such
notice. If the Warrants are redeemed, Warrant holders will lose their right
to exercise the Warrants during the balance of their five-year term except
during such 30 day redemption period. If the Company redeems the Warrants,
it would force the holders to exercise the Warrants at a time when it may not
be advantageous for them to do so, or to sell the Warrants at the then market
price, or to accept the nominal redemption price. See "DESCRIPTION OF
SECURITIES-Warrants".
13. Minnesota Anti-Takeover Law. The Company is subject to the
provisions of the Minnesota Business Corporation Act, which includes
provisions relating to "control share acquisitions" and restricting
"business combinations" with "interested shareholders". Such provisions
could have the effect of discouraging an attempt to acquire control of the
Company. See "DESCRIPTION OF SECURITIES-Minnesota Anti-Takeover Law".
14. Limitations of Liability. The Company's Articles of Incorporation
provide, as permitted by Minnesota law, that a director of the Company shall
not be personally liable to its shareholders for monetary damages for breach
of his or her fiduciary duty of care as a director, with certain exceptions.
In addition, the Company's bylaws provide for mandatory indemnification of
directors and officers to the fullest extent permitted by Minnesota law. See
"DESCRIPTION OF SECURITIES Indemnification."
15. Determination of Offering Price. The offering price per Unit and
the exercise price of the Warrants was determined arbitrarily by the Company
and the Underwriter, and is not based
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upon net worth, earnings, or other established investment criteria of value.
Accordingly, there can be no assurance that the Units can be resold at the
offering price, if at all. See "DESCRIPTION OF SECURITIES".
16. Broker-Dealer Sales of Company's Registered Securities. The Company's
securities are regulated by a Securities and Exchange Commission rule that
imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with a spouse). For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, such rule may affect the ability of
broker-dealers to sell the Company's securities and also may affect the
ability of purchasers in this offering to sell their securities in the
secondary market, if any. See "DESCRIPTION OF SECURITIES".
17. Outstanding Options and Warrants; Dilution. As of the date of this
Prospectus, the Company has outstanding warrants, exercisable at $.50 per
share, to purchase a total of 155,000 shares of Common Stock, and convertible
notes held by two former shareholders and one current shareholder which would
allow them to acquire up to 443,485 and 19,345 shares, respectively, of
Common Stock at $.40 per share and $.75 per share, respectively, and upon
successful completion of this offering the Company will have an Underwriter's
Unit Purchase Option outstanding. In addition, the Company's 204,999 shares
of Preferred Stock automatically convert to Common Stock in connection with
this offering. The Company anticipates that many of the warrants may be
exercised in the near future. In addition, there are currently outstanding
220,000 shares of Common Stock, for which the owners paid substantially less
than the offering price for the Units. Purchasers of the Units will incur
immediate substantial dilution from the offering price. The price which the
Company will receive for its Common Stock upon exercise of such options and
warrants will be significantly less than the market price for the Company's
Common Stock at the time such options and warrants are exercised. While such
options and warrants are outstanding, the holders thereof are given, at
little or no cost, the opportunity to profit from any rise in the market
price of the Company's Common Stock without assuming the risk of ownership.
To the extent that any such options or warrants are exercised, the book
value and voting interests of the Company's shareholders will be diluted
proportionately. See "DILUTION", "MANAGEMENT" and "DESCRIPTION OF SECURITIES
- Stock Options and Warrants".
18. Underwriter's Unit Purchase Option. The Company has agreed to sell
to the Underwriter, for nominal consideration, a Unit Purchase Option to
purchase up to 10% of the Units sold in this offering at an exercise price of
$1.20 per Unit (the "Unit Purchase Option"). The Company has agreed to
register at its expense under the Securities Act of 1933, as amended,and
applicable state securities acts, the Units and the shares of Common Stock
purchasable upon exercise of the warrants included in the Units. Both the
warrants and any profits realized by the Underwriter on the sale of the
shares underlying the warrants could be considered additional
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underwriting compensation. For the life of the warrants, the holders thereof
are given, at nominal cost, the opportunity to profit from the difference, if
any, between the exercise price of the warrants and the market price for the
Common Stock with a resulting dilution in the interest of existing
shareholders. The terms on which the Company could obtain additional capital
during the exercise period of the Underwriter's Unit Purchase Option may be
adversely affected, as the holders of the Underwriter's Unit Purchase Option
may be expected to exercise them when, in all likelihood the Company would be
able to obtain any needed capital by a new placement of securities on terms
more favorable than those provided by the Underwriter's warrants. See
"UNDERWRITING"..
19. Limited Experience of the Underwriter. The Underwriter commenced
business in May, 1994 and has completed only one public offering to date.
The Underwriter's relative inexperience in conducting public offerings could
have an adverse effect on the "due diligence" investigation of the Company
which the Underwriter has conducted, although the Underwriter believes that
such investigation has been thorough on its part. Moreover, although the
Underwriter believes it has exercised care in establishing the Price to
Public of the Units offered hereby, the Underwriter's inexperience in
establishing the price of the Units in this offering, and possibly in acting
as a market-maker after the effective date of this offering, could have an
adverse effect on the market value of the Units offered hereby following the
completion of this offering. See "UNDERWRITING".
20. Absence of Dividends. The Company has never declared or paid a
cash dividend on its common stock. The Company intends to retain any
earnings for use in the operation and expansion of its business and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future, including on the shares of Common Stock offered as part of the Units.
See"DIVIDEND POLICY."
21. No Stabilization. In connection with this offering, the
Underwriter will not over allot or effect transactions which are intended
to stabilize or maintain the market price of the Common Stock, the Warrants,
and/or the Units at a level above that which might otherwise prevail in the
open market. See "UNDERWRITING".
22. Limited Manufacturing Experience. To date, the Company's SKYWAY ADS
platforms have only been manufactured in limited quantities and have not been
manufactured on a commercial scale, and platforms with DISCOVERSCREEN
enhancements have never been manufactured. As a result, there can be no
assurance that the Company will not encounter difficulties in obtaining reliable
and affordable contract manufacturing assistance and/or in scaling up its
manufacturing capabilities, including problems involving production yields,
per-unit manufacturing costs, quality control, component supply, and
shortages of qualified manufacturing personnel. Any such difficulties could
also result in the inability of the Company to satisfy any customer demand
for its products in a cost-effective manner and would likely have a material
adverse effect on the Company.
-8-
23. Potential Inability to Adapt to Changes in Technology. The Company's
market is subject to rapid technological change and intense competition.
There can be no assurance that the Company will be able to keep pace with
this change. The Company's products could become subject to technological
obsolescence and there can be no assurance that the Company will be able to
adapt to rapidly changing technology. If the Company is unable for
technological or other reasons to develop products on a timely basis in
response to technological changes, or if the Company's products or product
enhancements do not achieve market acceptance, the Company's business would
be materially and adversely affected.
24. Limited Sources of Supply. The Company has only limited agreements
with vendors to supply components and subassemblies on a continuing basis.
Should production requirements increase, the need for additional components
and subassemblies will increase. In the future, the Company will attempt to
(i) consummate formal supply agreement relationships, although there can be
no assurance that it will be able to do so, and (ii) obtain multiple sources
of supply for most of its components, although it may be necessary to have
limited sources ofsupply for certain components. Should a key supplier be
unwilling or unable to supply any such components or subassemblies in a
timely manner, the Company would be materially adversely affected. See
"BUSINESS MARKETING SALES."
25. Technology. The Company intends to acquire with some of the proceeds
of this offering, a certain number of units of a proposed new product called
DISCOVERSCREEN. The Company does not own this product and does not control
its development or improvement. A prototype of the DISCOVERSCREEN product
has not yet been built. Technological difficulties in developing, installing
and maintaining new products are common, and may occur.
26. Effect on Market Price of Shares Eligible for Future Sale. Sales
of significant amounts of Common Stock in the public market or the perception
that such sales will occur could adversely affect the market price of the
Common Stock or the future ability of the Company to raise capital through
an offering of its equity securities. Of the 1,924,999 shares of Common
Stock to be outstanding upon completion of a maximum offering, only the
1,500,000 shares offered as part of the Units will be eligible for immediate
sale in the public market without restriction (unless some of such shares are
held by "affiliates" of the Company within the meaning of Rule 144 under the
Securities Act). The remaining 424,999 shares of Common Stock held by
existing stockholders upon completion of this offering will be "restricted
securities" as that term is defined in Rule 144 under the Securities Act. Of
these shares, 169,999 are currently eligible for resale in the open market
pursuant to Rule 144 under the Securities Act beginning 90 days after the
date of this Prospectus. An additional 105,000 shares will become eligible
for resale under Rule 144 on or prior to December 31,1997 and an additional
150,000 shares will become eligible for resale under Rule 144 on or prior to
December 31, 1998. The 155,000 shares of Common Stock underlying warrants
issued in conjunction with bridge financing will be eligible for sale under
Rule 144 two years after exercise of the warrants. The Company and certain of
its stockholders have agreed that they will not sell, directly or indirectly,
any Common Stock, without the prior written consent of the Underwriter
(which will not be unreasonably withheld),
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for a period of one year from the date of this Prospectus. In additon, certain
warrant holders have the right, subject to certain conditions, to participate
in future Company registrations and to cause the Company to register certain
shares of Common Stock owned by them upon exercise of currently outstanding
warrants. See "DESCRIPTION OF SECURITIES-Shares Eligible for Future Sale."
27. No Intellectual Property Protection/Possible Unavailability of
Licenses. The Company holds no patents and has not made any patent
applications. The Company believes that its use of the technology described
in the DISCOVERSCREEN, IM3-D and LASERTAINMENT do not infringe upon patents
or rights held by others, but the Company cannot give any assurances that
such infringements do not exist.
While the Company believes it will not be necessary to acquire additional
technologies in order to market its current planned products, there is no
assurance that the person or organization owning any additionally required
technologies will grant licenses to the Company at all, or, if licenses are
available, that the terms and conditions of such licenses will be acceptable to
the Company.
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SELECTED FINANCIAL DATA
The following selected financial data of the Company at and for each of the
fiscal yearsended February 29, 1996 and February 28, 1995 have been derived
from audited financial statements of the Company. The selected financial
data is qualified by reference to, and should be read in conjunction with,
the financial statements for such periods and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", included elsewhere in this Prospectus.
Nine Month Periods Ended
Year Ended Year Ended November 30, November 30,
February 29, February 28, 1996 1995
1996 1995 (Unaudited) (Unaudited)
Revenues $ 236,932 $ 134,411 $ 181,012 $ 174,808
Operating expenses:
General and administrative -
related party 33,660 48,520 -- 33,660
General and admini-
strative 360,510 163,223 274,152 181,513
Total operating
expenses 394,170 211,743 274,152 215,173
Loss from operations (157,238) ( 77,332) ( 93,140) ( 40,365)
Other Income (expense):
Interest expense ( 17,239) ( 3,813) ( 33,485) ( 6,964)
Miscellaneous income 2,442 2,483 6,325 753
Loss on disposal of property
and equipment ( 2,808) - - -
Total other income
(expense)( 17,605) ( 1,330) ( 27,160) ( 6,211)
Net loss $(174,843) $( 78,662) $(120,300) $( 46,576)
Net loss per share $( .44) $( .15) $( 1.72) (1) $( .09)
Weighted average number of
shares outstanding 399,096 510,000 70,000 (1) 507,589
Notes:
1. The figures shown are as of November 30, 1996. As of the date of this
Prospectus, there were 220,000 shares outstanding, and if such number of shares
had been outstanding at November 30, 1996, the net loss would have been $(.55)
per share.
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Management's Discussion and Analysis of Financial Condition
and Results of Operation
This discussion of the financial condition and the results of
operations of the Company should be read in conjunction with, and is
qualified in its entirety by, the financial statements and notes thereto
included elsewhere within the Prospectus, and the material contained in the
"Risk Factors" and " Business" sections of the Prospectus.
OVERVIEW
The Company is an advertising media company that started operations in
1993. It leases space for its advertising platforms from buildings, to which
it pays concessions, typically, 20% of advertising revenue. Each platform
has three panels, of which two are available for rent to advertisers and the
third is used for public service purposes, such as a map, or an ad for a non-
profit/charitable organization.
The Company intends, with the proceeds of the offering to expand its
operation to several other metropolitan markets, to add enhanced features to
its platforms, and to increase the percentage of panels rented to advertisers.
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEAR ENDED FEBRUARY 29, 1996
WITH THE FISCAL YEAR ENDED FEBRUARY 28, 1995
Revenues
Revenues for fiscal 1996 increased by 76% to $236,932 as compared to
$134,411 for fiscal 1995. The increase resulted from the additional
advertising sold due in part to the Company's installation of approximately
22 additional standard platforms. During these periods, per panel fees
charged by the Company did not change. As of February 28, 1995 the Company
had approximately 27 platforms and 50% of available ad panels were leased. As
of February 29, 1996 the Company had approximately 49 plaforms and 48% of
available ad panels were leased.
Loss from Operations
The loss from operations for fiscal 1996 increased by 103% to ($157,238) as
compared to a loss of ($77,332) for fiscal 1995. The increased loss from
operations resulted from an increase of $182,427, or 86% in operating
expenses, from $211,743 for fiscal 1995 to $394,170 for fiscal 1996. The
increase in operating expenses related primarily to a one-time stock grant to an
officer valued at $60,000, increased mimimum concession fees paid to
buildings, (subsequently, the Company has negotiated some reduced minimum
concession fees) increased uncollectible
-12-
accounts receivable, promotional costs, and legal fees related to the Stock
Redemption Agreement.
Other Income and Expenses
Other income (expense) for fiscal 1996 increased by $16,275, to ($17,605)
as compared to ($1,330) for fiscal 1995. The increased expense resulted
primarily from increased interest expense of ($17,239) in fiscal 1996 as
compared to ($3,813) in fiscal 1995, which arose from debt of approximately
$350,000, most of which was incurred in connection with the re-purchase
of shares of Common Stock owned by the previous majority shareholders and the
settlement of certain accounts payable owed to them and, secondarily, to fund
operations pending a proposed public offering.
COMPARISON OF THE NINE MONTH FISCAL PERIOD ENDED NOVEMBER 30, 1996
WITH THE NINE MONTH FISCAL PERIOD ENDED NOVEMBER 30, 1995 (UNAUDITED)
Revenues
Revenues for the nine month period ended November 30, 1996, increased by
3.5% to $181,012 as compared to $178,808 for the nine month period ended
November 30, 1995. All revenue was generated by the sale of ad space for
the SKYWAY ADS platforms. The number of platforms, and the per panel fees,
remained relatively constant during these periods.
Loss from Operations
The loss from operations for the nine month period ended November 30,
1996, increased by 131% to ($93,140) as compared to a loss of ($40,365) for
the nine month period ended November 30, 1995. The increased loss resulted
from an increase of $58,979, or 27% in operating expenses, from $215,173 for
the 1995 period to $274,152 for the 1996 period. The increase in operating
expenses resulted from an increase of approximately $65,000 in uncollectible
accounts; increased concession fees paid to buildings; increased costs
(primarily,audit and professional) associated with the proposed public offering,
and travel costs incurred in anticipation of a possible expansion of the
Company's market. Management does not, in the future, expect to have
problems of a similar magnitude, because of a new credit policy, as occured
in this period with respect to uncollectible accounts.
Other Income and Expense
Other income (expense) for the nine months ended November 30, 1996,
increased by $20,949, or 337%, to ($27,160) as compared to ($6,211) for the
nine months ended November 30, 1995. The increased expense resulted
primarily from increased interest expense of ($33,485) for the period ended
November 30, 1996, as compared to ($6,964) for the period ended November 30,
1995. The interest expense increase resulted from debt of approximately
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$335,000, most of which was incurred in connection with the re-purchase of
shares of Common Stock owned by the previous majority shareholders and the
settlement of certain accounts payable owed to them and, secondarily, to fund
operations pending a proposed public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current capital resources have been derived from the private
sale of debentures (which were accompanied by warrants for the purchase of
Common Stock) and from loans provided by financial institutions. As of
November 30, 1996, the Company had approximately $15,000 in cash.
Since inception the Company incurred net losses because of start-up
expenses, fixed costs and financing costs. The Company is currently
experiencing negative cash flow from operations (see "Statement of Cash Flow")
and expects that such situation will continue until its debt is
reduced and until a combination of expanded marketing efforts and product
enhancements, all of which will be financed from the proposed public
offering, lead to positive cash flow. As of November 30, 1996 the
approximate break-even point for sales was $23,000 per month less one time
expenses and less debt maintenance.
The Company's future capital requirements relate to two major goals, each
of which is reflected in the structure of the proposed public offering. If
the minimum offering is sold, the Company will be able to pay off much of
its debt, and commence modest additional marketing efforts. The Company
expects that as a result of a minimum offering the Company can expand
into a few new markets and put in place enough new units such that it would
expect to generate cash flow sufficient to meet its on going operations and
continue the modest expansion. If the maximum offering is sold, the Company
will be able to pay off all of its debt, significantly expand its marketing
efforts and significantly expand its range of enhanced product improvements.
The Company's management expects that if a minimum offering is sold,
proceeds will last a minimum of twelve months, and if a maximum offering is
sold, proceeds will last a minimum of twenty-four months (unless additional
capital were to be needed for expansion).
The Company does not currently have in place any financing arrangements for
working capital needs nor does the Company have any unused sources of liquidity
other than its cash reserves and on-going sales. There is no arrangement for
the Company's on-going capital equipment purchases. The Company believes it
may be possible to develop a strategic alliance with a lager company that is
in the out-of-home market but has not yet entered the markets identified by
the Company. The Company could bring, to such a strategic alliance, product
knowledge and trained personnel.
The Company does have sufficient unused capacity with its existing ad
spaces such that, if more were rented, it could generate revenue sufficient
to cover its operating expenses and make minor capital investments. However,
management's primary goal is to acquire the capital
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which will enable the Company to acquire units, both standard and specialized,
and place them in new markets, thereby expanding capacity and leading to
significantly greater revenues.
If the Company's proposed public offering is not completed in the near
future, it will seek alternate sources of financing, such as a private
placement of equity, to provide its capital resources.
-15-
DILUTION
The following discussion assumes that all of the purchase price for each
Unit is allocated solely to the one share of Common Stock included therein;
that none of the purchase price is allocated to the warrants; that the
204,999 shares of Preferred Stock, which automatically convert to Common
Stock in connection with this offering, have been converted to 204,999 shares
of Common Stock; and that the Common Stock bonus accrued at November 30, 1996
for 150,000 shares of Common Stock, not issued until December, 1996, was
outstanding. In other words, this discussion assumes that 424,999 shares of
Common Stock are outstanding prior to this offering.
The Net Tangible Book Value of the Company at November 30, 1996 was
$(631,589), or approximately $(1.49) per share (assuming that there were then
424,999 shares of Common Stock outstanding). "Net Tangible Book Value"
represents the tangible assets of the Company (total assets less intangible
assets) less all liabilities, excluding contingent liabilities. After giving
effect to the sale of a minimum of 550,000 shares, and a maximum of 1,500,000
shares at $1.00 per share and the receipt of net proceeds therefrom,
respectively, of $408,500 and $1,235,000, the Adjusted Net Tangible Book
Value of the Company at November 30, 1996 would have been $(223,089), or
$(.23) per share, assuming sale of the minimum offering; and Net Tangible Book
Value of $603,411, or $.31 per share if the maximum offering is sold. This
represents an immediate increase in the Net Tangible Book Value of $1.26 per
share to current holders of Common Stock and an immediate dilution of $1.23
per share to new investors, if the minimum is sold. If the maximum offering
had been sold, there would have been an immediate increase in the Net
Tangible Book Value of $1.80 per share to current shareholders, and an immediate
dilution of $.69 to new investors. Dilution per share is determined by
subtracting net tangible book value per share after the offering from the
offering price as illustrated by the following table:
Minimum Maximum
Public Offering price per share . . . . . . . . . . . . . $ 1.00 $ 1.00
Net Tangible Book Value per share
at November 30, 1996. . . . . . . . . . . . $ (1.49) $(1.49)
Increase attributable to offering. . . . . . . . .$ 1.26 $ 1.80
Net Tangible Book Value
per share after offering . . . . . . . . . . . .$ ( .23) $ .31
Dilution to new investors . . . . . . . . . . . . $ 1.23 $ .69
The following table sets forth, as of January 31, 1997, a comparison of
the respective investments of persons who are presently shareholders of the
Company, and of persons who purchase Units, on both a minimum and maximum
basis, in the public offering.
-16-
Total Percent
Amount Capital No. of Percent of Total
Paid Invest- Shares of Total Shares Held
Per Share ment Held Capital Invested After Closing
Minimum/Maximum Minimum/Maximum
CURRENT
INVESTORS
Common (1)
Shareholders$ .32 $ 70,500 220,000 10.3%/4.3% 22.6%/11.4%
Preferred(2)
Shareholders .30 61,500 204,999 9.0%/3.8% 21.0%/10.7%
Average or
Total .31 132,000 424,999 19.3%/8.1% 43.6%/22.1%
PUBLIC
INVESTORS(3)
Upon Completion of
Minimum
Offering 1.00 550,000 550,000 80.7% 56.4%
Total $682,000 974,999 100% 100%
Maximum 1.00 1,500,000 1,500,000 91.9% 77.9%
Offering
Total $1,632,000 1,924,999 100% 100%
(1) Reflects the issuance of 70,000 shares for $10,500 cash and 150,000 shares
for services valued at $60,000.
(2) These shares automatically convert to shares of Common Stock in connection
with this offering.
(3) No value is assigned to the Warrants included as part of the Units.
The foregoing discussion assumes: (i) no exercise of the Warrants
included in the Units; (ii) no exercise of the Underwriter's Unit Purchase
Option; and (iii) no exercise of currently outstanding options and warrants
to purchase Common Stock. The issuance of shares upon the exercise of such
options or warrants may result in additional dilution to shareholders. See
"Capitalization", "Underwriting" and "Description of Securities - Stock
Options and Warrants".
-17-
USE OF PROCEEDS
The net proceeds to the Company from the sale of Units offered hereby,
after deducting underwriting commissions, the underwriter's non-accountable
expense allowance and the estimated offering expenses payable by the Company,
are estimated to be $1,235,000, assuming the maximum offering is sold, and
$408,500 if the minimum is sold. The Company intends to use the net proceeds
from this offering substantially as follows:
If Minimum Sold If Maximum Sold
Repayment of Debt $306,149 (1) $ 503,052 (2)
Marketing and
Sales Promotion (3) 30,000 421,000
Product Development
and Introduction (4) 55,000 240,000
Accumulated dividends to
preferred shareholders 10,000 10,000
Working Capital 7,351 60,948
Total $408,500 $1,235,000
(1) Includes $135,000 in principal amount of 10% subordinated debentures which
mature on various dates in early 1997, and $171,149 in bank loans (which
include bank loans of $135,000, long term debt of $23,485 and current portion
of $12,664, as of November 30, 1996). The proceeds of these debentures and
loans were used for "bridge financing" and working capital pending the
completion of the Company's public offering. See "FINANCIAL STATEMENTS".
(2) Includes the items mentioned in footnote (1), above, plus $177,394 (as of
November 30, 1996) in principal amount of 11% notes to Lease Brothers
interests which are payable monthly through the year 2003, and $19,509 in
Notes due shareholders, as of November 30, 1996. The obligation to the Lease
Brothers was incurred in November, 1995, as part of a stock redemption
agreement. See "CERTAIN TRANSACTIONS" and "FINANCIAL STATEMENTS".
(3) Includes sales materials, travel, sales and support staff and advertising.
(4) Includes IM 3-D, DiscoverScreen, and Lasertainment.
The amounts set forth above reflect the Company's present proposed
application of
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proceeds. The actual expenditure of proceeds may vary from the amounts
indicated above, depending upon factors such as costs for marketing, the extent
to which operating revenues are generated, and the extent to which the
Company uses its present cash on hand.
Pending utilization of the proceeds as described above, the funds will be
invested temporarily in government securities, certificates of deposit, or
other similar financial instruments.
-19-
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1996, and, as adjusted, to reflect the sale of the minimum and
maximum number of Units offered hereby.
As Adjusted
Outstanding as of Minimum Maximum
November 30, 1996 Offering Offering
Bank debt $135,000 $ -0- $ -0-
10% Debentures 135,000 -0- -0-
Notes-Shareholders 19,509 19,509 -0-
Current Portion
long-term debt 33,178 20,514 -0-
Long-term debt (1) 23,485 -0- -0-
Long-term debt-
related party 156,880 156,880 -0-
Total short and
long-term debt 503,052 196,903 -0-
Redeemable convertible preferred stock (2):
Series A; 99,999
shares outstanding30,000 -0- -0-
Series B; 105,000
shares outstanding 31,500 -0- -0-
Total redeemable
preferred stock 61,500 -0- (2) -0- (2)
Shareholders' equity (deficit):
Common stock, 10,000,000 shares
authorized and 70,000
issued and
outstanding 700 9,750 (3) 19,250 (3)
Additional paid-in
capital 1,345 522,295 1,339,295
Accumulated equity
(deficit) (633,634) (633,634) (633,634)
Total shareholder
equity (deficit) (631,589) (101,589)(4) 724,911(5)
Total Capitalization $( 67,037) $ 95,314 $724,911
Number of Shares of Common
Stock Outstanding 70,000 974,999 (6) 1,924,999 (6)
(1) Does not include real estate lease obligations for SKYWAY ADS platforms
nor office space.
(2) 265,000 shares of Preferred Stock, stated value $.30 each, are authorized;
and automatically convert into an equivalent number of shares of Common Stock in
connection with this offering, shown under "as adjusted".
(3) Subsequent to November 30, 1996, an additional 150,000 shares of Common
Stock relating to a stock bonus,previously authorized and accrued at November
30, 1996, were issued.
(4) Reflects application of estimated net proceeds of 408,500 resulting from
sale of minimum number of Units.
(5) Reflects application of estimated net proceeds of 1,235,000 resulting from
sale of maximum number of Units.
(6) Does not include the possible exercise of outstanding warrants for the
purchase of up to 145,667 shares(155,000 shares as of the date hereof), nor
the possible conversion of convertible notes into 462,830 shares(based on
November 30, 1996 note balances), nor the possible exercise of any warrants
included as part ofthe Units offered hereby, or the Underwriter's Unit
Purchase Option.
-20-
BUSINESS
In General
Illuminated Media Inc. (the "Company" or "IMI") is an advertising media
company that has developed and is selling a new form of "out-of-home"
advertising called "SKYWAY ADS". The Company's business involves the
acquisition of leased spaces accessible to large numbers of pedestrians,
the installation and maintenance of advertising platforms, and the marketing and
sale of advertising used on those platforms. Photos of the platforms are
contained on the inside front and rear covers of this Prospectus.
The Company was incorporated in the State of Minnesota on March 9, 1993.
The most typical form of "out-of-home" advertising is billboards, large
displays intended to attract the attention and influence the spending
decisions of passing motorists. SKYWAY ADS are intended to attract the
attention and to influence the spending decisions of individuals passing on
foot. Each SKYWAY ADS "platform" consists of three back-lit panels which hold
transparent advertising messages. SKYWAY ADS are placed in skyway corridors and
shopping centers, and can also be placed in parking ramps, bus and train
stations, airports, and wherever there is a high volume of pedestrian
traffic. SKYWAY ADS are presently used at locations throughout the central
business/shopping districts of Minneapolis and St. Paul, Minnesota and at
the Mall of America in suburban Bloomington, Minnesota.
Background:
Advertising is often broken down into three categories: broadcast, print
and "out-of-home". The first two categories include television, radio,
newspapers, magazines, direct mail, telemarketing, and new forms such as ads on
the Internet. Examples of out-of-home advertising are billboards along
public highways, transit and airport posters, and storefront signs. SKYWAY
ADS are a form of out-of-home advertising directed toward individual
consumers in metropolitan areas who are moving about on foot.
Many metropolitan areas now have buildings connected by "skyways", and
tunnels or concourses. The use of these skyways and other connections has,
in many cities, created a new form and pattern of pedestrian traffic that
does not use city streets or sidewalks. The Company calls these types of
metropolitan areas, "Networked Cities."
Before the advent of skyways, or similar connections, pedestrian traffic
in cities took place along city sidewalks, or, in the case of suburban areas,
in large enclosed malls. In the downtown areas of American cities that are
inter-connected by skyways or underground concourses, most pedestrian traffic
moves through those skyways or concourses. This allows pedestrians, whether
shoppers, workers, visitors, or residents, to walk around a central business
district, from building to building, without going outside, and without using
city streets or sidewalks.
-21-
In addition to the convenience for individuals traveling in downtown areas
by foot, the development of downtown areas connected by skyways or concourses
has brought advantages to building owners and business interests in the area
as well. The development of connected downtowns was, in fact, a competitive
response to suburban shopping malls, by offering a similar free flow of
pedestrian traffic, unimpeded by vehicle traffic and by affording protection
from inclement weather. Although no one portion of a downtown area typically
has as large an open space as that in a typical suburban mall, collectively
there are usually as many shops and stores "indoors" within the connected
area as in any one suburban mall. The Company is of the view that the 52
blocks which are connected by skyway in downtown Minneapolis make it the largest
"shopping mall" in the world. "Networked Cities" such as Minneapolis create a
market for a new type of advertising which the Company is trying to deliver
with its SKYWAY ADS platforms.
Although individual stores and buildings have long used different
advertising media to reach pedestrians, skyways and tunnels create a new
category of wall space that is not within individual stores. This new
category, which consists of walls along corridors and around public
areas, is typically controlled by the building owner. This new category has,
in the Company's view, created a new market for a different kind of
advertising media.
Although the Company's SKYWAY ADS platforms were originally designed for
skyways and downtown corridors, the Company has placed some of its platforms
in the Mall of America (the largest enclosed mall in the United States).
The Company intends to continue the exploration of shopping and suburban
malls as a second major type of market for its platforms.
The Company acquires, from building owners, in the areas where it operates,
the right to use wall space for the purpose of installing platforms. Space is
typically acquired under the terms of a 2 to 3 year lease and involves the
payment to the building owner of a percentage of the revenues received, often
with a minimum rental.
After the lease is obtained, the Company installs one or more of its
platforms. This requires making the necessary electrical connections and
hanging the platform. After installation, the Company arranges for regular
maintenance, inspection, and cleaning of the platform.
After platforms are in place, the Company attempts to sell advertising for
its platforms. It uses its own sales persons, and attempts to sell both to
advertisers directly and to agencies.
The Skyway Ads Platform and Related Products
Each SKYWAY ADS advertising platform has three 24 inch by 36 inch panels.
It has a slim profile, extending no more than four inches from the wall. It
has interior lighting, known in the advertising industry as "backlit".
Platforms fit on the walls of skyway corridors, shopping malls (entrances and
interiors), building lobbies, and transit/transportation facilities. The basic
SKYWAY ADS platform holds three transparency ads in a sectored format, although
a non-sectored format is also available.
-22-
The Company has announced the availability of two new modifications for its
SKYWAY ADS platform. One is a touchscreen interactive display called Discover
Screen . The other is a thin film three-dimensional process called IM3-D.
Both of these devices are designed to fit within the standard SKYWAY ADS
platform.
DiscoverScreen
The DiscoverScreen is based on recently developed technology already used
in other products. Earlier technology could not, however, be placed within a
four inch deep compartment, and could only be used in places, such as kiosks,
that had more than four inches of depth. The DiscoverScreen allows passing
pedestrians to push any one of several on-screen buttons which cause various
types of information to appear on a screen. Then, depending on the interests
and preferences of the user, additional information can be obtained, either on
the
screen, or in a printed format. Until recently, this technology, allowing
use of the DiscoverScreen within the confines of the Company's four inch
SKYWAY ADS platform, was not available.
The Company has engineering drawings of DiscoverScreen, and has ordered the
production of a prototype. The Company will, depending on the number of Units
sold in this offering, purchase a number of DiscoverScreen units with some of
the proceeds of this offering. See "Use of Proceeds."
The Company expects that DiscoverScreen will appeal to passing individuals,
and also allows the Company to sell an additional form of advertising space.
IM3-D
The IM3-D product is a thin film transparency, which presents a three-
dimensional image to passing individuals. IM3-D costs substantially more to
produce than standard transparencies used in SKYWAY ADS platforms, thereby
presenting a barrier to the Company's sales to advertisers to date. The
Company has prototypes of the IM3-D product which it shows to advertisers,
but it has not yet installed any. The IM3-D product will fit in the standard
SKYWAY ADS platform. The Company has obtained an exclusive license to use this
product for commercial advertising purposes.
Markets
As of November 30, 1996, there were 52 SKYWAY ADS platforms in place in the
Minneapolis-St. Paul, Minnesota metropolitan area, 24 in the downtown skyway
system of Minneapolis, 8 in St. Paul, and 20 at the Mall of America in
Bloomington, Minnesota.
Contracts have been signed, or are in the final stages of negotiation, for
several platforms to be placed in the Calhoun Square specialty shopping mall
in Minneapolis, and in the Des Moines Building in Des Moines, Iowa. The
Company has investigated the possible use of SKYWAY ADS
-23-
in, among other cities, Dallas, Houston, Cincinnati, Sioux City, Iowa and
Winnipeg.
An article in the September 30, 1996, edition of Advertising Age magazine,
which is the industry's primary trade publication, stated that "out-of-home"
advertising is the smallest media sector when compared to broadcast and
print, but that it is the second fastest growing sector in the advertising
business. The article said that 1995 expenditures by all advertisers amounted
to $160.9 billion, of which the "out-of-home" category amounted to $1.11
billion, or 0.7% of the total, which was an increase from 0.6% in 1994.
The Company's three major target market sectors are Networked Cities,
suburban shopping malls and office buildings, and Business Improvement
Districts.
"Networked Cities"
Networked Cities have developed or are developing their downtown areas on
theMinneapolis model; that is, the core blocks of retail, commercial and office
development areconnected by a series of skyways and/or concourses (tunnels).
Among the "Networked Cities" that the Company has identified so far are:
Minneapolis/St. Paul; Duluth and Rochester, Minnesota; Des Moines and Sioux
City, Iowa; Dallas and Houston, Texas; Rochester, New York; Atlanta, Georgia;
Charlotte, North Carolina; Cincinnati, Ohio; and the Canadian cities of Calgary,
Edmonton, Montreal, Toronto and Winnipeg. There can be no assurance that the
Company will be successful in placing SKYWAY ADS platforms in these cities or
in selling SKYWAY ADS advertising.
Suburban Shopping Malls and Office Buildings
The Company has installed 20 SKYWAY ADS platforms at the entrances to the
Mall of America in Bloomington, Minnesota. It has an agreement with Simon
Property Group, the manager of the Mall of America to install SKYWAY ADS
platforms, on a trial basis in three more properties managed by the same
company: The Pavilion, in San Jose, California; Newport Centre, in Jersey
City, New Jersey; and Miller Hill Mall, in Duluth, Minnesota. Each of these is
a smaller sized suburban mall, but it represents a possible expansion into this
market category. The same management company owns and/or manages several other
suburban mall properties around North America.
The Company will explore expansion into shopping malls and other retail
properties owned and/or managed by other property managers as well. The
Company has also identified suburban office building lobbies as having
appropriate characteristics for SKYWAY ADS units with Discoverscreen.
Business Improvement Districts
The Company has received substantial interest in the DiscoverScreen product
from a
-24-
diverse group of smaller cities and Business Improvement Districts ("BIDs) in
larger cities. BIDs have been established in recent years to develop sections
of many larger cities through tax incentives and other inducements. Examples
of BIDs are New York City (34th Street BID and Times Square BID); Los Angeles
(Fashion District BID); and Santa Monica, California.
The Company also intends to take SKYWAY ADS and DiscoverScreen into
suburban office buildings and similar properties.
Selling Ad Space
The Company currently sells ad space to local and national accounts through
its full-time staff of four, as of December 31, 1996. A Manager of Direct
Marketing directs the telemarketing effort, which establishes meetings with ad
agencies and potential advertisers. The Company uses walking tours of skyway or
Mall of America locations, and/or videotape production of such locations as
some of its sales tools.
The Company expects to add a Director of Sales, who will develop and
supervise a small staff of sales representatives and a Director of Properties
and Operations, who will locate new markets and properties for the Company
and oversee the administration of all markets and properties in which the
Company has a presence.
Prospective Joint Marketing Ventures
The Company has reached written agreement for a joint sales program with
the publishers of Skyway News, a weekly newspaper distributed free to
workers, shoppers and others who utilize the skyway systems in downtown
Minneapolis and St. Paul. Under the proposed agreement, sales personnel from
Skyway News will attempt to sell ad space for DiscoverScreen panels to their
current local and national accounts in the Minneapolis-St. Paul area.
Although the Company and Skyway News will share the revenue stream, the
Company will benefit from the sales efforts of Skyway News personnel.
The Company has reached written agreement for a joint marketing agreement
with Lasertainment, Inc., of Roseville, Minnesota to market its laser imaging
services to the advertising community. Lasertainment is a production company
specializing in industrial shows and special events, both indoor (closing
time shows at shopping malls and/or at certain skyway locations) and outdoor
(walls of buildings in downtown locations). The Company would market the
Lasertainment services to several advertisers at the same location, as an
adjunct to its existing out of home, indoor SKYWAY ADS platform.
Plans for Expansion
The Company intends to use a significant amount of the net proceeds of this
offering to expand its products and services into all identified markets:
Networked Cities, Suburban Shopping
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Malls and office buildings, and BIDs.
Within the following two years, the Company plans to expand into another
ten Networked Cities in North America and to substantially expand its presence
into numerous BIDs and suburban office centers and shopping malls.
The Company plans to place SKYWAY ADS units with interactive DiscoverScreen
in additional suburban shopping malls within the first year after the completion
of this offering.
Competition
The Company is offering advertisers what it considers a relatively new and
effective medium for advertising directed at a relatively well defined group of
potential buyers. Even so, the Company competes for advertising dollars with
all other forms of advertising. This means that the Company is vulnerable to
two major competitive threats: either advertisers could decide to direct more
of their advertising dollars to other media, or strong competitors could enter
the Company's existing marketplace or its potential markets before the Company
does.
The advertising industry is categorized into broadcast, print and "out-of-
home" media. The first two include television, magazines, newspapers, radio,
telemarketing and Internet, all of which compete in some sense, with the
Company for a limited number of advertising dollars. Out-of-home includes
billboards and other signage, roadside and rooftop billboards and other
advertising signage, each of which also competes with the Company.
There are no barriers to entry into the Company's marketplace by strong
competitors, who can be expected to have much larger capital and larger sales
organizations, so that they can obtain leased space more readily, and once
obtained, can sell more readily to national and regional advertisers.
Intellectual Property Protection
The Company has no patented products. The Company has applied for
trademark protection for the names Illuminated Media Inc., DiscoverScreen,
IM3-D, and SKYWAY ADS.
Regulation
Generally, display advertising such as that engaged in by the Company is
not subject to regulation. However, some municipalities require, or may
require, local licensing, or pre-installation approval. The Company expects
to be able to comply with substantially all of such regulation in a cost-
effective manner.
-26-
Legal Proceedings
The Company is not presently a party to any material pending legal
proceedings.
Employees
As of December 31, 1996, the Company had four full-time employees.
Property
The Company leases approximately 1,500 square feet of office in downtown
Minneapolis that it considers adequate for its current needs.
The Company owns all of the SKYWAY ADS platforms which it uses.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information with respect to each of
the Directors and Executive Officers of the Company:
Name Age Position(s) Held
Robert H. Blank 55 Chief Executive Officer, Director
Richard D. Kothe 44 President, Chief Financial Officer,
Director
Kenneth Olsen 35 Director
Gail Emerson 48 Director
Mark Verplaetse 44 Director
Mark Hepburn 34 Director
Steve Unverzagt 43 Director
Robert H. Blank has been a director and officer of the Company since it was
founded in 1993. In November, 1995 he became Chairman of the Board of Directors
and Chief Executive Officer. Prior to 1993, Mr. Blank served, for three
years, as Chief Financial Officer of the Coborn Trust in St. Cloud,
Minnesota. Prior to that, Mr. Blank spent over 12 years in the securities
industry, ten years as a registered representative with various broker dealer
firms and two years with the Minnesota Department of Commerce.
Richard D. Kothe has been an officer and director of the Company since
January, 1996. Prior to joining the Company, Mr. Kothe served as the
President of the Kemps Marigold Credit Union of Minneapolis from 1993 to
1995. From 1991 to 1993 he was the President of his own firm, CU-Tech, which
provided strategic and technology consulting services to small and medium size
financial institutions with emphasis on credit unions. In the previous 10
years, Mr. Kothe worked in the marketing of technology services for companies
including Anacomp and First Financial Management Corp. as well as three years
with Citicorp/Citibank. Mr. Kothe has worked for or provided marketing and
consulting services to financial institutions since 1975.
Kenneth A. Olsen is the Director of Sales and Marketing for Staff-Plus,
Inc., Minneapolis, Minnesota. He was appointed to the Board of Directors of
Illuminated Media Inc. in December, 1995. Mr. Olsen received a B.A. degree in
Education from the University of Minnesota-Duluth in 1985, and began his
career in sales with Herman's World of Sporting Goods in St. Paul. Mr. Olsen
remained in the sporting goods business until 1989, becoming District Sales
Manager for Team Choice Sporting Goods Stores for the Minnesota-Wisconsin
district. In 1989, Mr. Olsen joined Central Parking Systems in Denver,
Colorado as a commercial property manager. In 1992, he returned to Minnesota
and joined Staff-Plus. Mr. Olsen is active in the Minneapolis Downtown
Council and chairs two Downtown Skyway events.
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Gail Emerson is President of Emerson Enterprises, Inc., a globally-focused
marketing consulting firm she founded in 1988. She has a B.A. and M.S. from
the University of Wisconsin-Madison. Her 20-year carer includes 3M, Carmichael-
Lynch Advertising, and, most recently, her own business. She has successfully
directed new product launches, new company start-ups, strategic market
research projects, award-winning advertising campaigns, and innovative global
expansion programs. Ms. Emerson's areas of expertise include marketing
research, strategic marketing planning, and marketing communications. She
mentors local micro-enterprise entrepreneurs and is a volunteer team leader
for Global Volunteers, an international volunteer service organization.
Mark Verplaetse has spent the last 18 years working in the computer
technology arena. He has been employed by Apertus Technologies in Minneapolis,
MN since 1994 providing service to Fortune 500 companies to develop and
integrate their MIS networks. From 1992 to 1994 Mr. Verplaetse was an
independent consultant working with Fortune 1000 companies in project
development for computer technologies. He also worked for Data Trend of Mpls,
MN from 1990 to 1992 as a Project Manager for MIS Development. Prior to that
he spent 14 years, beginning in 1976 with Deluxe Corp., working in management
of the MIS department.
Mark T. Hepburn has been in various sales and executive positions with
General Electric Company since 1985, and is currently Branch Manager of GE
Supply for the Oklahoma City and Tulsa districts, and is responsible for all
aspects of a $15 million wholesale distribution operation. Mr. Hepburn holds a
Bachelor of Engineering degree from the University of Minnesota's Institute
of Technology, and is a graduate of several GE programs, including the
Experienced Manager Course, Advanced Financial Management Seminar, and Modern
Marketing Program, among others. Mr. Hepburn is the oldest of two sons of
Robert H. Blank, Chairman and CEO of the Company.
Steve Unverzagt is currently Advertising Manager, Art Instruction Schools,
Minneapolis and is also the owner of Sun Consulting, Inc., which holds certain
marketing rights for 3-D technology currently being marketed by the Company.
Mr. Unverzagt has been Advertising and Promotions Manager for Rollerblade, Inc.,
and an account manager for Colle & McVoy Advertising, Inc., of Minneapolis, and
Grey Advertising, Inc.'s Minneapolis office. Mr. Unverzagt received his
Bachelor of Arts Degree from Augustana College, Sioux Falls, South Dakota,
and took graduate studies at the University of Minnesota Medical School (Bio-
Medical Research), and at South Dakota State University, Brookings, South
Dakota.
All directors of the Company hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified or
until their death, resignation, or removal from office. The officers of the
Company are appointed by the Board of Directors and hold office until their
successors are chosen and qualified or until death, resignation, or removal from
office. There are no family relationships among any of the directors and
officers except that Mark Hepburn is the son of Robert H. Blank.
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Executive Compensation
The following table sets forth all cash compensation paid by the Company,
for the fiscal year ended February 29, 1996, to each of the Company's executive
officers:
Other Annual Total
Name of Individual/Position Cash Compensation Compensation (1) Compensation
Robert H. Blank/ $42,700 $60,000 $102,700
Chief Executive Officer
(1) See fifth paragraph under "CERTAIN TRANSACTIONS."
When its financial resources and performance permit, the Company will
increase the compensation of its executive officers, and will possibly initiate
some type of performance-based bonus arrangement for their benefit.
Employment Agreements
Currently, the Company has no employment agreements with its two officers,
but it has adopted a form of employment agreement, and it expects to enter into
an employment agreement with such officers upon the completion of this offering.
Stock Option Plan
The Board of Directors has adopted a Stock Option Plan as a tool to attract
and retain key employees. As of the date of this Prospectus, no options have
been granted under such plan.
Compensation of Directors
Non-employee directors were not paid any fees or remuneration for services
as members of the Board of Directors during fiscal year 1996.
Limitation of Director's Liability
The Company has included provisions in its Articles of Incorporation and
Bylaws to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty (such provisions do
not eliminate liability for breaches of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, the improper payment of dividends or redemption of stock or
for any transaction from which the director derived an improper personal
benefit) and (ii) indemnify its directors and officers to the fullest extent
permitted by Minnesota law. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be
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permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
-31-
CERTAIN TRANSACTIONS
The Company was formed in March, 1993 by Michael Lease and Mark Lease (the
"Lease Brothers") and by Robert H. Blank, each of whom may be considered a
founder of the Company. The Company issued an aggregate of 490,000 shares to
such persons in consideration of services, valued at $4,900, rendered by them to
the Company.
Later in March, 1993, the Company acquired by assignment the rights of the
Lease Brothers to an Asset Purchase Agreement, whereby the Lease Brothers had
agreed to acquire the assets of Le Cole Indoor, a division of Le Cole, Inc. The
price for such assets was $29,330. Concurrently, the Company entered into a
Management Agreement with Lease Companies, a general partnership of the Lease
Brothers, pursuant to which an aggregate of $93,300 in management fees were
accrued through November, 1995, at which time the Stock Redemption Agreement,
described below was executed. Such Management Agreement was terminated in
November, 1995.
In November, 1995 the Company executed and closed a Stock Redemption
Agreement with the Lease Brothers, its two former major shareholders (who
were also, at that time, officers and directors of the Company), and with an
affiliated entity owned by them. Under such Agreement, the Company acquired
or $.40 per share, or an aggregate of $176,000, all 440,000 shares owned by the
Lease Brothers. In addition, the Company agreed to repay $109,300 in loans and
advances made by the Lease Brothers. The Company made an initial payment of
$100,000, and issued three 11% Promissory Notes for the balance of $185,300.
All of such notes have a term of seven years and three months, maturing on
March 1, 2003, are payable monthly, and are convertible at the option of the
Lease Brothers (the "Lease Option"), with respect to any principal amount then
outstanding, into shares of Common Stock of the Company at the rate of $.40 per
share. (At November 30, 1996, the principal amount of such notes, which
declines monthly, could have been converted into 443,485 shares of Common
Stock.) One of such notes, in favor of the affiliated entity, in the original
amount of $93,300, was secured by the assets of the Company and personally
guaranteed by Robert H. Blank, the Company's CEO. The Company will prepay
part of the Notes to the Lease Brothers, including the Note to the affiliated
entity, out of the proceeds of this offering, if greater than the minimum
number of Units offered is sold. See "USE OF PROCEEDS."
In November, 1995, in connection with the payment of $100,000 as part of
the closing of the Stock Redemption Agreement, the Company borrowed $150,000
from one individual pursuant to the terms of a 10% Promissory Note, secured
by all the assets of the Company and personally guaranteed by Robert H.
Blank, the Company's present CEO. As part of that transaction the Company
issued warrants for 50,000 shares at $.50 per share to such individual.
In February, 1996, the Board of Directors authorized the issuance of
150,000 shares of Common Stock, valued at $.40 per share, or $60,000, to
Robert H. Blank, Chief Executive Officer, as partial consideration for
services previously rendered by him.
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In May, 1996, the Company obtained bank loans in the aggregate amount of
$135,000, personally guaranteed by four individuals, the proceeds of which
were used, in part, to repay the $150,000 10% Promissory Note of November,
1995, mentioned above. The Company issued warrants for an aggregate of
45,000 shares to such individuals, as part of this transaction. The Company
will use part of the proceeds of this offering to repay this debt.
During the period May, 1996 through January, 1997, the Company issued and
sold an aggregate of $135,000 in principal amount of 10% Subordinated
Debentures, and as part of such transaction, issued warrants for an aggregate
of 45,667 shares. Two of the four purchasers were directors of the Company,
and the terms of their purchase arrangement were the same as for non-affliated
purchasers.
In late January and early February, 1997, the Company issued and sold an
aggregate of $28,000 in principal amount of 10% Subordinated Debentures to
one officer/director and to one spouse of an officer/director, and as part of
such transaction issued warrants for an aggregate of 9,333 shares. The terms
of their purchase arrangements were the same as for non-affliated purchasers.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 1, 1997, and as adjusted
to give effect to this offering by (i) each person known by the Company to
be the beneficial owner of 5% or more of the outstanding Common Stock; (ii)
each director and executive officer of the Company; and (iii) all executive
officers and directors of the Company as a group. Unless otherwise indicated,
each of the following persons has sole voting and investment authority with
respect to the shares of Common Stock set forth opposite their respective names.
Percent of Class (1)
Number of Shares After After
Name and Address of Beneficially Owned Before Minimum Maximum
Beneficial Owner As of November 30, 1996 Offering Offering (2) Offering(3)
Robert H. Blank 216,600 (4) 49.4% 21.5% 10.9%
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Richard Kothe 2,666 (5) .1 * *
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Kenneth Olsen -0-
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Gail Emerson -0-
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Mark Verplaetse 16,667 (5) 3.8 1.7 .9
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Mark T. Hepburn 5,000 (5) 1.2 .5 .3
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Steve Unverzagt -0-
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Norm Winer 62,000 (5) 12.7 6.0 3.1
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
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Sona T. Plummer 46,345 (6) 9.8 4.5 2.3
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
Rick Johnson 204,999 (7) 48.2% 21.0% 10.6%
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
* less than .1%
All executive officers
and directors as a
group (7 persons) (8) 240,933 52.8% 24.0% 12.3%
(1) This calculation is based on 220,000 shares of Common Stock and 204,999
shares of Convertible Preferred Stock (which have the same voting rights as
Common Stock and which are automatically convertible into Common Stock as part
of this offering), or an aggregate of 424,999 shares outstanding with voting
power as of November 30, 1996.
(2) Includes only the 550,000 shares and not the 550,000 warrants which are
part of the Units.
(3) Includes only the 1,500,000 shares and not the 1,500,000 warrants which are
part of the Units.
(4) Includes 150,000 shares of Common Stock authorized by the Company's Board
of Directors in February,1996, and accrued as a liability, but not issued and
delivered until December, 1996, after the date of the Company's November 30,
1996 unaudited financial statements, and includes, also, 16,600 shares (10,000
shares directly, and 6,600 shares pursuant to a warrant) owned by Mr. Blank's
spouse. Mr. Blank disclaims any beneficial interest in such 16,600 shares.
(5) All of such shares are held only in the form of warrants for the purchase
of shares of Common Stock.
(6) Of such shares, 10,000 shares of Common Stock are held directly and the
remaining shares are held indirectly in the form of warrants for the purchase of
17,000 shares of Common Stock and notes convertible into 19,345 shares of Common
Stock.
(7) Consists of Preferred Stock only. Some of such shares are held in the name
of Mr. Johnson's children.
(8) This table does not take account of the possible exercise of presently
outstanding warrants for the purchase of 155,000 shares, nor the possible
conversion of notes into 462,830 shares as of November 30, 1996, (see
"CERTAIN TRANSACTIONS") nor the possible exercise of any warrants sold as part
of this offering nor the possible exercise of any part of the Underwriter's
Unit Purchase Option that is issuable upon completion of this offering, but does
include all shares owned beneficially by the officer and director shown
(including 30,933 shares subject to warrants).
DESCRIPTION OF SECURITIES
Units
Each unit offered hereby consists of one share of Common Stock and one
redeemable
-35-
Warrant. Warrants are immediately exercisable and separately transferable from
the Common Stock. Each Warrant entitles the holder to purchase, at any time
until redemption or five years following the Effective Date, two shares of
Common Stock at an exercise price of $2.75 per share, subject to adjustment.
The Company is not presently aware of any arrangements which may result in
a change in its control, except to the extent that the successful completion of
the offering described in this Prospectus would place more than 50% of
outstanding voting shares in the hands of public investors.
Capital Stock
The Company's authorized capital stock consists of 10,000,000 undesignated
shares, $.01 par value. After the closing of this offering, there will be,
prior to the automatic conversion of Preferred Stock, issued and outstanding
770,000 shares of Common Stock, in case of the sale of the minimum offering; and
1,720,000 shares of Common Stock in case of the sale of the maximum offering.
After automatic conversion of Preferred Stock in connection with this
offering, there will be 974,999 and 1,924,999 shares outstanding, respectively,
in the event of a minimum or maximum offering.
In addition, the Company has issued and outstanding 99,999 shares of
Class A Convertible Preferred Stock, par value $.01, stated value $.30; and
105,000 shares of Class B Convertible Preferred Stock, par value $.01,
stated value $.30. All outstanding shares of Preferred Stock will
automatically be converted into shares of Common Stock in connection with
this offering.
As of the date hereof, there were three record holders of Common Stock and
four record holders (but only one beneficial holder) of Preferred Stock.
Common Stock
There are no preemptive, subscription, conversion or redemption rights
pertaining to the Common Stock. The absence of preemptive rights could
result in a dilution of the interest of existing shareholders should additional
shares of Common Stock be issued. Holders of the Common Stock are entitled
to receive such dividends as may be declared by the Board of Directors out of
assets legally available therefore, and to share ratably in the assets of the
Company available upon liquidation.
Each share of Common Stock is entitled to one vote for all purposes and
cumulative voting is not permitted in the election of directors. The Class A
and Class B Convertible Preferred Stock have the same voting rights as the
Common Stock. Collectively these three classes of stock are referred to as the
"voting stock". Accordingly, the holders of more than fifty percent of all of
the outstanding shares of voting stock can elect all of the directors.
Significant corporate
-36-
transactions such as amendments to the articles of incorporation, mergers, sales
of assets and dissolution or liquidation require approval by the affirmative
vote of the majority of the outstanding shares of the voting stock. Other
matters to be voted upon by the holders of voting stock normally require the
affirmative vote of a majority of the shares present at the particular
shareholder's meeting. The Company's director's and officers as a group
beneficially own 49.4% of the outstanding voting stock of the Company. Upon
completion of this offering, assuming the minimum and maximum number of shares
offered is sold, respectively, such persons will beneficially own either 21.5%
or 10.9% of the outstanding shares.
The rights of holders of the shares of Common Stock may become subject in
the future to prior and superior rights and preferences in the event the Board
of Directors establishes one or more additional classes of Common Stock or one
or more additional series of Preferred Stock. The Board of Directors has no
present plans to establish any such additional class or series.
Redeemable Warrants
The redeemable warrants included as part of the Units will be issued under
and governed by the provisions of a Warrant Agreement (the "Warrant Agreement")
between the Company and Norwest Bank as Warrant Agent (the "Warrant Agent").
The following summary of the Warrant Agreement is not complete, and is qualified
in its entirety by reference to the Warrant Agreement, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is part.
The shares of Common Stock and the redeemable warrants offered as part of
the Units are detachable and separately transferable. One redeemable warrant
entitles the holder ("warrant holder") to purchase two shares of Common Stock
during the five years following the Effective Date, subject to earlier
redemption, provided that at such time a current Registration Statement relating
to the shares of Common Stock issuable upon exercise of the warrants is in
effect and theissuance of such shares is qualified for sale or exempt from
qualification under applicable state securities laws. Each redeemable warrant
will be exercisable at a price equal to $2.75 per share, subject to adjustment
in certain events.
The redeemable warrants are subject to redemption by the Company, on not
less than 30 days written notice, at a price of $.01 per warrant at any time
following a period of 20 consecutive trading days where the per share closing
price of the Common Stock exceeds $3.25 (subject to adjustment). For these
purposes, the closing price of the Common Stock, if the Common Stock is listed
on a national securities exchange, shall be determined by the last reported
sale price on the primary exchange on which the Common Stock is traded. Holders
of the redeemable warrants will automatically forfeit all rights thereunder
except the right to receive the $.01 redemption price per warrant unless the
redeemable warrants are exercised before they are redeemed.
The warrant holders are not entitled to vote, receive dividends or exercise
any of the rights
-37-
of holders of shares of Common Stock for any purpose. The redeemable warrants
are in registered form and may be presented for transfer, exchange, or exercise
at the office of the Warrant Agent. There is currently no established market
for the redeemable warrants and there is no assurance that any such market will
develop.
The Warrant Agreement provides for adjustment of the exercise price and the
number of shares of Common Stock purchasable upon exercise of the redeemable
warrants, to protect warrant holders against dilution in certain events,
including stock dividends, stock splits, reclassification, and any combination
of Common Stock, or the merger, consolidation, or disposition of substantially
all the assets of the Company.
The redeemable warrants may be exercised upon surrender of the certificate
therefor on or prior to the expiration date (or earlier redemption date) at the
offices of the Warrant Agent, with the form of "Election to Purchase" on the
reverse side of the certificate properly completed and executed as indicated,
accompanied by payment of the full exercise price (by certified or cashier's
check payable to the order of the Company) for the number of redeemable warrants
being exercised.
Shares Eligible For Future Sale
Upon completion of this offering, assuming sale of the maximum number of
shares offered, and assuming the automatic conversion of 204,999 shares of
Convertible Preferred Stock into an equivalent number of shares of Common Stock,
there will be 1,924,999 shares of Common Stock issued and outstanding. The
shares purchased in this offering will be freely tradable without registration
or other restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by an "affiliate" of the
Company (as defined in the Act).
All the currently outstanding shares of Common Stock and Preferred Stock
were acquired in reliance upon the "private placement" exemption provided by
Section 4(2) of the Securities Act and are deemed restricted securities
within the meaning of Rule 144 ("Restricted Shares"). Restricted Shares may not
be sold unless they are registered under the Securities Act or are sold
pursuant to an applicable exemption from registration, including an exemption
under Rule 144. Of the 424,999 Restricted Shares presently outstanding, 169,999
are eligible for sale under Rule 144 commencing on the 90th day following the
Effective Date; and the balance of 255,000 will become eligible for sale
under Rule 144, assuming all of the other requirements of Rule 144 have been
satisfied. However, the holders of all Restricted Shares, except for two
individuals who each own 10,000 shares, have agreed, as a condition of the
Underwriting Agreement between the Company and the Underwriter, that they
will not sell or grant any option for the sale of, or otherwise dispose of
any equity securities of the Company (or any securities convertible into or
exchangeable for equity securities of the Company) for 12 months after the date
hereof, without the prior consent of the Underwriter, which will not
unreasonably be withheld. See CAPITALIZATION and HIGH RISK FACTORS, No. 17,
for information as to outstanding
-38-
options and warrants and securities convertible into Common Stock.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least two
years from the later of the date of issuance by the Company or acquisition
from an affiliate, may sell such securities in broker's transactions or
directly to market makers, provided that the number of shares sold in any
three month period may not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume of the shares of
Common Stock in the over-the-counter market during the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to certain notice
requirements and the availability of current public information about the
Company. After three years have elapsed from the later of the issuance of
restricted securities from the Company or their acquisition from an
affiliate, such securities may be sold without limitation by persons who are
not affiliates under the rule.
In general, under Rule 701 as currently in effect, any employee, consultant
or advisor of the Company who purchases shares from the Company by exercising a
stock option outstanding on the date of the offering is eligible to resell
such shares 90 days after the date of the Prospectus in reliance on Rule 144,
but without compliance with certain restrictions contained in Rule 144,
including the holding period requirement. Currently, the Company has no stock
options outstanding that could be exercised under Rule 701, and there are no
plans to issue any such options in the foreseeable future.
Following this offering, the Company cannot predict the effect, if any,
that sales of the Common Stock or the availability of such Common Stock for
sale, will have on the market price prevailing from time to time. Nevertheless,
sales by existing shareholders of substantial amounts of Common Stock could
adversely affect prevailing market prices for the Common Stock if and when a
public market exists.
Minnesota Anti-Takeover Law
The Company is governed by the provisions of Sections 302A.671 and 302A.673
of the Minnesota Business Corporation Act. In general, Section 302A.671
provides that the shares of a corporation acquired in a "control share
acquisition" have no voting rights unless voting rights are approved in a
prescribed manner. A "control share acquisition" is an acquisition, directly
or indirectly, of beneficial ownership of shares that would, when added to all
the other shares beneficially owned by the acquiring person, entitle the
acquiring person to have voting power of 20% or more in the election of
directors. In general, Section 302A.673 prohibits a publicly held Minnesota
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. "Business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
the interested shareholder. An "interested shareholder" is a person who
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is the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock or who is an affiliate or associate of the
corporation and at any time within four years prior to the date in question
was the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock.
Transfer Agent and Registrar
The Company has selected Norwest Shareowner Services, Norwest Bank
Minnesota, N.A., 161 North Concord Exchange, P.O. Box 738, South St. Paul,
Minnesota 55075-0738, telephone (612) 450-4061, to act as Registrar and Transfer
Agent for the Company's Common Stock and Warrant Agent for the Redeemable
Warrants.
Indemnification
The Company's Bylaws and the provisions of the Minnesota Business
Corporation Act, which govern the actions of the Company, provide that present
and former directors and officers of the Company shall be indemnified against
certain liabilities and expenses which any of them may incur as a result of
being, or having been, a director or officer of the Company. Indemnification
is contingent upon certain conditions being met, including, that the person: has
not been previously indemnified by another party for the same matter; has acted
in good faith; has received no improper personal benefit; and, in the case of a
criminal proceeding, has no reason to believe that the conduct complained of
was unlawful and reasonably believed that the conduct complained of was in
the best interests of the Company, or in certain circumstances, reasonably
believed that, the conduct complained of was not opposed to the best interests
of the Company.
In addition, the Company's Articles of Incorporation provide that a
director of the Company shall not be liable for monetary damages for a breach of
such director's fiduciary duty, except for a breach of the duty of loyalty,
acts not in good faith or in knowing violation of law, violations of state
securities laws, or for actions from which the director derived an improper
personal benefit. The Company has not obtained directors and officers .
liability insurance.
Insofar, as the indemnification of liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions of its Articles of Incorporation, Bylaws
and the provisions of the Minnesota Business Corporation Act, or otherwise,
the Company has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
-40-
UNDERWRITING
The Company through its Underwriter, Tuschner & Company, Inc., is offering
hereby a Minimum of 550,000 Units and up to a Maximum of 1,500,000 Units at the
offering price of $1.00 per Unit. The Company and the Underwriter have entered
into an Underwriting Agreement whereby the Underwriter has been retained as the
exclusive agent of the Company to use its best efforts to offer and sell these
Units to the public in states in which this offering is authorized for sale.
There is no assurance that any of the securities offered hereby will be sold,
and there is no firm commitment from the Underwriter or any other broker-dealer
or person to sell or pay for any Units offered hereby. The Underwriter intends
to seek certain selected broker-dealers to participate in this offering, who
must agree to act as agents in the sale of these securities and who
are members of the National Association of Securities Dealers ("NASD").
The Company will pay the Underwriter a 10% sales commission and a 3%
nonaccountable expense allowance relating to the sale of the Units offered
hereby of which $5,000 has been advanced. The Underwriter may reallow all or a
portion of its agency selling commissions and expense allowance to any selected
dealers in regard to Units sold by them in this offering. The Underwriting
Agreement also provides for certain indemnification of the Underwriter and any
selected dealers by the Company, including certain liabilities arising out of
the Securities Act of 1933, as amended. Insofar as indemnification under this
Act may be permitted by the provisions of the Underwriting Agreement, the
Company is informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy and thus
unenforceable.
All funds received for the sale of the Minimum 550,000 Units offered hereby
will be deposited in an impoundment account with Bank Windsor, Minneapolis,
Minnesota, acting as Impoundment Agent pursuant to the terms of a written
Impoundment Agreement, to be held until the earlier of (i) the date the minimum
offering proceeds have been received in such escrow account, or (ii) the 60th
day after the effective date of this Prospectus (plus an additional 30-day
period if extended by the mutual consent of the Underwriter and the Company).
In the event the minimum offering is not sold during this 60-day after the
effective date of this Prospectus (plus an additional 30-day period if
extended by the mutual consent of the Underwriter and the Company). In the
event the minimum offering is not sold during this 60-day period, or 90-day
period if extended, the proceeds from the sale of Units in this offering will
be refunded to subscribers promptly in full, without interest thereon or
deduction therefrom. Until such time as the proceeds of this offering have
been released from escrow, purchasers will be deemed subscribers and not
shareholders of the Company, and they will have no right to demand return of
their subscription payments during the escrow period. After sale of the Minimum
Units, the Company and the Underwriter may continue to offer the balance of
this offering for any remainder of the 60-day, or extended 90-day, period of
this offering.
The Underwriter has informed the Company that the Underwriter does not
intend to confirm sales of Units offered hereby to any accounts over which it
exercises discretionary
-41-
authority.
The Company also has agreed to issue a Unit Purchase Option granting the
Underwriter the right to purchase that number of Units of the Company equal to
10% of the total Units sold in this offering, with this option exercisable
over a four-year period commencing one year from the date of this Prospectus
at an exercise price of $1.20 per Unit. The rights under this Unit Purchase
Option are not transferable for a one-year period except to officers or
shareholders of the Underwriter. The Unit Purchase Option contains standard
adjustments to prevent dilution in the event of stock splits or dividends,
mergers, or other business combinations, and other such events. In addition,
these warrants also provide the Underwriter with certain registration rights
including "piggy-back" participatory rights and a one-time demand
registration right. If the Unit Purchase Option is exercised and any
underlying securities of the Company are later sold at prices exceeding the
exercise price of this option, the Underwriter may be deemed to have received
additional underwriting compensation.
Upon the exercise of each Warrant which is exercised after _____________,
1997, the Company will pay the Underwriter a fee of three percent (3%) of the
aggregate exercise price, of which one percent (1%) may be re-allowed to any
dealer who solicited the exercise (which may also be the Underwriter) if:
(i) the closing bid price of the Company's Common Stock on the date
the Warrant is exercised is greater than the then exercise price of the
Warrants; (ii) the exercise of the Warrant is solicited by a member of the
National Association of Securities Dealers, Inc.; (iii) the Warrant is not
held in a discretionary account; and (iv) the solicitation of the exercise of
the Warrant was not in violation of Rule 10b-6 promulgated under the Securities
and Exchange Act of 1934.
The Units offered hereby are subject to prior sales or withdrawal,
cancellation, or suspension of the offering without notice, and to the right of
the Underwriter to reject offers to purchase such Units in whole or in part.
There is no provision for any installment sales in this offering, and all
shares of Common Stock involved in these Units will be fully-paid and
nonassessable upon the Units being purchased in this offering.
The Underwriter was incorporated in 1993 and commenced business as a
Minneapolis-based broker-dealer in May, 1994. This is the second public
offering in which it has served as a managing or lead underwriter or exclusive
agent for the sale of securities.
None of the officers or directors of the Company plan to purchase any of
the Units offered hereby. Although affiliates of the Company may purchase Units
in this offering in order to attain completion of the minimum offering hereby,
the Company is not aware of any such planned purchase by an affiliate. Any
such purchases will be made for investment purposes only, and not for
redistribution.
John M. Tuschner, President of the Underwriter, owns warrants for the
purchase of 8,333 shares which were acquired as compensation for personally
guaranteeing some of the Company's
-42-
bank debt in 1996. See "CERTAIN TRANSACTIONS."
Pursuant to the Underwriting Agreement, all directors and five percent
shareholders of the Company have agreed not to sell, transfer or otherwise
dispose of an aggregate of 404,999 shares of Common Stock during a one-year
lock-up period commencing on the date of this Prospectus without the prior
written consent of the Underwriter.
REPORTS TO SHAREHOLDERS
The Company will furnish its shareholders with annual reports containing
audited financial statements and a report by independent certified public
accountants. The Company may also provide quarterly and other reports
containing unaudited financial information.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Keller & Lokken, P.A., St. Paul,
Minnesota. Certain legal matters will be passed upon for the Underwriter by
Furber Timmer Zahn, PLLP, Minneapolis, Minnesota.
EXPERTS
The balance sheets of the Company as of February 29, 1996 and February 28,
1995 and the related statements of income, shareholders' deficit and cash flows
for the years then ended included in this Prospectus have been audited by
Silverman Olson Thorvilson & Kaufmann, LTD, certified public accountants, as
set forth in their reports thereon (which contains an explanatory paragraph
with respect to substantial doubt about the Company's ability to continue as a
going concern and management's plans described in Note 2 of the financial
statements) appearing elsewhere in the Registration Statement. Such financial
statements are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
AVAILABLE AND ADDITIONAL INFORMATION
The Company is not at present a reporting company under the Securities
Exchange Act of 1934, as amended, and therefore is not required and does not
file periodic reports with the Securities and Exchange Commission.
The Company has filed a Registration Statement on Form SB-2 under the
Securities Act(the "Registration Statement"), with respect to the securities
offered hereby, with the Securities and Exchange Commission ("SEC") in
Washington, D.C. This Prospectus, filed as part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain portions of which
have been omitted in accordance with the rules and regulations of the SEC.
For further information with respect to the Company and the shares offered
hereby, reference is made to the Registration Statement and to the exhibits
-43-
and schedules thereto, which may be inspected without charge, or copies of which
may be obtained from the SEC's Washington, D.C. office, 450 Fifth Street N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. In addition, such
information is available without charge through use of the SEC's EDGAR system,
which allows interested persons to obtain on-line access to such information.
Statements made in the Prospectus as to the contents of any contract,
agreement or document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, and each such statement is
qualified in its entirety by such reference.
The Company will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of any exhibits
to the Registration Statement. Inquiries should be directed to Richard D. Kothe,
Illuminated Media Inc., 15 S. Fifth Street, Suite 715, Minneapolis, MN 55402,
telephone number 612-338-3554, FAX 612-370-0381.
-44-
ILLUMINATED MEDIA, INC.
FINANCIAL STATEMENTS
For the Years Ended
February 29, 1996 and February 28, 1995
and the Nine Months Ended
November 30, 1996 and 1995 (Unaudited)
ILLUMINATED MEDIA, INC.
INDEX TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Independent Auditors' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Shareholders' Deficit 4
Statement of Cash Flows 5-6
Notes to the Financial Statements 7-16
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Illuminated Media, Inc.
Minneapolis, Minnesota
We have audited the accompanying balance sheet of Illuminated Media, Inc. as of
February 29, 1996 and February 28, 1995, and the related statements of
operations, shareholders' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Illuminated Media, Inc. as
of February 29, 1996 and February 28, 1995, and the results of its operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the financial statements, the Company's recurring
losses, negative cash flows from operations and net working capital
deficiency raise substantial doubt as to its ability to continue as a going
concern. Management's plans as to these matters are also described in Note 2.
The 1996 financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
SILVERMAN OLSON THORVILSON & KAUFMANN LTD
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota
July 31, 1996, except for Note 2
which is dated February 14, 1997
F-1
ILLUMINATED MEDIA, INC.
BALANCE SHEET
February 29, 1996 and February 28, 1995 and November 30, 1996 (Unaudited)
November 30,
1996
ASSETS 1996 1995 (Unaudited)
Current assets:
Cash $ 4,795 $ - $ 15,767
Accounts receivable, net of allowance for
doubtful accounts of $24,818, $-0-
and $67,132, respectively 10,287 7,400 30,310
Prepaid expenses 5,000 - 5,000
Other receivables - related parties
(Note 3) 6,590 200 529
Total current assets 26,672 7,600 51,606
Property and equipment, net (Note 4) 42,675 45,154 37,059
Other assets 398 597 249
Total assets $ 69,745 $53,351 $ 88,914
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Checks drawn in excess of available
funds $ - $ 245 $ -
Note payable (Note 5) 150,000 - -
Notes payable - bank (Note 6) - - 135,000
Notes payable - shareholders (Note 7) 19,509 5,000 19,509
Debentures payable (Note 8) - - 20,000
Debentures payable-related party (Note 8) - - 115,000
Accounts payable 49,713 29,384 84,529
Accrued expenses - related parties
(Note 15) 65,916 60,226 63,217
Accrued expenses 6,096 3,683 8,205
Deferred revenue - 1,000 -
Current portion of long-term debt
(Note 9) 11,710 10,329 12,664
Current portion of long-term debt -
related parties (Note 10) 12,826 - 20,514
Total current liabilities 315,770 109,867 478,638
Long-term debt (Note 9) 31,290 42,430 23,485
Long-term debt - related parties (Note 10)172,474 - 156,880
Total liabilities 519,534 152,297 659,003
Contingencies and commitments
(Notes 14 and 15) - - -
Redeemable preferred stock:
Series A convertible preferred stock,
$.30 stated value; 110,000 shares
authorized and 99,999 shares issued
and outstanding (Note 11) 30,000 30,000 30,000
Series B convertible preferred stock
$.30 stated value; 155,000 shares
authorized and 105,000 shares issued
and outstanding (Note 11) 31,500 31,500 31,500
Total redeemable preferred stock 61,500 61,500 61,500
Shareholders' deficit:
Common Stock, $.01 par value; 735,000 shares
authorized and 70,000, 510,000 and 70,000
issued and outstanding, respectively 700 5,100 700
Additional paid-in capital 1,345 9,800 1,345
Accumulated deficit (513,334)(175,346) (633,634)
Total shareholders deficit (511,289)(160,446) (631,589)
Total liabilities, redeemable
preferred stock and
shareholders' deficit $ 69,745 $ 53,351 $ 88,914
The accompanying notes are an integral part
of the financial statements.
F-2
ILLUMINATED MEDIA, INC.
STATEMENT OF OPERATIONS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
November November
30, 1996 30, 1995
1996 1995 (Unaudited) (Unaudited)
Revenues $ 236,932 $ 134,411 $ 181,012 $ 174,808
Operating expenses:
General and administrative -
related party 33,660 48,520 - 33,660
General and administrative 360,510 163,223 274,152 181,513
Total operating expenses 394,170 211,743 274,152 215,173
Loss from operations ( 157,238) ( 77,332) ( 93,140) ( 40,365)
Other income (expense):
Interest expense ( 17,239) ( 3,813) ( 33,485) ( 6,964)
Miscellaneous income 2,442 2,483 6,325 753
Loss on disposal of
property and equipment( 2,808) - - -
Total other income
(expense) ( 17,605) ( 1,330) (27,160) ( 6,211)
Net loss $( 174,843) $(78,662) $(120,300) $( 46,576)
Net loss per share $( .44) $( .15) $( 1.72) $( .09)
Weighted average number of
shares outstanding 399,096 510,000 70,000 507,589
The accompanying notes are an integral part
of the financial statements.
F-3
ILLUMINATED MEDIA, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
<TABLE>
<CAPTION>
Additional
Total
Common Stock Paid Accumulated
Shareholders'
Shares Amount In Capital Deficit
Deficit
<C> <C> <C> <C>
<C>
<S>
Balance at February 28, 1994 510,000 $ 5,100 $ 9,800 $( 96,684)
$(81,784)
Net loss - - - ( 78,662)
(78,662)
Balance at February 28, 1995 510,000 5,100 9,800 (175,346)
(160,446)
Common stock redemption
(Note 12) (440,000) (4,400) ( 8,455) (163,145)
(176,000)
Net loss - - - (174,843)
(174,843)
Balance at February 29, 1996 70,000 700 1,345 (513,334)
(511,289)
Net loss (Unaudited) - - - (120,300)
(120,300)
Balance at November 30, 1996
(Unaudited) 70,000 $ 700 $ 1,345 $(633,634)
$(631,589)
The accompanying notes are an integral part
of the financial statements.
F-4
ILLUMINATED MEDIA, INC.
STATEMENT OF CASH FLOWS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
November 30, November 30,
1996 1995
1996 1995 (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $(174,843)$( 78,662)$(120,300) $(46,576)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization15,076 12,139 9,934 11,307
Loss on disposal of property
and equipment 2,808 - - -
Decrease (increase) in assets:
Accounts receivable ( 2,887) 3,575 (20,023) (17,156)
Prepaid expenses ( 5,000) - - -
Other receivables -
related parties ( 6,390) ( 200) 6,061 (10,971)
Increase (decrease) in liabilities:
Accounts payable 20,329 17,277 34,816 ( 3,125)
Accrued expenses -
related parties 98,990 35,530 ( 2,699) 34,099
Accrued expense 2,413 1,713 2,109 ( 1,307)
Deferred revenue ( 1,000) ( 7,100) - ( 1,000)
Net cash used in operating
activities (50,504) (15,728) (90,102) ( 34,729)
Cash flows from investing activities:
Purchase of property and
equipment (15,206) (31,944) ( 4,169) ( 15,207)
Cash flows from financing activities:
Increase (decrease) in note
payable 150,000 - (150,000) 150,000
Proceeds from the issuance of:
Notes payable - bank - - 135,000 -
Note payable - shareholders 14,509 - - 14,509
Debentures payable - - 35,000 -
Debentures payable-related
party - - 100,000 -
Long-term debt - 59,362 - -
Redemption of common stock ( 84,000) - - ( 84,000)
Payment of long-term debt ( 9,759) ( 25,926) ( 6,851) ( 8,466)
Payment of long-term debt -
related parties - - ( 7,906) -
Increase (decrease) in checks drawn
in excess of available funds( 245) 245 - ( 245)
Net cash provided by
financing activitie 70,505 33,681 105,243 71,798
Increase (decrease) in cash 4,795 ( 13,991) 10,972 21,862
Cash - beginning of year - 13,991 4,795 -
Cash - end of year $ 4,795 $ - $15,767 $ 21,862
The accompanying notes are an integral part
of the financial statements.
F-5
ILLUMINATED MEDIA, INC.
STATEMENT OF CASH FLOWS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
November November
30, 1996 30, 1995
1996 1995 (Unaudited) (Unaudited)
Supplemental disclosure of
cash flow information:
Cash paid for interest $ 7,937 $ 3,099 $ 35,007 $ 6,140
Supplemental schedule of non-cash investing and financing activities:
For the year ended February 29, 1996 and the nine months ended November 30,
1995:
The Company converted $93,300 of accrued expenses - related parties to a long-
term note payable (Note 10).
As partial redemption of 440,000 shares of $.01 par value common stock, the
Company issued long-term debt aggregating $92,000 (Note 12).
The accompanying notes are an integral part
of the financial statements.
F-6
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 1: Summary of Significant Accounting Polices
Nature of Organization:
Illuminated Media, Inc. (formerly Skyway Advertising, Inc.) or the
"Company" is engaged in the business of providing a medium for out-of-home
advertising called Skyway Ads. Each Skyway Ad unit consists of three
back-lit advertising panels. Skyway Ads units are located primarily in
skyway corridors, shopping centers and parking ramps in the Minneapolis/
St. Paul metropolitan area.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is computed using
accelerated methods and is charged to expense based on the estimated
useful lives of the assets.
Expenditures for additions and improvements are capitalized, while repairs
and maintenance are expense as incurred.
Other Assets:
Other assets consist of organization costs and are being amortized
straight-line over five years.
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes, if any. Deferred taxes represent the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Net Loss Per Share of Common Stock:
Net loss per share is calculated based on the weighted average number of
shares actually outstanding as the effect of including common stock
equivalents would be anti-dilutive.
Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of trade accounts
receivable. Accounts receivable arise from the sale of advertising space
to a diversified customer base located primarily in Minnesota. The
Company performs ongoing credit evaluations of its customers' financial
condition, and generally requires no collateral from its customers.
F-7
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 1: Summary of Significant Accounting Polices (Continued)
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements:
The Company has not adopted Statement of Financial Accounting SFAS No.
123, Accounting for Stock-Based Compensation (SFAS 123) in fiscal 1996. SFAS
123 is effective for years beginning after December 15, 1995 and prescribes
accounting and reporting standards for all stock-based compensation plans.
Since the Company intends to elect continued recognition of certain stock-based
compensation using the intrinsic value method prescribed under Accounting
Principles Board Opinion No.25, Accounting for Stock Issued to Employees, no
effect on the Company's expense recognition is expected.
Note 2: Continued Existence and Management's Plans
During 1996, the Company incurred a net loss of $174,843 and negative
cash flows from operations of $(50,504), resulting in a negative working capital
of $(289,098) and an accumulated deficit of $(513,334) at February 29, 1996. As
a result of this financial position, management believes that additional capital
will be necessary to enable the Company to continue its operations.
The Company has engaged a brokerage firm to raise a minimum of
$550,000 to a maximum of $1,500,000 of capital through the sale of common stock
in a public offering. Management believes that the amount to be raised and the
expected improvements in operating results, will be adequate to fund the cash
requirements of the Company through February 28, 1997. No assurance can be
provided, however,that the amount of capital raised, if any, will be sufficient
to meet these needs.
As of February 14, 1997, the public offering had not commenced.
F-8
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 3: Other Receivables - Related Parties
Other receivables - related parties consisted of the following at:
November 30,
February February 1996
29, 1996 28, 1995 (Unaudited)
Director/ shareholders $ 5,840 $ - $ -
Employee 750 200 529
$ 6,590 $ 200 $ 529
Other receivables are unsecured and due on demand.
Note 4: Property and Equipment
Property and equipment consisted of the following at:
November
February February 30, 1996
29, 1996 28, 1995 (Unaudited)
Advertising panels $ 66,663 $ 58,525 $ 70,501
Furniture 1,217 1,217 1,548
Equipment 3,359 1,641 3,359
71,239 61,383 75,408
Less accumulated depreciation ( 28,564) ( 16,229) ( 38,349)
Property and equipment, net $ 42,675 $ 45,154 $ 37,059
All property and equipment is being depreciated over estimated useful
lives of 5-7 years.
Depreciation expense was $14,877 and $11,940 for the years ended
February 29, 1996 and February 28, 1995, respectively. For the
periods ended November 30, 1996 and 1995, depreciation expense was
$9,785 and $11,158, respectively.
Note 5: Note Payable
At February 29, 1996, note payable consisted of a short term loan
bearing interest at 10%, payable at the earlier of March 27, 1996 or
the closing of the Company's initial public offering. The note is
secured by substantially all corporate assets and guaranteed by two
of the Company's shareholders. In addition, the Company issued
warrants to the note holder to purchase up to 55,000 shares of the
Company's common stock at a per share price of $.50 (Note 14).
F-9
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 6: Notes Payable - Bank
As of November 30, 1996, the Company has two notes from a bank
aggregating $135,000. The notes bear interest at a variable rate (10.75% at
November 30, 1996) and mature May 13, 1997. The notes are secured by
substantially all corporate assets and personally guaranteed by four unrelated
individuals. As inducement for these guarantees, the Company has issued these
individuals warrants to purchase 45,000 shares of the Company's common stock at
$.50 per share expiring September 1998 (Note 14).
Note 7: Notes Payable - Shareholders
Notes payable - shareholders consisted of the following at:
November
February February 30, 1996
29, 1996 28, 1995 (Unaudited)
Note payable to an officer/shareholder
with interest at 5%. The note is unsecured
and due on demand. $ 5,000 $ 5,000 $ 5,000
Note payable to a shareholder with
interest at 12% payable monthly. The
note is secured by advertising panels
and is due on demand. At the option
of the holder, the note can be converted
into the Company's common stock at a
conversion price of $.75 per share any-
time before September 1999. 14,509 - 14,509
Total notes payable -
shareholders $ 19,509 $ 5,000 $19,509
Note 8: Debentures Payable
As of November 30, 1996, the Company has issued debentures aggregating
$135,000. The debentures bear interest at 10% payable at various maturity
dates through February 28, 1997. The debentures are secured by substantially
all corporate assets. As inducement to the debenture holders, the Company
issued warrants to purchase 45,667 shares of the Company's common stock, 21,667
expiring September 1998 and24,000 expiring November 1998 (Note 14). Debentures
aggregating $115,000 and therelated warrants to purchase 38,667 shares of the
Company's common stock were issued to a current shareholder and to two directors
of the Company.
F-10
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 9: Long-term Debt
As of February 29, 1996, February 28, 1995 and November 30, 1996, the
Company has a note payable to a credit union aggregating $43,000, $52,759 and
$36,149, respectively. The note accrues interest at 13.5% payable monthly. The
note is secured by substantially all corporate assets and guaranteed by an
officer/shareholder of the Company. The note matures in May 1999.
Future maturities of long-term debt are as follows at February 28:
1997 $ 11,710
1998 13,393
1999 15,317
2000 2,580
Total $ 43,000
Note 10: Long-term Debt - Related Parties
Long-term debt - related parties consisted of the following at:
November
February February 30, 1996
29, 1996 28, 1995 (Unaudited)
Note payable to a Partnership (Note 15)
owned by former officers/shareholders
of the Company with interest 11%,
principal and interest payable monthly
beginning April 1996. The note is
secured by substantially all corporate
assets and is guaranteed by an officer/
shareholder of the Company. The note
matures in March 2003. $ 93,300 $ - $ 89,320
Notes payable - common stock redemption
(Note 12) to two former officer/shareholders
of the Company with interest at 11%,
principal and interest payable monthly
beginning April 1996. The notes are
secured by substantially all corporate
assets and are guaranteed by an officer/
shareholder of the Company. The notes
mature in March 2003. 92,000 - 88,074
185,300 - 177,394
Less current portion ( 12,826) - ( 20,514)
Long-term debt - related parties $ 172,474 $ - $ 156,880
F-11
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 10: Long-term Debt - Related Parties (Continued)
The holders of the notes payable - common stock redemption have an
unqualified option to convert any remaining unpaid notes payable into shares of
the Company's common stock at a conversion price of $.40 per share (Note 15).
Future maturities of long-term debt - related parties are as follows
at February 28:
1997 $ 12,826
1998 21,083
1999 23,522
2000 26,244
2001 29,082
Thereafter 72,543
$ 185,300
Note 11: Preferred Stock
Series A Convertible/Redeemable Preferred Stock:
The Company has outstanding 99,999 shares of voting, cumulative,
convertible, redeemable series A preferred stock with a stated value of $.30 per
share. Each share of series A preferred stock is convertible into one share of
common stock beginning in June 1995 at the option of the holder, or is
automatically converted at the date that the Company initiates a public offering
of its capital stock. The holders of series A preferred stock have the right to
require the Company to redeem all or a portion of the preferred shares at a
redemption price equal to the stated value of the stock plus any accumulated and
unpaid dividends. Dividends are payable annually on December 31 of each year,
if declared, at a rate of 8% of the stated value of the preferred shares. No
dividends were declared during the years ended February 29, 1996 and February
28, 1995 or during the period ended November 30, 1996.
Series B Convertible/Redeemable Preferred Stock:
The Company has outstanding 105,000 shares of voting, cumulative,
convertible, redeemable series B preferred stock with a stated value of $.30 per
share. The holder of the shares has the option to either convert each share of
series B preferred stock into one share of common stock or require that the
Company redeem the preferred stock at a redemption price of $.50 per share. In
addition, each share of series B preferred stock is automatically converted into
one share of common stock at the date that the Company initiates a public
offering of its capital stock. Dividends are payable monthly, if declared, at a
rate of 8% of the stated value of the preferred shares. Series B preferred
stock has dividend preferences over both common stock and Series A preferred
stock. No dividends were declared during the years ended February 26, 1996 and
February 28, 1995 or during the period ended November 30, 1996.
F-12
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 12: Common Stock Redemption
During the year ended February 29, 1996, the Company redeemed 440,000
shares of its common stock by paying the shareholders $84,000 and issuing notes
aggregating $92,000 (Note 10).
Note 13: Income Taxes
For the years ended February 29, 1996 and February 28, 1995, the
effective rate varies from the maximum federal statutory rate as a result of the
following items:
1996 1995
Tax benefit computed at maximum
federal statutory rate ( 34.0)% ( 34.0)%
Loss to be carried forward 34.0 34.0
Provision for income taxes - % - %
For the period ended November 30, 1996 and 1995, the effective rate
varies from the maximum federal statutory rate as a result of the following
items:
1996 1995
(Unaudited) (Unaudited)
Tax benefit computed at maximum
federal statutory rate ( 34.0)% ( 34.0)%
Loss to be carried forward 34.0 34.0
Provision for income taxes - % - %
For financial statement purposes, no tax benefit has been reported for
the years ended February 29, 1996 and February 28, 1995 or the periods ended
November 30, 1996 and 1995 as the Company has had significant losses in recent
years and realization of the tax benefit is uncertain. Accordingly, a valuation
allowance has been established for the full amount of the deferred tax asset.
Deferred taxes represent the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Temporary differences
result primarily from using the cash basis of accounting for income tax
reporting versus the accrual basis used for financial reporting, and from the
net operating loss carryforwards.
F-13
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 13: Income Taxes (Continued)
Deferred taxes consisted of the following at:
November
February February 30, 1996
29, 1996 28, 1995 (Unaudited)
Asset:
Net Operating Loss carryforward $37,400 $24,000 $63,600
Adjustments to cash basis:
Accounts payable 34,000 20,000 41,700
Accrued expenses 15,000 - 9,800
Net Deferred tax asset 86,400 44,000 115,100
Less Valuation allowance (86,400) (44,000) (115,100)
Net deferred tax asset $ - $ - $ -
The net change in the deferred tax valuation allowance was an increase
of $47,400 and $21,000 for the years ended February 29, 1996 and February 28,
1995, respectively and $23,700 and $11,600 for the periods ended November 30,
1996 and 1995, respectively.
As of February 28, 1996, the Company had net operating loss
carryforwards for income tax purposes as follows:
Carryforwards Net Operating
Expires Loss
February 28 Carryforwards
2009 $ 60,000
2010 43,000
2011 56,000
$ 159,000
Note 14: Commitments and Contingencies
Operating Leases:
The Company leases space for its advertising panels from various
skyway systems and shopping centers located in the Minneapolis and St. Paul
area. These non-cancelable leases provide for contingent payments based upon a
percentage (ranging from 8% to 40%, with the majority at 20%) of advertising
revenues generated from each location. These leases have terms of two to five
years and expire at various dates through November 1998.
Rent expense for the years ended February 29, 1996 and February 28,
1995 was $58,945 and $24,182, respectively. For the periods ended November 30,
1996 and1995, rent expense was $55,200 and $43,106, respectively.
F-14
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 14: Commitments and Contingencies (Continued)
Stock Warrants:
During fiscal 1996, the Company issued warrants as an inducement for
short-term financing and loan guarantees (Notes 5, 6 and 8). As of November 30,
1996, the following warrants to purchase shares of the Company's were
outstanding and exercisable.
Common Shares Exercise Price
Under Warrants Per Share Expiration Date
50,000 $ .50 November 1997
5,000 $ .50 February 1998
66,667 $ .50 September 1998
24,000 $ .50 November 1998
145,667
Upon completion of the Company's initial public offering, the exercise
price on the warrants to purchase 145,667 common shares, including 38,667
issued to a current shareholder and to two directors (Note 8), is adjusted to
one-half of the price of the Company's common shares in its initial public
offering.
Significant Customers:
During the years ended February 29, 1996 and February 28, 1995, the
Company had sales to five customers aggregating 46.7% and 46.3% of total sales,
respectively.
Note 15: Related Party Transactions
Lease Companies:
During fiscal 1996 and 1995, the Company had a management agreement
with Lease Companies, a partnership owned by former officers/shareholders of the
Company. Pursuant to the management agreement, the Company will pay Lease
Companies $4,050 per month plus 10% of monthly revenue in excess of $21,500
in exchange for administrative, accounting and sales services. During the years
ended February 29, 1996 and February 28, 1995, the Company incurred
management fees of $33,660 and $48,520, respectively, of which $93,300 and
$60,226 remained unpaid at February 29, 1996 and February 28, 1995. The unpaid
management fees at February 28, 1995, are included in accrued expenses -related
parties on the accompanying balance sheet. During 1996, the contract terminated
and unpaid management fees were converted into a long-term note payable (Note
10). During the periods ended November 30, 1996 and 1995, management fees
aggregated $0 and $33,660, respectively.
F-15
ILLUMINATED MEDIA, INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Years Ended February 29, 1996 and February 28, 1995
and the Nine Months Ended November 30, 1996 and 1995 (Unaudited)
Note 15: Related Party Transactions (Continued)
Stock Grants:
In fiscal 1996, an officer/shareholder of the Company was granted
150,000 shares of the Company's common stock in recognition for past service to
the Company. The grant has been valued at $60,000 and is included in accrued
expenses - related parties on the accompanying balance sheet at February 29,
1996 and November 30, 1996.
Stock Options:
During fiscal 1996 in connection with the redemption of the Company's
common stock (Notes 10 and 12), the Company issued two former officers/
shareholders an unqualified option to convert their notes payable into shares of
the Company's common stock at a conversion price of $.40 per share. The options
expires in December 1997.
During fiscal 1996 in connection with a loan from a Company
shareholder (Note 7), the Company issued the shareholder an unqualified option
to convert the note payable into shares of the Company's common stock at a
conversion price of $.75 per share. The option expires in September 1999.
During fiscal 1994, the Company sold series B convertible/redeemable
preferredstock in a private placement (Note 11). In accordance with the private
placement, all purchasers of the preferred stock received an option to purchase
common stock at $.30 per share. In connection with the series B preferred stock
issuance, a board member was issued an unqualified option to purchase 50,000
shares of preferred stock at an option price of $.30 per share. These options
expires in January 1997.
As of November 30, 1996, none of the options discussed above had
been exercised.
F-16
[Photos of Skyway Ads platforms to be added]
45
Until (insert date) all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
TABLE OF CONTENTS
Summary of Offering. . . . . . . . . . . . . . . . . . . .
The Company. . . . . . . . . . . . . . . . . . . . . . . .
High Risk Factors. . . . . . . . . . . . . . . . . . . . .
Selected Financial Data. . . . . . . . . . . . . . . . . .
Management's Discussion. . . . . . . . . . . . . . . . . .
Dilution . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . .
Dividend Policy. . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . .
Principal Shareholders . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . .
Description of Securities. . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
_____________________________
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances,
imply that there has been no change in the affairs of the Company since the date
hereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy in any state in which such offer or solicitation is not
lawful, or to any person to whom it is unlawful to make such an offer or
solicitation.
46
1,500,000 UNITS
ILLUMINATED MEDIA INC.
Each Unit Consists of One Share of
Common Stock and One Common Stock
Warrant to Purchase Two
Shares of Common Stock
____________________
PROSPECTUS
____________________
TUSCHNER & COMPANY, INC.
March , 1997
47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Under Section 302A.521, Minnesota Statutes, the Company is required to
indemnify its directors, officers, employees, and agents against liability under
certain circumstances, including liability under the Securities Act of 1933, as
amended (the "Act"). See also Article VII of the Company's Articles of
Incorporation, filed herewith as Exhibit 3.1. The general effect of such
provisions is to relieve the directors and officers of the Company from
personal liability which may be imposed for certain acts performed in their
capacity as directors or officers of the Company, except where such persons have
not acted in good faith.
Insofar as indemnification for liabilities arising out of the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy, as expressed in the Act, and is,
therefore, unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the Registrant in connection with the issuance
and distribution of the securities registered hereby are set forth in the
following table:
SEC Registration Fee $ 3,709
Blue Sky Registration Fees 1,000
NASD Filing Fee 3,609
Transfer agent 7,500
Printing and engraving 12,000
Legal 26,000
Accounting 16,000
Miscellaneous 182
Total: $70,000
Note: The foregoing estimated expenses do not include commissions,
nor the Underwriter's non-accountable expense allowance, nor the fees and
expenses of Underwriter's counsel, payable by the Registrant.
II-1
Item 26. Recent Sales of Unregistered Securities.
Since November 30, 1993, the Registrant has sold securities in the
amounts, at the times and for the consideration listed below.
a. In February, 1994, the Registrant sold 105,000 shares of its Series
B Convertible Preferred Stock to one individual investor for $.30 per share, or
an aggregate of $31,500. In connection with that transaction, the Registrant
granted to such investor, for no additional consideration, an option (which has
now expired, unexercised), until January 28, 1997, to purchase 50,000 shares of
Preferred Stock at $.30 per share.
b. In September, 1995, the Registrant sold to one individual a 12%
note, in the aggregate amount of $14,509.00, which by its terms was convertible
until September, 1999 to Common Stock of the Registrant at the rate of $.75 per
share, or an aggregate of 19,345 shares.
c. As part of a stock redemption agreement in November, 1995, with two
individuals (who were officers and directors of the Registrant) and a business
entity wholly owned by them, the Registrant issued three Promissory Notes to
such persons in the aggregate principal amount of $185,300 and granted such
persons an option for the life of the outstanding principal balance owing to
them, to convert such balance into shares of the Registrant's Common Stock at
$.40 per share (which, at November 30, 1996, would have entitled them to
purchase up to 443,485 shares of Common Stock). The Registrant did not
receive any separate consideration for the granting of such option.
d. In November, 1995, in connection with a $150,000 loan transaction,
the Registrant issued a Warrant for 50,000 shares to the individual who made the
loan and subsequently issued a Warrant for an additional 5,000 shares to such
individual, as part of an agreement to extend the maturity date of such loan.
The Registrant did not receive any separate consideration for the issuance of
such Warrants.
e. On various dates between May, 1996 and November, 1996, the
Registrant sold an aggregate of $135,000 in principal amount of 10% Subordinated
Debentures, together with an aggregate of 45,667 Warrants to purchase Common
Stock to four individual investors (of whom two were directors of the
Registrant). The Registrant did not receive any separate consideration for the
granting of such Warrants.
f. In February, 1996, the Board of Directors authorized the issuance of
150,000 shares of Common Stock, valued at $.40 per share, or $60,000, to Robert
H. Blank, Chief Executive Officer, as partial consideration for services
previously rendered by him. Such shares were issued in December, 1996.
g. In August, 1996, in connection with the obtaining of two bank loans
aggregating $135,000, the Registrant issued Warrants for an aggregate of 45,000
shares of Common Stock to four individuals who personally guaranteed such loan.
In addition, as security for their guarantees, the Registrant issued 10%
debentures to each of such individuals in an amount equivalent to that which
they personally guaranteed, and such individuals have confirmed in writing that
such debentures will bear interest and become due and payable only at such time,
if ever, as there is a default on the bank loans and the individual advances
funds to the bank. None of such individuals was an affiliate of the Company,
although one was a principal of the Underwriter in this transaction. The
Registrant did not receive any separate consideration for the granting of such
Warrants or Debentures.
h. On various dates in late January, 1997, and early February, 1997,
the Registrant sold an aggregate of $28,000 in principal amount of 10%
Subordinated Debentures, together with an aggregate of 9,333 Warrants to
purchase Common Stock to
II-2
two individual investors (of whom one was an officer and director of the
Registrant and the other a spouse of an officer and director). The Registrant
did not receive any separate consideration for the granting of such Warrants.
There were no underwriting discounts or commissions paid by the
Registrant as part of any such transactions. However, a registered securities
broker-dealer did assist with the loan transaction in November, 1995,
described in Item 26.c., and, as a result, became entitled to a 7% cash
commission, payable by the Registrant after the lender was repaid.
All securities transactions listed for this Item 26 were made in reliance
upon the exemptions from registration under Sections 3(b) and 4(2) of the
Securities Act of 1933, as amended (in that sales were made to a small number of
persons, many of whom were accredited investors, and all of whom were
required to purchase for investment purposes only, and each of the instruments
recited that they were issued for investment purposes only).
Item 27. Exhibits.
(a) Exhibits filed and to be filed. (i) The following Exhibits are
filed as part of this Registration Statement:
1.1. Form of Underwriting Agreement between the Registrant and Tuschner &
Co.,Inc.
1.3. Form of Escrow Agreement.
1.4. Form of Impoundment Agreement.
3.1. Articles of Incorporation of the Registrant, dated March 9, 1993, with
amendments.
3.2. Bylaws of the Registrant, dated March 9, 1993, as amended May 5, 1993
4.2. Form of Warrant Agreement by and among the Registrant, the Underwriter,
and the Warrant Agent, including a Form of Warrant Certificate.
4.3. Form of the Registrant's 10% Subordinated Debenture Due September 30,
1996, and other dates.
4.4. Form of the Registrant's Warrant to Purchase Common Shares, expiring
November 10, 1998, and other dates.
4.5. Form of Maturity Extension Agreement for Debentures.
10.1. Stock Redemption Agreement, dated November 28, 1995, between the
Regisrant and various Lease Brothers entities, together with exhibits
thereto, namely three promissory notes, a personal guaranty and a
security agreement.
10.2. Bridge Financing Agreement, dated November 27, 1995, between the
Registrant and Norman Winer, together with exhibits thereto, namely
Promissory Note, Security Agreement, Guaranty of Re-Payment, form of
Subordination Agreement and form of Temporary Waiver of Right to Put.
10.3. Form of lease with building for space for Skway Ad platform.
10.4. Form of advertising contract for Skyway Ad.
10.5. Lease Agreement between Registrant and its lessor.
10.6. Registrant's Corporate Stock Option Plan.
10.7. Form of Executive Employment Agreement.
24.1. Consent of Silverman Olson Thorvilson & Kaufmann Ltd., Independent
Auditor.
25.1. Form of Power of Attorney, running from each of the Registrant's
directors namely Robert H. Blank, Richard D. Kothe, Gail Emerson, Mark
Verplaetse, Kenneth A. Olsen, Steven Unverzagt, and Mark T. Hepburn, to
Robert H. Blank and Richard D. Kothe, CEO and CFO of the Registrant,
respectively,with respect to signing of this Registration Statement and
any amendments.
27.1. Financial Data Schedule.
(ii) The following exhibits will be filed by amendment:
II-3
1.2. Form of Underwriter's Unit Purchase Agreement.
4.1. Form of Common Stock certificate.
5.1. Opinion of Keller & Lokken, P.A. regarding legality of securities.
24.2. Consent of Keller & Lokken, P.A. Contained in Exhibit 5.1 to this
Registration Statement.
Item 28. Undertaking.
a. Rule 415 Offering [Item 512(a) of Regulation S-B] The small business
issuer will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
b. Equity offerings of nonreporting small business issuers [Item
512(d) of Regulation S-B]:
The small business issuer will provide to the underwriter, at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
c. Request for Acceleration of Effective Date [Item 512(e) of
Regulation S-B]:
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
Signatures
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Minneapolis, State of Minnesota, on February 14, 1997.
ILLUMINATED MEDIA, INC.
/s/Robert H. Blank
By: Robert H. Blank,
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Dated:
/s/ Robert H. Blank Chief Executive Officer, February 14, 1997
Robert H. Blank and Director (Principal
Executive Officer)
/s/Richard D. Kothe Chief Financial Officer, February 14, 1997
President, and Director
(Principal Financial Officer,
Principal Accounting Officer)
* Director )
Gail Emerson )
)
* Director )
Kenneth Olsen )
)
* Director ) By: /s/ Robert H. Blank
Mark Verplaeste ) Robert H. Blank
) Attorney-in-Fact
* Director )
Steve Unverzagt )
) February 14, 1997
* Director )
Mark T. Hepburn )
* Executed by Robert H. Blank as Attorney-in-Fact
II-5
Signatures
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Minneapolis, State of Minnesota, on February __, 1997.
ILLUMINATED MEDIA, INC.
By: Robert H. Blank,
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Dated:
Chief Executive Officer, February __, 1997
Robert H. Blank and Director (Principal
Executive Officer)
Chief Financial Officer, February __, 1997
Richard D. Kothe President, and Director
(Principal Financial Officer,
Principal Accounting Officer)
Director )
Gail Emerson )
)
)
Director )
Kenneth Olsen )
)
)
Director ) By:_______________________
Mark Verplaeste ) Robert H. Blank
) Attorney-in-Fact
)
Director )
Steve Unverzagt )
) February __, 1997
)
Director )
Mark T. Hepburn )
II-6
As filed with the Securities and Exchange Commission on February 27, 1997.
Registration No. 33-
-----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------
ILLUMINATED MEDIA INC.
----------------------------
II-7
INDEX TO EXHIBITS
Exhibits Page No.
Filed Herewith:
1.1. Form of Underwriting Agreement between the Registrant and Tuschner &
Co.,Inc.
1.3. Form of Escrow Agreement.
1.4. Form of Impoundment Agreement.
3.1. Articles of Incorporation of the Registrant, dated March 9, 1993, with
amendments.
3.2. Bylaws of the Registrant, dated March 9, 1993, as amended May 5, 1993
4.2. Form of Warrant Agreement by and among the Registrant, the
Underwriter, and the Warrant Agent, including a Form of Warrant
Certificate.
4.3. Form of the Registrant's 10% Subordinated Debenture Due September 30,
1996, and other dates.
4.4. Form of the Registrant's Warrant to Purchase Common Shares, expiring
November 10, 1998, and other dates.
4.5. Form of Maturity Extension Agreement for Debentures.
10.1.Stock Redemption Agreement, dated November 28, 1995, between the
Regisrant and various Lease Brothers entities, together with exhibits
thereto, namely three promissory notes, a personal guaranty and a security
agreement.
10.2.Bridge Financing Agreement, dated November 27, 1995, between the
Registrant and Norman Winer, together with exhibits thereto, namely
Promissory Note, Security Agreement, Guaranty of Re-Payment, form of
Subordination Agreement and form of Temporary Waiver of Right to Put.
10.3.Form of lease with building for space for Skway Ad platform.
10.4.Form of advertising contract for Skyway Ad.
10.5.Lease Agreement between Registrant and its lessor.
10.6.Registrant's Corporate Stock Option Plan.
10.7.Form of Executive Employment Agreement.
24.1.Consent of Silverman Olson Thorvilson & Kaufmann Ltd., Independent
Auditor.
25.1.Form of Power of Attorney, running from each of the Registrant's directors
namely Robert H. Blank, Richard D. Kothe, Gail Emerson, Mark
Verplaetse, Kenneth A. Olsen, Steven Unverzagt, and Mark T. Hepburn,
to Robert H. Blank and Richard D. Kothe, CEO and CFO of the
Registrant, respectively, with respect to signing of this Registration
Statement and any amendments.
27.1.Financial Data Schedule.
(ii) The following exhibits will be filed by amendment:
1.2. Form of Underwriter's Unit Purchase Agreement.
4.1. Form of Common Stock certificate.
5.1. Opinion of Keller & Lokken, P.A. regarding legality of securities.
24.2.Consent of Keller & Lokken, P.A. Contained in Exhibit 5.1 to this
Registration Statement.
II-8
</TABLE>
EXHIBIT 1.1
ILLUMINATED MEDIA, INC.
UNDERWRITING AGREEMENT
Minneapolis, Minnesota
December ____, 1996
Tuschner & Company, Inc.
Suite 800, One Financial Plaza
120 South Sixth Street
Minneapolis, MN 55402
Gentlemen:
Illuminated Media, Inc. (the "Company"), a Minnesota
corporation, proposes to issue and sell exclusively through you
(the "Underwriter"), pursuant to this Underwriting Agreement
(the "Agreement"), up to 1,500,000 Units (the "Units" or a
"Unit"), at a purchase price of $1.00 per Unit, each Unit
consisting of one share of the Company's common stock and
one redeemable common stock purchase warrant to purchase
two shares of such common stock at $2.75 per share (the
"Warrants" or a "Warrant"). Each Warrant entitles the holder
to purchase two shares of common stock for $2.75 per share
from the date hereof until five years from the Effective Date,
subject to adjustment in certain instances, and is redeemable
in
certain instances commencing 60 days from the date of this
Agreement at $.01 per Warrant. The offering of the Units is
further described in the Registration Statement No.
_________, filed on Form SB-2 with the United States
Securities and Exchange Commission (the "Commission" ).
The Units to be sold by the Company hereunder will be
offered for the Company by you on an "all or none" basis with
respect to 550,000 Units and on a "best efforts" with respect
to
an additional 1,000,000 Units. The shares of common stock
included in the Units and in the Unit Purchase Option (defined
in Section 6) which the Company agrees herein to sell to you
are referred to herein as the "Shares." The shares of common
stock issuable on exercise of the Warrants included in the
Units
and in the Warrants included in the Units subject to the Unit
Purchase Option are referred to herein as the "Warrant
Shares." The Warrants included in the Units subject to the
Unit Purchase Option are referred to herein as the
"Underwriter's Warrants." All securities included in the Units
and in the Unit Purchase Option (and securities which may be
acquired on exercise thereof) are sometimes referred to herein
as the "Underlying Securities."
1. Covenants, Representations, and Warranties of the
Company. In order to induce the Underwriter to enter into
this Agreement, the Company covenants, represents, and
warrants to you as follows, as of the date hereof and as of the
date of each Closing, as if made on such date:
(a) The Company has filed the Registration
Statement relating to the Units with the Commission pursuant
to the Securities Act of 1933 ("Act"), as amended, and pursuant
to the Commission's rules and regulations promulgated
thereunder (the "Regulations"). The Company has furnished to
the Underwriter and to its legal counsel four signed and ten
conformed copies of the Registration Statement together with
all amendments, and exhibits. As used in this Agreement, the
term "Registration Statement" means the Registration
Statement, including the Prospectus, the exhibits and financial
statements included therein, and all amendments including any
amendments after the effective date of the Registration
Statement. The term "Prospectus" means the prospectus filed as
a part of Part I of the Registration Statement, including all
pre-effective and post-effective amendments and supplements
thereto.
(b) The Registration Statement and all other
documents previously filed or filed after the date hereof with
the Commission conform and will conform with all of the
requirements of the Act and the Regulations in all material
respects. Neither the Registration Statement, the Prospectus,
nor the other material filed or to be filed with the Commission
contains or will contain any untrue statements of material fact
nor are there or will there be any omissions of material facts
required to be stated therein or that are necessary to make the
statements therein not misleading, except that this warranty
does not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing
to the Company by and with respect to the Underwriter, or
any dealer through the Underwriter, expressly for use in the
Registration Statement or Prospectus or any amendment or
supplement thereto.
(c) The Company has used its best efforts to qualify
the Units for offering in every state reasonably designated by
the Underwriter. The applications to register the Units and
documents filed therewith, whether previously filed or filed
after the date hereof with any state do not and will not
contain
any untrue statements of material fact nor are there or will
there be any omissions of material facts required to be stated
therein or that are necessary to make the statements therein
not misleading.
(d) The outstanding capital stock of the Company
has been duly and validly authorized and issued, is fully paid
and assessable, and conforms to all statements made in
Registration Statement and Prospectus with respect thereto.
The Units, and the Unit Purchase Option have been duly and
validly authorized by all necessary corporation by the
Company. The Warrants, the Unit Purchase Option, and
Underwriter's Warrants, when sold and delivered by the
Company as provided herein and therein, will constitute valid
and binding obligations of the Company, enforceable in
accordance with their terms. A sufficient number of shares of
common stock have been reserved for issuance upon exercise of
the Warrants, the Unit Purchase Option and the Underwriter's
Warrants, and when delivered upon due exercise, will be
validly issued, fully paid and nonassessable. The Units, Unit
Purchase Option, and the Underlying Securities conform to all
statements respecting them in the Registration Statement and
Prospectus. Upon delivery of and payment for the Unit
Purchase Option to be sold by the Company as set forth in this
Agreement, the Underwriter and its designees will receive good
and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims except those created by,
through, or under the Underwriter and except restrictions on
transfer arising under federal and state securities laws. The
Shares and Warrant Shares, upon issuance, will not be subjec to
the preemptive rights of any shareholders of the Company.
(e) The Company has been legally incorporated and
is a validly existing corporation under the laws of the state
of
its incorporating jurisdiction, and is lawfully qualified to
conduct the business for which it was organized and which it
proposes to conduct. The Company is qualified to conduct
business as foreign corporation in each Jurisdiction where the
nature of its business requires such qualification except where
failure to so qualify would not have a material adverse effect
on
the Company.
(f) The Company's capitalization is as stated in the
Registration Statement. There are no outstanding options,
warrants, or other rights to purchase or require the issuance
of
(by conversion or otherwise) any securities of the Company,
however characterized, except as described in the Registration
Statement. With respect to the offer to sell, sale, offer to
purchase, or purchase of any of its securities, the Company has
not committed any violations of the of the federal securities
laws; the Regulations; or the laws, rules, or regulations of
any
jurisdiction wherein such securities transactions or
solicitations
occurred. All prior sales of the Company's securities were
exempt from the registration and prospectus delivery
requirements of the Act and applicable state law.
(g) The Board of Directors of the Company and the
shareholders of the Company have adopted an Incentive Stock
Option Plan designed to qualify under Section 422A of the
Internal Revenue Code. The Incentive Stock Option Plan and
all outstanding options thereunder are as described in the
Registration Statement.
(h) During the period of the offering of the Units and
for one year from the date the Commission declares the
Registration Statement to be effective (the "Effective Date"),
the Company will not sell any securities (except: options
issued
pursuant to the Company's Incentive Stock Option Plan;
except any shares issued upon the exercise of such options; any
shares issued upon the exercise of any other options or
warrants outstanding on the Effective Date; and the Warrants,
Unit Purchase Option, and Underwriter's Warrants) without
the Underwriter's prior written consent, which will not be
unreasonably withheld.
(i) The Company has caused each of its officers,
directors, and each of its other shareholders owning 5% or
more of the Company's outstanding common stock to enter
into an agreement with the Underwriter pursuant to the terms
of which each such Person has agreed not to sell any shares
owned directly or indirectly by such person for a period of 12
months from the Effective Date without the Underwriter's
prior written consent, which will not be unreasonably
withheld.
(j) Except as described in the Registration
Statement, the Company has no subsidiaries nor contemplates
acquiring subsidiaries or engaging in mergers with or the
acquisition of any companies. The Company owns all or a
majority of the outstanding capital stock of its subsidiaries,
free
of any liens, encumbrances, or adverse claims of any kind.
(k) The financial statements, together with related
schedules and notes, included in the Registration Statement and
Prospectus present fairly the financial condition and results
of
operations of the Company as of the dates and for the periods
indicated, and are reported upon by independent public
accountants according to generally accepted accounting
principles and as required by the Regulations.
(1) Except as disclosed in the Registration Statement
and the Prospectus, the Company does not have any direct or
contingent liabilities, obligations, or claims pending, nor has
it
or they received threats of claims or regulatory action by any
government agency or other party. Further, except as disclosed
in the Registration Statement and the Prospectus, subsequent
to the date information is given in the Registration Statement
and Prospectus: (a) there has been no material adverse change
in the management, condition (financial or otherwise), or
prospects of the Company or in its business taken as a whole;
(b) there has been no material transaction entered into by the
Company other than transactions in the ordinary course of
business; (c) the Company has not incurred any material
obligations, contingent or otherwise, which are not disclosed
in
the Registration Statement and the Prospectus (except
liabilities
incurred in the ordinary course of business which do not in the
aggregate result in a material adverse change in the financial
or
other condition, business, or prospects of the Comany); (d)
there has been no change in the capital or long term debt
(except current payments) of the Company or any subsidiary;
(e) the Company has not paid or declared any dividends or
other distributions on its common shares; and (f) the Company
has not committed to any of the foregoing.
(m) The Company's securities, however
characterized, are not subject to preemptive or registration
rights. No shareholder of the Company has any cumulative or
extraordinary voting rights by agreement or otherwise.
(n) The Company has the legal right and authority
and has taken all necessary corporate action to enter into this
Agreement, and, upon its execution, to effect the proposed sale
of the Units, to execute and deliver the Unit Purchase Option
and the Warrant Agreement, and to effect all other transactions
contemplated by this Agreement. This Agreement, the Unit
Purchase Option, the Impoundment Agreement, and the
Warrant Agreement are valid and binding agreements of the
Company and are enforceable against the Company in
accordance with their respective terms, except as enforcement
may be limited by bankruptcy, moratorium, or similar laws
governing creditors' rights generally; except as the
availability
of equitable remedies is subject to the exercise of judicial
discrection; and except as provisions pertaining to
indemnification may be unenforceable under federal or state
securities laws.
(o) The Company knows of no person who has
rendered any services in connection with the introduction of
the Company to the Underwriter. No broker's or other
finder's fees are due and payable by the Company and none
will be paid by it.
(p) The Company is eligible to use Form SB-2 for
offering the Units.
(q) The Company and its affiliates are not currently
offering any securities nor has the Company or its affiliates
offered or sold any securities except as required to be
described
(and as so described) in the Registration Statement.
(r) The Company will not file any amendment or
supplement to the Registration Statement, Prospectus, or
exhibits unless the Underwriter and its counsel have been
previously furnished a copy, and unless the Underwriter or its
counsel have consented in writing to the filing of the
amendment or supplement, nor will the Company request that
the Registration Statement be declared effective without the
Underwriter's consent.
(s) The Company possesses adequate certificates or
permits issued by the appropriate federal, state, and local
regulatory authorities necessary to conduct its business and to
retain possession of its properties. The Company has not
received any notice of any proceeding relating to the
revocation or modification of any of these certificates or
permits.
(t) The Company filed all tax returns required to be
filed and is not in default in the payment of any taxes which
have become due pursuant to any law or any assessment. No
tax return is the subject of any current or announced
examination by any taxing authority.
(u) The Company has marketable title or a valid
leasehold interest to all properties, including intellectual
properties, described in the Registration Statement as owned or
used by it. The properties are free and clear of all liens,
charges,
encumbrances, or restrictions, however characterized, except as
described in the Registration Statement. All of the contracts,
leases, subleases, patents, copyrights, licenses, and
agreements,
however characterized, under which the Company holds
properties as described in the Registration Statement are in
full
force and effect. The Company is not in default under any of
the material terms or provisions of any contracts, leases,
subleases, patents, copyrights, licenses, or agreements under
which the Company holds its properties. There are no known
claims against the Company concerning the Company's under
such leases, subleases, patents, copyrights, licenses, and
agreements and concerning its right to continued possession of
its properties.
(v) All original documents (or genuine copies
thereof) and other information relating to the Company's
affairs have and will continue to be made available upon
request to the Underwriter and to its counsel at the
Underwriter's office or at the office of the Underwriter's
counsel and copies of any such documents will be furnished
upon request to the Underwriter and to its counsel. Included
within the documents made available have been at least the
Articles of Incorporation and any Amendments; minutes of all
of the meetings of the Incorporators, Directors and
Shareholders; all financial statements; and copies of all
contracts, leases, patents, copyrights, licenses, or agreements
to
which the Company is a party or in which the Company has
an interest.
(w) The Company has appointed Norwest Bank
Minnesota, N.A., Minneapolis, Minnesota, as the Company's
transfer and warrant agent. The Company will continue to
retain a transfer agent reasonably satisfactory to the
Underwriter for so long as the Company is subject to the
reporting requirements under Section 12(a) or Section 15(d) of
the Securities Exchange Act of 1934, or so long as the
Underwriter is a principal market-maker in shares of the
Company's common stock, and so long as the Warrants are
outstanding. The Company will make arrangements to have
available at the office of the transfer agent sufficient
quantities
of the Company's common stock and warrant certificates as
may be needed for the quick and efficient transfer of the
Shares
and exercise of the Warrants.
(x) The Company will use the proceeds from the sale
of the Units substantially as set forth under "Use of Proceeds"
in the Registration Statement and Prospectus.
(y) There are no contracts or other documents
required to he described in the Registration Statement or to be
filed as exhibits to the Registration Statement which have not
been described or filed as required.
(z) The Company is not (with or without notice or
lapse of time) in material default under any of the contracts,
leases, licenses comittments, debentures, notes, or agreements
to which it is a party or by which it or its properties is
bound.
The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and
compliance with the terms of this Agreement will not (with or
without notice or lapse of time) conflict with or result in a
breach of or give any party the right to accelerate or declare
a
default under any of the material terms, conditions or
provisions of, or constitute a material default under, the
Articles of Incorporation or Bylaws of the Company, or any
note, indenture, mortgage, deed of trust, or other agreement or
instrument to which the Company is a party or by which it or
any of its property is bound, or result in a violation of any
existing law, order, rule, regulation, writ, injunction, or
decree
of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign,
having
jurisdiction over the Company, or its property. The consent,
approval, authorization, or order of any court or governmental
instrumentality, agency, or body is not required for the
consummation of the transactions herein contemplated except
such as may be required under the Act, under the Blue Sky or
securities laws of any state or jurisdiction, or the rules of
the
National Assocation of Securities Dealers, Inc. (the "NASD").
(aa) Each contract to which the Company and its
subsidiaries is a party has been duly and validly executed, is
in
full force and effect in all material respects in accordance
with
their respective terms, and no contracts have been assigned by
the Company, except as disclosed in the Registration Statement
and Prospectus. The Company knows of no present situation,
condition, or fact which would prevent compliance with the
terms of such contracts. Except for amendments or
modifications of contracts in the ordinary course of business
and except as disclosed in the Registration Statement and
Prospectus, the Company has no intention of exercising any
right which would cancel any of its obligations under any
contract, and has no knowledge that any other party to any
contract in which the Company has an interest has any
intention not to render full performance under such contract.
(bb) The Company has not made any representation,
whether oral or in writing, to anyone, whether an existing
shareholder or not, that any of the Shares will be reserved for
or directed to them during the proposed public offering.
(cc) The Company has caused each of its current
shareholders to agree in writing with respect to shares
acquired
by them prior to the Effective Date that they have acquired the
shares for investment purposes only and they acknowledge that
they hold "restricted securities" as defined in Rule 144 of the
Commission.
(dd) Except as disclosed in the Registration Statement
and Prospectus, there is no action, suit, or proceeding pending
before any court or governmental agency, authority or body
or, to the knowledge of the Company, threatened which might
result in judgments against the Company not adequately
covered by insurance or which collectively might result in any
material adverse change in the condition (financial or
otherwise), the business, or the prospects of the Company, or
which would materially affect the properties or assets of the
Company.
(ee) All of the above representations and warranties shall
survive the Closing performance, or termination of this
Agreement.
2. Covenants, Representations, and Warranties of
the Underwriter. The Underwriter represents and warrants as
follows as of the date hereof and as of each closing date as if
made on such date:
(a) It is registered as a broker-dealer with the
Commission, in good standing with the Minnesota
Department of Commerce, and is registered, to the extent
registration is required, with the appropriate governmental
agency in each state in which it offers or sells the shares and
is a
member of the National Association of Securities Dealers, Inc.
("NASD") and will use its best efforts to maintain such
registrations, qualifications, and memberships throughout the
term of the offering.
(b) To the knowledge of the Underwriter, no action
or proceeding is pending against the Underwriter or any of its
officers or directors concerning the Underwriter's activities
as a
broker or dealer that would affect the Company's offering of
the Shares.
(c) The Underwriter will offer the Units only in
those states and in the quantities that are identified in the
Blue
Sky Memoranda from the Underwriter's counsel to the
Underwriter that the offering of the Units has been qualified
for sale under the applicable state statutes and regulations.
The
Underwriter, however, may offer the Units in other states if
(i)
the transaction is exempt from the registration requirements in
that state, (ii) the Company's counsel has received notice ten
days prior to the proposed sale, and (iii) the Company's
counsel does not object within said ten day period.
(d) The Underwriter knows of no person who
rendered any services in connection with the introduction of
the Company to the Underwriter. No person acting by,
through or under the Underwriter will be entitled to receive
from the Underwriter or from the Company any finder's fees
or similar payments.
(e) The written information provided by the
Underwriter for inclusion in the Registration Statement and
Prospectus consists of certain information on the front and
back Prospectus cover pages, and that set forth under
"Underwriting" in the Prospectus. Such information contains
no misstatement of a material fact and does not omit any
material fact necessary to make such statements not misleading.
(f) The Underwriter will, reasonably promptly after
the Closing date, supply the Company with all information
required from the Underwriter for the completion of Form SR
and such additional information as the Company may
reasonably request to be supplied to the securities commissions
of such states in which the Units have been qualified for sale.
(g) All of the above representations and warranties
shall survive the performance or termination of this
Agreement.
3. Employment of the Underwriter In reliance
upon the representations and warranties and subject to the
terms and conditions of this Agreement:
(a) The Company employs the Underwriter as its
exclusive agent to sell for the Company's account the Units, on
a cash basis only, at a price of $1.00 per Unit. The
Underwriter
agrees to use its best efforts, as agent for the Company, to
sell
the Units subject to the terms and conditions set forth in this
Agreement. It is understood between the parties that there is
no firm commitment by the Underwriter to purchase any or
all of the Shares.
(b) The obligation of the Underwriter to offer the
Units is subject to receipt by it of written advice from the
Commission that the Registration Statement is effective, is
subject to the Units being qualified for offering under
applicable laws in the states as may be reasonably designated
by
the Underwriter, is subject to the absence of any prohibitory
action by any governmental body, agency or official, and is
subject to the terms and conditions contained in this
Agreement and in the Registration Statement covering the
offering to which this Agreement relates.
(c) The Company and the Underwriter agree that the
agency between the Company and the Underwriter will
terminate ninety (90) days from the Effective Date (which
period may be extended for an additional period not to exceed
thirty (30) days by mutual agreement between the Company
and the Underwriter). If the agency between the Company and
the Underwriter terminates without at least 550,000 Units
being sold, the full proceeds which have been paid for the
Units shall be returned to the purchasers. Prior to the sale of
all
of the Units to be offered, all proceeds received from the sale
of
the Shares will be deposited in an impoundment account
entitled "BankWindsor-Illuminated Media, Inc." with
BankWindsor, Minneapolis, Minnesota.
(d) The Company, the Underwriter and
BankWindsor, Minneapolis, Minnesota, will, prior to offering
the Units, enter into an Impoundment Agreement in form
satisfactory to the parties and approval by the Minnesota
Commissioner of Securities. The parties mutually agree to
faithfully perform their obligations under the an Impoundment
Agreement. The Underwriter will promptly deliver the funds
into the impoundment account in accordance with Rule 15(c)2-4
of the Securities Exchange Act
of 1934, as amended but in
any event not to exceed noon of the next business day after
receipt of such funds.
(e) The Underwriter shall have the right to associate
with other dealers as it may determine and shall have the right
to grant to such persons such concessions out of the
commissions to be received by the Underwriter as the
Underwriter may determine, under and pursuant to a Selected
Dealer Agreement in the form filed as an exhibit to the
Registration Statement.
(f) Subject to the sale of at least 550,000 Units, the
Company agrees to pay to the Underwriter an underwriting
commission computed at the rate of $1.00 (10% of the public
offering price) for each of the Unit sold by the Underwriter at
the public offering price of $.10 per Unit. This commission
shall be payable in certified funds upon the release of the
funds
which have been deposited in the escrow account.
4. Expenses of the Underwriter.
(a) Subject to the sale of at least 550,000 Units, and
subject to the provisions of paragraph 14(e) hereof, the
Company shall reimburse the Underwriter for its expenses on
a nonaccountable basis in an amount of 3% of the offering
proceeds. The Underwriter acknowledges that it has received
$5,000 cash of the nonaccountable expense allowance. Subject
to the provisions of paragraph 14(e) hereof, the remaining
nonaccountable expense allowance is due on the release of the
funds in the impoundment account to the Company.
(b) Except as stated in subparagraph 14(e) of this
Agreement, the Underwriter agrees that out of its
nonaccountable expense allowance the Underwriter will pay all
costs incurred or to be incurred by the Underwriter or by its
personnel in connection with the offering of the Units, except
those to be paid by the Company as described in paragraph 5
hereof.
5. Expenses of the Company.
The Company will pay, whether or not the transactions
contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs
and expenses incident to the performance of its obligations
under this Agreement, including (without limitation) (i) all
expenses incident to the authorization of the Units and their
issue and delivery to the Underwriter; (ii) any original issue
taxes in connection therewith and all transfer taxes, if any,
incident to the initial sale of the Units to the public; (iii)
the
costs and expenses incident to the preparing, printing, and
filing the Registration Statement and Prospectus under the Act
and with the NASD of the Registration Statement, any
Preliminary Prospectus, and the definitive Prospectus and any
amendments or supplements thereto; (iv) the cost of printing,
reproducing, and filing all exhibits to the Registration
Statement, the underwriting documents, and the Selected
Dealers Agreement; (v) the cost of printing and furnishing to
the Underwriter copies of the Registration Statement and
copies of the Prospectus as herein provided; (vi) the cost of
"tombstone" or other similar advertising permitted under the
Act (subject to our mutual agreement as to the amount); and
(vii) the cost of qualifying the Unitsunder the state
securities or
Blue Sky laws as provided herein, including expenses and
disbursements of the Underwriter and the Underwriter's
counsel fees incurred in connection with such qualification if
the Underwriter's counsel undertakes to effect such
qualification.
6. Unit Purchase Option.
Subject to the sale of all of the Shares, the Company
agrees to sell to the Underwriter (or its designees) an option
(the "Unit Purchase Option"), in form attached as Exhibit A
hereto, for a purchase price of $100 entitling the Underwriter
to purchase 10% of the Units sold in the offering.
7. Threat of Regulatory Action.
The Company and the Underwriter agree to advise each
other immediately and confirm in writing the receipt of any
threat of or the initiation of any steps or procedures which
would impair or prevent the right to offer the Shares or the
issuance of any suspension or stop orders or other prohibitions
preventing or impairing the proposed offering of the Units. In
the case of the happening of any such event, neither the
Company nor the Underwriter will acquiesce in such steps,
procedures, or suspension orders if such acquiescence would
adversely affect the other party or this offering and, in such
event, each party agrees to actively defend any such actions or
orders unless both parties agree in writing to acquiesce in
such
actions or orders or unless counsel for each party advises the
parties that the probability of successfully defending against
such actions or orders is remote.
8. Further Covenants of the Company. The
Company further covenants and agrees with the Underwriter
as follows:
(a) The Company will advise the Underwriter as
soon as the Company is advised of any comments by the
Commission, of any request made by the Commission for an
amendment to the Registration Statement or Prospectus or for
supplemental information, and of any order or of the
institution of any adverse proceedings with respect to the
offering of the Units. The Company will immediately deliver
to the Underwriter copies of any letters or other documents
containing such comments, requests, or notice of such
proceedings involved.
(b) The Company will use its best efforts to qualify
the sale of the Units in such states as shall be reasonably
designated by the Underwriter. The officers, directors,
promoters, and shareholders of the Company will comply with
applicable state escrow requirements, including those
pertaining to the escrow of shares, provided that the period of
escrow shall not exceed two years from the Effective Date and
provided that the period of escrow shall only be based upon
the passage of time.
(c) The Company will provide the Underwriter and
its counsel with copies of all applications for the
registration or
qualification of Units filed with the various state authorities
and will provide the Underwriter and its counsel with copies of
all comments and orders received from these authorities.
(d) The Company will deliver to the Underwriter
and to other broker-dealers as directed by the Underwriter as
many copies of preliminary Prospectuses as the Underwriter
may reasonably request during the period following filing the
Registration Statement. The Company will deliver to the
Underwriter and to other broker-dealers as requested by the
Underwriter as many copies of the definitive Prospectus as the
Underwriter may reasonably request during the period of the
offering and for 90 days after the Effective Date.
(e) The Company will furnish to the Underwriter
for so long as the Company's common stock is registered
under the Securities Exchange Act of 1934 and for so long as
the Warrants are outstanding with the following:
(1) Within 90 days after the close of each fiscal
year of the Company, a financial report of the Company
and its subsidiaries, if any, on a consolidated basis,
such
report to include such information in such form as the
Company shall be required to include in reports for that
fiscal year to be filed with the Commission and such
report to be certified by independent public accountants;
(2) Within 60 days after the end of each
quarterly fiscal period of the Company other than the
last quarterly fiscal period in any fiscal year, copies in
printable form of the financial statements of the
Company and its subsidiaries, if any, on a consolidated
basis, for that period and as of the end of that period,
which financial statements shall include a narrative
discussion of such financial statements and of the
business conducted by the Company and its subsidiaries,
if any, during such fiscal quarter and such information
in such form as the Company shall be required to
include in reports for that period to be filed with the
Commission, all subject to year-end adjustment, signed
by the principal financial or accounting officer of the
Company;
(3) As soon as is available, a copy of each
report of the Company mails to shareholders or files
with the Commission;
(4) Copies of all news, press, or public
information releases when made;
(5) Upon request in writing from the
Underwriter, such other information as may reasonably
be requested concerning the properties, business and
affairs of the Company and its subsidiaries, if any.
(f) The Company agrees to notify the Underwriter
immediately of any event that materially affects the Company
or its securities and that should be set forth in an amendment
or supplement to the Registration Statement or the Prospectus
in order to make the statements made therein not misleading.
Similarly, the Company agrees to prepare and furnish to the
Underwriter as many copies as the Underwriter may request of
an amended Prospectus or a supplement to the Prospectus in
order that the Prospectus as amended or supplemented will not
contain any untrue statement of a material fact or omit to
state
any material fact required to be stated therein or that is
necessary in order to make the statements made therein not
misleading.
(g) The Company will file with the Commission the
required Reports on Form SR and will file with the
appropriate state securities commissioners any sales and other
reports required by the rules and regulations of such agencies
and will supply copies to the Underwriter.
(h) As soon as practicable after successful termination
of the offering of the Units, the Company will make a filing
under Section 12(g) of the Securities Exchange Act of 1334, as
amended, on Form 8-A with respect to its common stock,
Units, and Warrants, and will use its best efforts to cause it
to
become effective. The Company agrees to deliver a copy of the
Form 8-A to the Underwriter and to its counsel when filed.
(i) Except with the Underwriter's approval, the
Company agrees that the Company will not do the following
until (a) the completion of the offering of the Units, or (b)
the
termination of this Agreement, or (c) 90 days after the
Effective
Date, whichever occurs later:
(1) Undertake or authorize any change in its capital
structure or authorize, issue, or permit any public or private
offering of additional securities;
(2) Authorize, create, issue, or sell any funded
obligations, notes or other evidences of indebtedness, except
in
the ordinary course of business and within 12 months of their
creation;
(3) Consolidate or merge with or into any other
corporation; or
(4) Create any mortgage or any lien upon any of its
properties or assets except in the ordinary course of its
business.
(j) For so long as the Company's Units, common
stock or warrants are registered under the Securities Exchange
Act of 1934, as amended, the Company will hold an annual
meeting of shareholders for the election of directors within
180
days after the end of each of the Company's fiscal years and,
within 180 days after the end of each of the Company's fiscal
years, will provide the Company shareholders with the audited
financial statements of the Company as of the end of the fiscal
year just completed prior thereto. Such financial statements
shall be those required by Rule 14a-3 under the Securities
Exchange Act of 1934, as amended, and shall be included in an
annual report meeting the requirements of the Rule. Further,
the Company agrees to make available to the Underwriter and
the Company's shareholders in printable form within 60 days
after the end of each fiscal quarter of the Company (other than
the last fiscal quarter in any fiscal year) reasonably itemized
financial statements of the Company and its subsidiaries, if
any,
for the fiscal quarter just ended and a narrative discussion of
such financial statements and the business conducted by the
Company and its subsidiaries, if any, during such quarter.
(k) As soon as practical, but in any event not later
than fifteen months after the Effective Date, the Company will
make generally available to its securities holders, according
to
Section ll(a) of the Act, an earnings statement of the Company
in reasonable detail covering a period of at least twelve
months
beginning after the Effective Date and will advise the
Underwriter in writing that such statement has been made
available.
(1) The Company agrees to have the Units and
Underlying Securities listed on NASDAQ on the first day of
trading in the Units. The Company and the Underwriter will
agree upon the NASDAQ symbol to be used. The Company
will obtain a CUSIP number for its common stock, Units, and
Warrants.
(m) Within 30 days after the successful termination of
the offering of the Shares, the Company agrees to submit
information about the Company to be included in various
securities manuals, including Moody's Over-The-Counter
Manual and/or Standard & Poor's, Standard Corporation
Records to facilitate secondary trading in the Shares.
(n) The Company will qualify the Units for
secondary trading in California as soon as possible.
(o) The Company agrees to cause the stock
certificates of all of the current shareholders of the Company
and of any future officers or directors of the Company to be
clearly legended as being restricted against transfer without
compliance with the Act and to cause the Company's transfer
agent to put stop transfer instructions against such stock
certificates.
(p) The officers and directors of the Company at the
time of the filing of the Company's Registration Statement and
at the effective date of the Company's Registration Statement
shall be reasonably acceptable to the Underwriter.
(q) The Company shall keep the Registration
Statement and qualification under such Blue Sky laws as
reasonably requested by the Underwriter effective for so long
as the Warrants are outstanding and shall distribute to the
Warrant holders supplemented or amended Prospectuses as
required by the Act to permit exercise thereof.
(r) Prior to the first Closing, the Company shall
execute a warrant agreement with the warrant agent
satisfactory to the Underwriter.
(s) As soon as practicable, the Company shall deliver
to the Underwriter a cash budget and projections of cash flow,
capital expenditures, and profit or loss, all in form and
containing such information as is reasonably satisfactory to
the
Underwriter.
(t) Until this Agreement is terminated as provided
herein, the Company will not engage another underwriter or
agent to offer the Units.
9. Indemnification By Company.
The Company agrees to indemnify and hold harmless
the Underwriter and each person who controls the
Underwriter within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities,
joint or
several, to which they or any of them may become subject
under the Act or any other statute or at common law and to
reimburse persons indemnified as above for any legal or other
expenses (including the cost of any investigation and
preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only
insofar as such losses, claims, damages, liabilities and
litigation
arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the
Registration Statement or any amendment thereto or any
application or other document filed in order to qualify the
Shares under the Blue Sky or securities laws of the states
where
filings were made, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary
to make the statements therein not misleading, all as of the
date
when the Registration Statement or such amendment, as the
case may be, becomes effective, or any untrue statement or
alleged untrue statement of a material fact contained in the
Prospectus (as amended or supplemented if the Company shall
have filed with the Commission any amendments thereof or
supplements thereto), or the omission or alleged omission to
state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however,
that the indemnity agreement contained in this Section 9 shall
not apply to amounts paid in settlement of any such litigation
if such settlements are effected without the consent of the
Company, nor shall it apply to the Underwriter or any person
controlling the Underwriter in respect of any such losses,
claims, damages, liabilities, or actions arising out of or
based
upon any such untrue statements or alleged untrue statement,
or any such omission or alleged omission, if such statement or
omission was made in reliance upon information peculiarly
within the knowledge of the Underwriter and furnished in
writing to the Company by the Underwriter specifically for
use in connection with the preparation of the Registration
Statement and Prospectus or any such amendment or
supplement thereto. This indemnity agreement is in addition
to any other liability which the Company may otherwise have
to the Underwriters. The Underwriter agrees within ten days
after the receipt by it of written notice of the commencement
of any action against them or against any person controlling
them as aforesaid, in respect of which indemnity may be
sought from the Company on account of the indemnity
agreement contained in this Section 9 to notify the Company
in writing of the commencement thereof. The failure of the
Underwriter so to notify the Company of any such action shall
relieve the Company from any liability which it may have to
the Underwriters or any person controlling them as aforesaid
on account of the indemnity agreement contained in this
Section 9, but shall not relieve the Company from any other
liability which it may have to the Underwriters or such
controlling person. In case any such action shall be brought
against the Underwriters or any such controlling person and
the Underwriters shall notify the Company of the
commencement thereof, the Company shall be entitled to
participate in (and, to the extent that it shall wish, to
direct) the
defense thereof at its own expense, but such defense shall be
conducted by counsel of recognized standing and reasonably
satisfactory to the Underwriter or such controlling person or
persons, defendant or defendants in such litigation. The
Company agrees to notify the Underwriter promptly of
commencement of any litigation or proceedings against it or
any of its officers or directors, of which it may be advised,
in
connection with the issue and sale of any of its securities and
to
furnish to the Underwriter, at its request, copies of all
pleadings therein and permit the Underwriter to be an observer
therein and apprise the Underwriter of all developments
therein, all at the Company's expense. Provided, however,
that in no event shall the indemnification agreement contained
in this Section 9 inure to the benefit of any Underwriter (or
any person controlling such Underwriter) on account of any
losses, claims, damages, liabilities or actions arising from
the
sale of the Units based upon any misstatement of a material
fact or omission to state a material fact in any information
included in the Registration Statement furnished by the
Underwriter and pertaining to the Underwriter.
10. Indemnification By Underwriter.
The Underwriter agrees, to the extent of and in the same
manner as set forth in Section 9 above, to indemnify and hold
harmless the Company, the directors of the Company and each
person, if any, who controls the Company within the meaning
of Section 15 of the Act with respect to any statement in or
omission from the Registration Statement or any amendment
thereto, or the Prospectus (as amended or as supplemented, if
amended or supplemented as aforesaid) or any application or
other document filed in any state or jurisdiction in order to
qualify the Units under the blue sky or securities laws
thereof,
if such statement or omission was made in reliance upon
information peculiarly within its knowledge and furnished in
writing to the Company by the Underwriter on its behalf
specifically for use in connection with the preparation thereof
or supplement thereto. The Underwriter shall not be liable for
amounts paid in settlement of any such litigation if such
settlement was effected without the consent of the
Underwriter. In case of commencement of any action in
respect of which indemnity may be sought from the
Underwriter on account of the indemnity agreement contained
in this Section10, each person agreed to be indemnified by the
Underwriter shall have the same obligation to notify the
Underwriter as the Underwriter have toward the Company in
Section 9 above, subject to the same loss of indemnity in the
event such notice is not given, and the Underwriter shall have
the same right to participate in (and, to the extent that it
shall
wish, to direct) the defense of such action at its own expense,
but such defense shall be conducted by counsel of recognized
standing and satisfactory to the Company. The Underwriter
agrees to notify the Company promptly of the commencement
of any litigation or proceeding against the Underwriter,, or
against any such controlling person, of which it may be
advised, in connection with the issue and sale of any of the
securities of the Company, and to furnish to the Company at
its request copies of all pleadings therein and apprise it of
all
the developments therein, all at the Underwriter's expense, and
permit the Company to be an observer therein.
11. Contribution.
If the indemnification provided for in Sections 9 or 10 is
unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to
therein,
then each indemnifying party shall in lieu of indemnifying
such indemnified party contribute to the amount paid or
payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect not
only
(i) the relative benefits received by the Company on the one
hand and the Underwriter on the other from the offering of
the Shares, but also (ii) the relative fault of the Company and
the Underwriter in connection with the statements or
omissions which resulted in such losses, claims, damages,
expenses or liabilities (or action in respect thereof), as well
as
any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the
Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the
Shares (before deducting expenses other than the
nonaccountable expense allowance payable by the Company to
the Underwriter) received by the Company bear to the total
underwriting commissions and expense allowance received by
the Underwriter in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates
to
information supplied by the Company or the Underwriter,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriter
agree that it would not be just and equitable if contribution
pursuant to this Section 11 were determined by pro rata
allocation or by any other method of allocation which does not
take account of the equitable considerations referred to above
in this Section 11. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof)
referred to
above in this Section 11 shall he deemed to include any legal
or
other expenses to which such indemnified party would be
entitled if Section 9 and 10 were applied. Notwithstanding the
provisions of this Section 11, the Underwriter shall not be
required to contribute any amount in excess of the amount by
which the total price which the Shares underwritten by it and
distributed to the public exceeds the amount of any damages
which the Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission
or alleged omission plus the Underwriter's proportionate share
of such legal or other expenses; and any punitive or exemplary
damages if the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material
fact
relates to information supplied by or statements made by the
Underwriter. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled
to contribution from any person who was not guilty of such
fraudulent misrepresentation.
12. Conditions Precedent to the Obligations of the
Underwriter.
All obligations of the Underwriter under this
Agreement, and disbursement of the proceeds of this offering
to the Company are subject to the following conditions
precedent:
(a) The Registration Statement shall have become
effective on or prior to 12:00 Noon Minneapolis time, on
February 15, 1997, or such later date as the Underwriter may
agree to. On or prior to the Closing Date, no order suspending
the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission or be pending; any
request for additional information on the part of the
Commission (to be included in the Registration Statement or
Prospectus or otherwise) shall have been complied with to the
satisfaction of the Commission; and neither the Registration
Statement or the Prospectus nor any amendment thereto shall
have been filed to which counsel to the Underwriter shall have
reasonably objected in writing or have not given their consent.
(b) The Underwriter shall not have disclosed in
writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto
contains an untrue statement of a fact which, in the opinion of
counsel to the Underwriter, is material, or omits to state a
fact
which, in the opinion of such counsel, is material and is
required to be stated therein, or is necessary to make the
statements therein not misleading.
(c) The Company's warranties and representations
set forth herein shall be true as of the Closing Date and the
Company shall have kept and observed all covenants required
of it to such date.
(d) The authorization of the Units, the Warrants, the
Unit Purchase Option, and the Underlying Securities, the
Registration Statement and the Prospectus, and all corporate
proceedings and other legal matters incident thereto and to
this
Agreement shall be reasonably satisfactory in all respects to
counsel to the Underwriter. The Underwriter shall have
received an opinion dated as of the Closing Date from its
counsel, substantially in the form of the opinion called for by
Section (d), qualified in such manner as the Underwriter may
deem acceptable.
(e) The Company (which term shall include any
subsidiaries of the Company) shall have furnished to the
Underwriter the opinion, dated the Closing Date, addressed to
the Underwriter, from Keller & Lokken, P.A., counsel to the
Company, to the effect that based upon a review by them of
the Registration Statement; the Prospectus, and the Company's
Articles of incorporation, bylaws, and relevant corporate
proceedings; an examination of such statutes they deem
necessary, and such other investigation by such counsel as they
deem necessary to express such opinion:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the
laws of Minnesota, with full corporate power and
authority to own and operate its properties and to carry
on its business as set forth in the Registration Statement
and Prospectus.
(ii) The Company is not required to qualify or
register as a foreign corporation in any state, and there
are no jurisdictions in which the Company's ownership
of property or its conduct of business requires such
qualification or registration and where the failure to so
qualify would have a material adverse effect on its
operations.
(iii) The Company has authorized and outstanding
capital capital stock as set forth in the Registration
Statement and Prospectus; the capitalization of the
Company, the Units, the Warrants, and the Unit
Purchase Option conform to the statements concerning
them in the Registration Statement and Prospectus; the
outstanding capital stock of the Company has been duly
and validly issued and is fully-paid and nonassessable and
contain no preemptive or other sotck purchase rights;
the Shares have been, and the Shares and Warrant Shares
issuable upon due exercise of the Warrants will be, when
delivered against payment, duly and validly authorized
and, upon issuance thereof and payment therefor in
accordance with this Agreement and the Warrants, will
be duly and validly issued, fully paid, and nonassessable,
and will not be subject to the preemptive rights of any
shareholder of the Company.
(iv) The Unit Purchase Option has been duly and validly
authorized and issued and is a valid and binding
instrument enforceable against the Company in
accordance with its terms, except as enforcement may be
limited by bankruptcy or similar laws affecting
creditors' rights general application affecting creditors'
rights, except as the availability of equitable remedies
requires the exercise of judicial discretion, and except
as
enforcement of the indemnification provisions therein
may be limited by federal or state securities laws.
(v) A sufficient number of shares of the Company's
common stock have been duly reserved for issuance
upon exercise of the Warrants, the Unit Purchase
Option and the Underwriter's Warrants. The shares of
Common Stock issuable on due exercise of the Unit
Purchase Option and the Warrants included therein will
be validly issued fully paid, and non-assessable.
(vi) No consents, approvals, authorizations, or orders of
agencies, officers, or other regulatory authorities are
known to such counsel which are necessary for the valid
authorization, issue, or sale of the Units and Warrant
Shares hereunder, except as required under the Act or
blue sky or state securities laws.
(vii) The issuance and sale of the Units, the Shares,
the
Warrants, the Warrant Shares, the Unit Purchase
Option and the Underwriter's Warrants Regulatory and
the consummation of the transactions herein
contemplated, and compliance with the terms of this
Agreement and the transactions contemplated therein
will not (with or without notice or lapse of time)
conflict with or result in a breach of any of the terms,
conditions, or provisions of or constitute a default or
give another party a right to accelerate under the
articles
of incorporation or bylaws of the Company, or under
any note, indenture, mortgage, deed of trust, or other
agreement or instrument known to such counsel after
reasonable investigation to which the Company is a
party or by which the Company or any of its property
is bound, or under any existing law (provided this
paragraph shall not relate to federal or state securities
laws), order, rule, regulation, writ, injunction, or
decree
known to such counsel of any government,
governmental instrumentality, agency, body, arbitration
tribunal, or court, domestic or foreign, having
jurisdiction over the Company or its property.
(viii) The Registration Statement has become effective
under the Act and, to the best knowledge of such
counsel after reasonable investigation, no order
suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that
purpose have been instituted or are pending or
contemplated by the Commission under the Act or by
any authority acting under any state securities or
blue-sky law;
and the Registration Statement and Prospectus,
and each amendment and supplement thereto, comply as
to form in all material respects with the requirements of
the Act and the Regulations thereunder.
(ix) Such counsel is familiar with all contracts
referred
to in the Registration Statement or Prospectus and such
contracts are sufficiently summarized or disclosed
therein or filed as exhibits thereto as required, and such
counsel, after a reasonable investigation, does not know
of any contracts required to be summarized or disclosed
or filed, and such counsel, after a reasonable
investigation, does not know of any legal or
governmental proceedings pending or threatened to
which the Company is the subject of such a character
required to be disclosed in the Registration Statement or
the Prospectus which are not disclosed and properly
described therein.
(x) This Agreement, the Warrant Agreement, the
Impoundment Agreement, the Impoundment
Agreement, and the Unit Purchase Option have been
duly authorized and executed by the Company and are
valid and binding agreements of the Company and are
enforceable against the Company in accordance with
their terms, (except that no opinion need be expressed as
to financial statements contained in the Registration
Statement or Prospectus); except ats enforcement may
be limited by bankruptcy or similar laws affecting
creditors' rights except as the availability of equitable
remedies requires the exercise of judicial discretion, and
except as enforcement of the indemnification provisions
therein may be limited by federal or state securities
laws.
(x) After a reasonable investigation such counsel has no
reason to believe that either the Registration Statement
nor the Prospectus or any such amendment or
supplement contains any untrue statement of a material
fact or omits to state a material fact required to be
stated
therein or necessary to make the statements therein not
misleading in light of the circumstances under which
made.
As to routine factual matters such as the issuance of
stock certificates and receipt of payment therefor, the states
in
which the Company transacts business, the adoption of
resolutions reflected by the Company's minute book and the
like, such counsel may rely on the certificate of an
appropriate
officer of the Company. Such opinion shall also cover such
other matters incident to the transactions contemplated by this
Agreement as the Underwriter shall reasonably request.
(f) The Underwriter shall have received a letter
addressed to it and dated the date of this Agreement and the
Closing Date, respectively, from Silverman, Olson,
Thorvilson, and Kaufmann, Ltd., independent public
accountants for the Company, stating that (i) with respect to
the Company they are independent public accountants within
the meaning of the Act and the applicable Regulations
thereunder and the response to Item 509 of Regulation S-B as
reflected by the Registration Statement is correct insofar as
it
relates to them; (ii) in their opinion, the financial
statements of
the Company examined by them at all dates and for all periods
referred to in their opinion and included in the Registration
Statement and Prospectus, comply in all material respects with
the applicable accounting requirements of the Act and the
Regulations thereunder with respect to registration statements
on Form S-B2; (iii) on the basis of certain indicated
procedures
(but not an examination in accordance with generally accepted
accounting principles), including examinations of the
instruments of the Company set forth under "Capitalization"
and/or "Summary Financial Information" in the Prospectus, a
reading of the latest available interim unaudited financial
statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other
persons responsible for its financial and accounting matters
regarding the specific items for which representations are
requested below, and a reading of the minute books of the
Company, nothing has come to their attention which would
cause them to believe that during the period from the last
audited balance sheet included in the Registration Statement to
a specified date not more than five days prior to the date of
such letter (a) there has been any change in the capital stock
or
other securities of the Company or any payment or declaration
of any dividend or other distribution in respect thereof or
exchange therefor from that shown on its audited balance
sheets or in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration
Statement or Prospectus other than as set forth in or
contemplated by the Registration Statement or Prospectus; (b)
there have been any material decreases in net current assets,
or
net assets as compared with amounts shown in the last audited
balance sheet included in the Prospectus so as to make said
financial statements misleading; and (c) on the basis of the
indicated procedures and discussions referred to in clause
(iii)
above, nothing has come to their attention which, in their
judgment, would cause them to believe or indicate that (1) the
unaudited financial statements and schedules set forth in the
Registration Statement and Prospectus do not present fairly the
financial position and results of the Company for the periods
indicated, in conformity with the generally accepted
accounting principles applied on a consistent basis with the
audited financial statements, and (2) the dollar amounts,
percentages and other financial information set forth in the
Registration Statement and Prospectus under the captions
"Prospectus Summary," "Risk Factors," "Dilution,"
"Capitalization," "Executive Compensation," "1996 Stock
Option Plan," "Principal Shareholders," and "Certain
Transactions," are not in agreement with the Company's
general ledger, financial records, or computations made by the
Company therefrom.
(g) The Underwriter shall be furnished without charge,
in addition to the original signed copies, such number of
signed
or photostatic or conformed copies of such letters as the
Underwriter shall reasonably request.
(h) Between the date hereof and the Closing Date, there
shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or
threatened against the Company before or by any federal or
state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign, wherein an
unfavorable ruling, decision or finding would materially
adversely affect the business, franchises, licenses, patents,
operations or financial condition or income of the Company
considered as an entity.
(i) The Company shall have furnished to the
Underwriter a certificate by the chief executive officer and
chief financial officer, dated as of the Closing Date, to the
effect
that:
(i) The representations and warranties of the
Company in this Agreement are true and correct at and
as of the Closing Date, and the Company has complied
with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or
prior to the Closing Date.
(ii) The Registration Statement has become effective
and no order suspending the effectiveness of the
Registration Statement has been issued and to the best of
the knowledge of the respective signers, no proceeding
for that purpose has been initiated or is threatened by
the Commission.
(iii) The respective signers have each carefully
examined the Registration Statement and Prospectus and
any amendments and supplements thereto, and the
Registration Statement and the Prospectus and any
amendments and supplements thereto contain all
statements required to be stated therein, and all
statements contained therein are true and correct, and
neither the Registration Statement nor Prospectus nor
any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary
to
make the statements therein not misleading and, since
the effective date of the Registration Statement, there
has occurred no event required to be set forth in an
amended or a supplemented Registration Statement or
Prospectus which has not been so set forth.
(j) All of the Units being offered by the Company and
the Warrants being purchased from the Company by the
Underwriter shall be tendered for delivery in accordance with
the terms and provisions of this Agreement.
(k) The Units shall be qualified in such states as the
Underwriter may reasonably request pursuant to Section 5.04,
and each such qualification shall be in effect and not subject
to
any stop order or other proceeding on the Closing Date.
(l) All opinions, letters, certificates, and evidence
mentioned above or elsewhere in this Agreement shall be
deemed to be in compliance with the provisions hereof only if
they are in form and substance satisfactory to counsel to the
Underwriter, whose approval shall not be unreasonably
withheld. The suggested form of such documents shall be
provided to the counsel for the Underwriter at least one
business day before the Closing Date. The Underwriter's
counsel will provide a written memorandum stating such
closing documents which he deems necessary for their review.
Such memorandum shall be delivered five business days before
the Closing Date to counsel for the Company.
(m) Any certificate signed by an officer of the Company
and delivered to the Underwriter or to counsel for the
Underwriter will be deemed a representation and warranty by
the Company to the Underwriter as to the statements made
therein.
13. Delivery, Payment, and Closing.
"Closing", as referred to herein, shall mean each event at
which proceeds from the sale of the Units are delivered to or
received by the Company. A "Closing Date" shall be a date on
which a closing is held. The Closing shall occur at 10:00
a.m.,
Minneapolis time, on the fifth business day following the date
on which 550,000 Units have been sold, at the offices of the
Underwriter, unless some other time, date, and place is
mutually agreed upon by the Company and the Underwriter.
Thereafter, one or more Closings will be held at monthly or
more frequent intervals as agreed upon until the Termination
Date. The provisions of Section 12 and this Section 13 shall
apply to each such Closing. At the Closing, certificates for
the
Units to be sold through the Underwriter shall be registered in
such names and denominations as the Underwriter shall
request at least two full business days prior to the Closing
Date. Such certificates shall be made available to the
Underwriter in definitive form for the purpose of inspection at
least one day before the commencement of the Closing.
14. Termination.
(a) This Agreement may be terminated by the
Underwriter by notice to the Company in the event that the
Company shall have failed or been unable to comply with any
of the terms, conditions, or provisions of this Agreement on
the part of the Company to be performed, complied with or
fulfilled within the respective times herein provided for,
unless
compliance therewith or performance or satisfaction thereof
shall have been expressly waived by the Underwriter in
writing.
(b) This Agreement may be terminated by the
Underwriter by notice to the Company if the Underwriter
believes in its sole judgment that any adverse changes have
occurred in the management of the Company; that material
adverse changes have occurred in the financial condition or
obligations of the Company; or if the Company shall have
sustained a loss by strike, fire, flood, accident or other
calamity
of such a character as, in the sole judgment of the
Underwriter,
may interfere materially with the conduct of the Company's
business and operations regardless of whether or not such loss
shall have been insured.
(c) This Agreement may be terminated by the
Underwriter by notice to the Company at any time if, in the
sole judgment of the Underwriter, payment for and delivery of
the Shares is rendered impracticable or inadvisable because (i)
additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the
trading in securities generally, or minimum or maximum prices
shall have been generally established on the New York or
American Stock Exchange, or trading in securities generally on
either such Exchange shall have been suspended, or a general
moratorium shall have been established by federal or state
authorities; or (ii) a war or other national calamity shall
have
occurred; or (iii) substantial and material changes in the
condition of the market (either generally or with reference to
the sale of the Shares to be offered hereby) beyond normal
fluctuations are such that it would be undesirable,
impracticable or inadvisable in the sole judgment of the
Underwriter to proceed with this Agreement or with the
public offering; or (iv) of any matter materially adversely
affecting the Company.
(d) In the event any action or proceeding shall be
instituted or threatened against the Underwriter, either in any
court of competent jurisdiction, before the Commission or any
state securities commission concerning its activities as a
broker
or dealer that would prevent the Underwriter from acting as
such, at any time prior to the effective date hereunder, or in
any court pursuant to any federal, state, local or municipal
statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee
of the Underwriter's assets or if the Underwriter makes an
assignment for the benefit of creditors, the Company shall have
the right on three days' written notice to the Underwriter to
terminate this Agreement without any liability to the
Underwriter of any kind except for the payment of expenses as
provided in Section 4(a) and 5 herein.
(e) Any termination of this Agreement pursuant to
this Section 14 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or
consequential damages) on the part of any party thereto, except
that in such event (i) the Underwriter shall provide the
Company with a statement of its accountable expenses, which
shall include but are not limited to, the Underwriter's counsel
fees, consultants' fees, entertainment expenses, travel
expenses,
postage expenses, advertising costs, due diligence meeting
expenses, duplication expenses, long-distance telephone
expenses, and other expenses directly attributable to this
offering (but not general office expenses or overhead) incurred
in connection with the proposed offering and (ii) if such
accountable expenses are more than $20,000 (including
Underwriter's counsel fees), the Underwriter shall bear such
excess but the Company shall reimburse the Underwriter for
all such accountable expenses up to $20,000. or if such
accountable expenses are less than $20,000, the Underwriter
shall refund any excess payment it has received.
15. Notices. All notices shall he in writing and shall
be delivered at or mailed to the following addresses or sent by
telegram to the following addresses with written confirmation
thereafter:
To the Company:
ILLUMINATED MEDIA, INC. .
15 South Fifthe Street
Suite 715
Minneapolis, MN 55402
ATTN: President
With copy to
Richard P. Keller, Esq.
Keller & Lokken, P.A.
175 East Fifth Street
Suite 763
St. Paul,, MN 55101
To the Underwriter:
TUSCHNER & COMPANY, INC.
Suite 800, One Financial Plaza
120 South Sixth Street
Minneapolis, MN 55402
ATTN: President
With copy to
Michael L. Berde, Esq.
Merritt, Furber & Timmer
2100 Metropolitan Centre
333 South Seventh Street
Minneapolis, MN 55402
16. Binding Effect.
This Agreement shall inure to the benefit of and be
binding upon the Company and the Underwriter (including
the selected dealers as provided in Sections 9 and 10) and
their
successors. Nothing expressed in this Agreement is intended to
give any Person other than the persons mentioned in the
preceding sentence any legal or equitable right, remedy or
claim under this Agreement. However, the representations,
warranties and indemnity and defense obligations of the
Company included in this Agreement also inure to the benefit
of any person who controls the Underwriter and participating
dealers within the meaning of Section 15 of the Act and the
representations, warranties, indemnities and defense
obligations
of the Underwriter and participating dealers inure to the
benefit of each officer who signs the Registration Statement,
each director of the Company and each person who controls
the Company within the meaning of Section 15 of the Act.
17. Miscellaneous Provisions.
(a) Time shall be of the essence of this Agreement.
(b) This Agreement shall be construed according to
the laws of the state of Colorado.
(c) The representations and warranties made in this
Agreement shall survive the termination of this Agreement and
shall continue in full force and effect regardless of any
investigation made by the party relying upon any such
representation or warranty.
(d) This Agreement is made solely for the benefit of
the Company and its officers, directors and controlling persons
within the meaning of Section 15 of the Act and of the
Underwriter and its officers, directors and controlling persons
within the meaning of Section 15 of the Act, and their
respective successors, heirs and Personal representatives, and
no
other person shall acquire or have any right under or by virtue
of this Agreement. The term "successor" as used in this
Agreement shall not include any purchaser, as such, of the
Units.
(e) The Underwriter will provide upon closing a list
of all the names and addresses of all participating dealers and
shall provide the Company with such changes of the address or
name of such participating dealers as occur and of which the
Underwriter is notified. Further, the Underwriter shall use its
best efforts to maintain the current name and address of all
participating dealers during the terms of this Agreement.
If this Agreement correctly sets forth our understanding
please indicate your acceptance in the space provided below for
that purpose.
Very truly yours,
ILLUMINATED
MEDIA, INC.
By
__________________________
President
Confirmed and accepted as of
the date of this Agreement:
TUSCHNER & COMPANY, INC.
By___________________________
John M. Tuschner, President
EXHIBIT 1.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT made and entered into this______ day of ________,
199__, by and between the persons named on Schedule A hereto (herein
collectively referred to as "Depositors"); Bank Windsor, a corporate fiduciary
with its principal office in Minneapolis, Minnesota, (hereinafter called the
"Escrow Agent"); Illuminated Media Inc., a Minnesota corporation with its
principal office in Minneapolis, Minnesota (hereinafter called the "Issuer")
and the Commissioner of Commerce for the State of Minnesota (hereinafter
called the "Commissioner");
WITNESSETH THAT:
Each of the depositors is the owner of shares of Common Stock of the Issuer
and each owns the number of shares listed opposite his or her name on Schedule
A, attached hereto and made a part hereof.
The Issuer has applied to the Commissioner for registration of its
securities for sale to residents of Minnesota, and as a condition of
registration the Depositors, the Escrow Agent and the Issuer agree to be
bound by this Agreement and the applicable Rules and Regulations of the
Commissioner.
Each of the Depositors has deposited the securities listed opposite his
name on Schedule A with the Escrow Agent, and the Escrow Agent hereby
acknowledges receipt thereof. These securities are herein collectively
referred to as "escrowed securities".
THEREFORE, the parties agree as follows:
1. The Escrow Agent agrees to hold the escrowed securities until such
time as the Escrow Agent shall receive a written release issued by the
Commissioner permitting the release from escrow of all or a part of the
escrowed securities held under this Agreement. Upon receipt of such release,
the Escrow Agent may release to each Depositor all or a part of his or her
escrowed securities in accordance with the order of the Commissioner.
Subject to the above provisions, the term of escrow under this Agreement
shall run for a period of three years from the date of the Order of
Registration, unless at an earlier date the Issuer shall have demonstrated
annual net earnings, after taxes and excluding extraordinary items,
determined in accordance with generally accepted accounting principles, for any
two consecutive years after the date of the Order of Registration, of at
least five percent (5%) on an amount determined by multiplying the total
number of outstanding shares of the Issuer, including the
escrowed securities, by the average price per share paid by public investors.
The existence of the required annual net earnings shall be demonstrated by a
certificate to that effect furnished to the Commissioner by an independent
certified public accountant or an authorized officer of the Issuer.
In addition, the Issuer and each of the Depositors shall furnish the
Commissioner a written statement that none of the escrowed securities nor any
interest therein have been sold, transferred or otherwise disposed of (except
as permitted by paragraph 4 hereof) as a condition of the release
from escrow.
2. Notwithstanding any provision of paragraph 1, the Commissioner may,
in his discretion, terminate the term of escrow with respect to all or any part
of the escrowed securities of any Depositor before the expiration of the period
of occurrence of the event specified in paragraph 1 and release such
securities if he determines that the release of such securities to the
Depositor(s) will not be detrimental to the Issuer, the public investors or any
other party concerned. At the time of release by the Commissioner of any
securities from escrow, the application of this Agreement shall terminate with
respect to the securities so released.
3. While it is held in escrow pursuant to this Agreement, no escrowed
security nor any interest therein, nor any right or title thereto, may be sold
or transferred, by means of transfer of the security separate from the
certificate representing it or otherwise, without the prior written
release of the Commissioner, except that the release of the Commissioner need
not be obtained to transfer escrowed shares by will or the laws of descent and
distribution or otherwise by order of process of any Court.
4. Upon receipt of such written release from the Commissioner directing
that some or all of the escrowed securities of the Depositors held under this
Escrow Agreement be released for the purpose of transfer to another person
against concurrent deposit of the securities so transferred, the Escrow Agent
may release such securities but only against such deposit under this
Agreement of all of the transferred securities. The Commissioner shall
authorize such transfer of the escrowed securities only upon receipt of a
signed statement by the proposed transferee that he has full knowledge of the
terms of this Escrow Agreement and that he accepts such securities
subject to the conditions of this Escrow Agreement.
5. The Depositors agree that they shall be entitled to receive cash and
property dividends with respect to the escrowed securities while such securities
are held in escrow pursuant to this Agreement to the same extent as other
security holders of the same class of security and
that said cash or property dividends shall be placed under the terms of this
Escrow Agreement.
6. Upon declaration of any dividend in shares of the Issuer or a
subsidiary to which the escrowed securities are entitled pursuant to a share
dividend or split authorized by a vote of the Issuer`s shareholders, the
Depositors and the Escrow Agent shall forthwith enter into a
Supplemental Escrow Agreement, covering such share dividend, which Supplemental
Escrow Agreement shall incorporate all the conditions of escrow contained in
this Agreement. The shares received as a dividend shall be forthwith
deposited in escrow with the Escrow Agent pursuant to
such Supplemental Escrow Agreement, and the Escrow Agent shall deliver to the
Commissioner a receipt for the shares thus escrowed.
7. During the term of escrow, the Depositors shall not be entitled to and
hereby waive all rights to participate in any distribution of assets of the
Issuer in the event of liquidation,dissolution, or winding up, until the public
investors shall have received cash or property in an
amount or value equal to the price paid by public investors for securities
purchased by such public investors; and thereafter the Depositors shall
participate without the public investors until they
shall have received cash or other property in an amount or value equal to the
price paid by the Depositors for the escrowed securities; and thereafter the
public investors and the Depositors shall participate equally according to
the terms of their securities. Any Depositor(s) seeking release
of all or any part of his escrowed securities pursuant to this paragraph 7 shall
furnish the Commissioner a written statement that none of the escrowed
securities nor any interests therein have been sold, transferred (except as
provided in paragraph 4 herein) or otherwise disposed of,
without the consent of the Commissioner, as a condition of the release from
escrow.
8. This Escrow Agreement shall not be construed to prohibit any Depositor
from participating in any distribution of securities of any corporation other
than the Issuer resulting from the sale of assets of the Issuer or a merger or
consolidation of the Issuer with or into any other corporation or
corporations. In the event, of such a transaction the Escrow Agent should
obtain written authorization from the Commissioner prior to the release of any
escrowed securities, and any such distribution payable in securities of any
corporation other than the Issuer paid with respect to the escrowed
securities shall be delivered to the Escrow Agent and held
pursuant to a Supplemental Escrow Agreement prepared and executed as described
in paragraph 7, above. In the event of the merger or consolidation of the
Issuer with or into any other corporation or corporations, any securities
shall be delivered to the Escrow Agent and held pursuant to a Supplemental
Escrow Agreement prepared and executed as described in paragraph
6, above.
9. The Escrow Agent may conclusively rely upon and shall be protected in
acting upon any statement, certificate, notice, request, consent, order or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties. The Escrow Agent shall have no duty or liability
to verify any such statement, certificate, notice, request,
consent, order or other document and its sole responsibility shall be to act
only as expressly set forth in this Escrow Agreement. The Escrow Agent shall
be under no obligation to institute or defend any action, suit or proceeding
in connection with this Escrow Agreement unless first indemnified to its
satisfaction. The Escrow Agent may consult counsel in respect of any question
arising under this Escrow Agreement and the Escrow Agent shall not be liable
for any action taken or omitted in good faith upon advice of such counsel. All
securities held by the Escrow Agent pursuant to this Escrow Agreement shall
constitute trust property for the purposes for which they are held and the
Escrow Agent shall not be liable for any interest thereon.
10. The Escrow Agent shall be entitled to receive from the Company
reasonable compensation for its services as contemplated herein. In the event
that the Escrow Agent shall render any additional service not provided for
herein or that any controversy shall arise hereunder or that the Escrow Agent
shall be made a party or shall intervene in any action, suit or proceeding
pertaining to this escrow Agreement, it shall be entitled to receive
reasonable compensation for the Company for such additional services.
11. This Escrow Agreement shall be binding upon and inure to the benefit
of the parties hereto, their heirs, successors and assigns.
12. This Escrow Agreement shall terminate in its entirety when all
escrowed securities covered hereby and by any Escrow Agreements supplemental
hereto have been released as provided in paragraph 1.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the
date first above written.
ESCROW AGENT: DEPOSITORS:
National City Bank of Minneapolis
______________________________
By ___________________________
Its __________________________ ______________________________
ISSUER:
Illuminated Media Inc.
By ___________________________ Accepted for filing:
Its __________________________ ______________________________
Commissioner of Commerce
S C H E D U L E A
Name and Address No. and Type of Securities
Robert H. Blank 200,000 Shares of Common Stock
Illuminated Media Inc.
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
EXHIBIT 1.4
IMPOUNDMENT AGREEMENT
THIS IMPOUNDMENT AGREEMENT made and entered into this _________ day of
February, 1997, by and between Illuminated Media Inc., (hereinafter called the
"Issuer") Tuschner & Co., Inc. (the "Underwriter") and Bank Windsor with
principal offices in Minneapolis, Minnesota (hereinafter called the
"Impoundment Agent");
WITNESSETH THAT:
WHEREAS, the Issuer has applied to the Commissioner of Commerce for the
State of Minnesota (hereinafter called the "Commissioner") for registration of
up to 1,500,000 Units (each Unit consisting of one share of Common Stock and
one redeemable Warrant for the purchase of
two shares of Common Stock) for sale to the residents of the State of Minnesota
on the basis of 550,000 Units minimum, and 1,500,000 Units maximum; and
WHEREAS, as a condition of registration of such offering under the
Securities Laws of the State of Minnesota the Commissioner requires that the
Issuer provide for the impoundment of the proceeds to be received from such
offering of securities; and
WHEREAS, the Issuer, Underwriter and the Impoundment Agent desire to enter
into an agreement with respect to the said impoundment of proceeds;
NOW, THEREFORE, in consideration of the premises and agreements set forth
herein, the parties hereto agree as follows:
1. PROCEEDS TO BE PLACED IN ESCROW:
All proceeds received from the sale of the securities subject to this
Impoundment Agreement on or after the date hereof shall be paid to the
Impoundment Agent before 12:00 noon on the second business day following the
date of subscription in accordance with Rule 15c2-4
under the Securities Exchange Act of 1934 and deposited by the Impoundment Agent
in an escrow account. During the term of this Impoundment Agreement, the Issuer
shall cause all checks received by it in payment for such securities to be
either payable to the Impoundment Agent or endorsed forthwith to the
Impoundment Agent.
2. IDENTITY OF SUBSCRIBERS:
The Issuer shall cause to be delivered to the Impoundment Agent two
signed counterparts of each Subscription Agreement which shall contain, among
other things, the name and address of each subscriber thereto, the date and
amount subscribed, and the amount paid, or,
in the alternative, shall furnish to the Impoundment Agent with each deposit of
funds in the impoundment a list of the persons who have subscribed the money,
showing the name, address, date and amount of subscription and amount of
money paid. All proceeds so deposited shall
remain the property of the subscriber and shall not be subject to any liens
or charges by the Impoundment Agent, or judgments or creditors` claims against
the Issuer until released to the Issuer as hereinafter provided.
3. DISBURSEMENT OF FUNDS:
Upon the receipt by Impoundment Agent of amounts paid in of not less
than $550,000.00 the Impoundment Agent shall forthwith notify the Commissioner
in writing of the impoundment of such amounts. Upon receipt by the Impoundment
Agent of written authorization from the Commissioner, then said Impoundment
Agent, on demand of the Issuer, shall pay over
to the Issuer all impounded funds. If the specified minimum amount of proceeds
have not been impounded during the term of impoundment, then, within three
business days after the last day of the term of impoundment, the Impoundment
Agent shall notify the Commissioner in writing
that the conditions of impoundment have not been satisfied, and shall within a
reasonable time, but in no event not more than thirty (30) days after the
last day of the term of impoundment refund to each subscriber at the address
appearing on the Subscription Agreement or list of subscribers, or at such other
address as shall be furnished the Impoundment Agent by the
subscriber in writing, all sums paid by him pursuant to his subscription, and
shall then notify the Commissioner in writing of such refund.
4. TERM OF IMPOUNDMENT:
This impoundment shall terminate on the one hundred fiftieth (150th)
day following the effective date of the registration of the Issuer`s securities
in the State of Minnesota, unless
extended by the consent in writing of the parties hereto and all subscribers to
the securities subscribed to date and the Commissioner. Upon termination
hereof, whether after extension or otherwise, the Impoundment Agent shall
disburse the funds in the impoundment account in the
manner and upon the terms directed in paragraph three hereof. The Issuer may
abandon the sale of securities anytime prior to the date above. Upon the
receipt of a copy of the Resolution authorizing said abandonment, duly
attested to by the Secretary of the Issuer, accompanied by the
written consent of the Commissioner, the Impoundment Agent shall be authorized
to refund the monies received from the subscribers.
5. TERMINATION BY REVOCATION OR SUSPENSION:
If at any time prior to the termination under paragraph four of this
impoundment, said Impoundment Agent is advised by the Commissioner that the
registration to sell securities has been revoked or suspended, said
Impoundment Agent shall thereupon return all funds to the
respective subscribers.
6. CONSENT OF COMMISSIONER TO RELEASE FUNDS:
No funds shall be released to the Issuer hereunder except upon the
express written authorization of the Commissioner. If the Commissioner finds
that any conditions of this Agreement have not been satisfied, or that any
provisions of the Minnesota Securities Laws or
regulations have not been complied with, then he may withhold such authorization
for release of funds by the Impoundment Agent to the Issuer and may direct the
Impoundment Agent to return the funds to the subscribers. In making his
determination hereunder, the Commissioner may
require from the Issuer a statement of all expenses and/or all amounts paid into
the escrow, certified by an independent certified public accountant or an
officer of the Issuer and any further
financial or other information as the Commissioner may deem appropriate or
helpful in making such determination.
7. INSPECTION OF RECORDS:
The Commissioner may, at any time, inspect the records of the
Impoundment Agent, insofar as they relate to this Impoundment Agreement, for the
purpose of determining compliance with and conformance to the provisions of this
Impoundment Agreement.
8. DUTY AND LIABILITY OF THE IMPOUNDMENT AGENT:
The sole duty of the Impoundment Agent, other than as herein specified
, shall be to receive said funds and hold them subject to release, in accordance
with the written instructions of the Commissioner, and the Impoundment Agent
shall be under no duty to determine whether the Issuer is complying with
requirements of the Commissioner in tendering to the Impoundment
Agent said proceeds of the sale of said securities.
The Impoundment Agent may conclusively rely upon and shall be
protected in acting upon any statement, certificate, notice, request, consent,
order or other document believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Impoundment Agent shall have no
duty or liability to verify any such statement, certificate, notice,
request, consent, order or other document and its sole responsibility shall be
to act only as expressly set forth in this Impoundment Agreement. The
Impoundment Agent shall be under no obligation to institute or defend any
action, suit or proceeding in connection with this Impoundment Agreement
unless first indemnified to its satisfaction. The Impoundment Agent may
consult counsel in respect of any question arising under this Impoundment
Agreement and the Impoundment Agent shall not be liable for any action taken or
omitted in good faith upon advice of such counsel. All funds held by
Impoundment Agent pursuant to this Impoundment Agreement shall constitute trust
property for the purposes for which they are held and the
Impoundment Agent shall not be liable for any interest thereon.
9. IMPOUNDMENT AGENT`S FEE:
The Impoundment Agent shall be entitled to reasonable compensation for
its services. The fee agreed upon for services rendered hereunder is intended
as full compensation for the Impoundment Agent`s services as contemplated by
this Agreement; provided, however, in the event that the conditions of this
Impoundment Agreement are not fulfilled, or the Impoundment Agent renders any
material service not contemplated in this Agreement,
or there is any assignment of interest in the subject matter of this Impoundment
Agreement, or any material modification hereof, or if any material controversy
arises hereunder, or the Impoundment Agent is made a party to or
justifiably intervenes in any litigation pertaining to this Impoundment
Agreement, or the subject matter hereof, the Impoundment Agent shall be
reasonably compensated for such extraordinary services
and reimbursed for all costs and expenses, including reasonable
attorney`s fees, occasioned by any delay, controversy, litigation or event, and
the same may be recoverable from the Issuer only.
10. BINDING AGREEMENT AND SUBSTITUTION OF IMPOUNDMENT
AGENT:
The terms and conditions of this Agreement shall be binding on the
heirs, executors and assigns, creditors or transferees,
or successors in interest, whether by operation of law or
otherwise, of the parties hereto. If, for any reason, the Impoundment Agent
named herein should be unable or unwilling to continue
as such Impoundment Agent, then the other parties to this
Agreement may substitute, with the consent of the Commissioner, another
Impoundment Agent. Any apportionment of the fees provided
for in paragraph nine will be subject to agreement of the parties.
11. ISSUANCE OF CERTIFICATES:
Until the terms of this Agreement have been met and the funds
hereunder released to the Issuer, the Issuer may not issue
any certificates or other evidences of securities, except
subscription agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Impoundment
Agreement on the date first above written.
BANK WINDSOR ILLUMINATED MEDIA INC.
By ____________________________ By____________________________
Its ________________________ Its _______________________
(an authorized signature)
TUSCHNER & CO., INC.
By ____________________________
Its ________________________
Accepted and approved for filing this ________ COMMISSIONER OF COMMERCE
day of_____________, 1997.
By___________________________
Its________________________
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SKYWAY ADVERTISING, INC.
The undersigned, being of full age and for the purpose of forming a
corporation under Minnesota Statutes Chapter 302A, does hereby adopt the
following Articles of Incorporation:
ARTICLE I
Name
The name of this corporation shall be Skyway Advertising, Inc.
ARTICLE II
Registered Office
The location and address of this corporation's registered office in this
state shall be 12 South Sixth Street, Suite 1126, Minneapolis, MN 55402.
ARTICLE III
Authorized Capital
The total authorized number of shares of this corporation is One Million
(1,000,000) shares. Common Stock shall have the par value of one cent ($.01)
per share. The Board of Directors has the authority to establish more than one
class or series of shares and to fix the relative rights and
preferences of any such different classes or series.
ARTICLE IV
Cumulative Voting Prohibition
Shareholders shall have no rights of cumulative voting.
ARTICLE V
Preemptive Rights Prohibition
Shareholders shall have no rights, preemptive or otherwise, to acquire any
part of any unissued shares or other securities of this
corporation or of any rights to purchase shares or
other securities of this corporation before the corporation may offer them to
other persons.
ARTICLE VI
Incorporator
The name and address of the incorporator of this corporation is:
Jeff C. Anderson
3400 City Center
33 South Sixth Street
Minneapolis, MN 55402
ARTICLE VII
Limitation of Director Liability
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) liability based on a
breach of the duty of loyalty to the corporation or the shareholders; (ii)
liability for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; (iii) liability
based on the payment of an improper dividend or an
improper repurchase of the corporation's stock under
Minnesota Statutes Section 302A.559; or
(iv) liability for any transaction from
which the director derived an improper personal benefit.
If Minnesota Statutes Chapter 302A hereafter is amended to authorize the
further elimination or limitation of the liability of
directors, then the liability of a director of the corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by Minnesota Statutes
Chapter 302A, as amended. Any repeal or modification of this
Article by the shareholders of the corporation shall be prospective only
and shall not adversely affect any limitation on the personal liability of a
director of the corporation existing at the time of such repeal
or modification.
ARTICLE IX
Directors Action by Written Consent
Any action required or permitted to be taken at a meeting of the Board of
Directors may be taken by written action signed by all of the directors
then in office, unless the action is
one which need not be approved by the shareholders,
in which case such action shall be
effective if signed by the number of directors that would be
required to take the same action at
a meeting at which all directors were present.
IN WITNESS WHEREOF, the undersigned has set his hand this day of
____________, 1993
STATE OF MINNESOTA Anderson, Incorporator
DEPARTMENT OF STATE
FILED
MAR 9 1993
/s/ Joan Anderson Growe
Secretary of State
AMENDED ARTICLES OF INCORPORATION
OF
ILLUMINATED MEDIA INC.
The Undersigned, being of full age and for the purpose of forming a
corporation under Minnesota Statutes Chapter 302A, does hereby adopt the
following Articles of Incorporation:
ARTICLE I
Name
The name of this corporation shall be Illuminated Meda Inc.
ARTICLE I
Registered Office
The location and address of this corpcraton's registered office in
this state shall be 15 South 5th Street, Suite 715, Minneapolis, Minnesota
55402.
ARTICLE III
Authorized Capital
The total authorized number of shares of this corporaton is One
Mi1lion (1,000,000) shares. Common Stock shall have the par va1ue of one
cent ($.01) per share. The Board of Directors has the authority to establish
more than one class or series of shares and to fix the relative rights and
preferences of any such different classes or series.
ARTICLE IV
Cumulative Voting Prohibition
Shareholders have no rights of cumulative voting.
ARTICLE V
Preemptive Rights Prohibition
Shareholders shall have no rights, preemptive or otherwise, to acquire
any part of any unissued shares or other securities.
ACTION IN WRITING BY THE SHAREHOLDERS
OF
SKYWAY ADVERTISING, INC.
The undersigned, being all of the shareholders of Skyway Advertising,
Inc., a Minnesota corporation (the "Corporation"), do hereby take the following
action pursuant to section 302A.441 of Minnesota Statutes in lieu of a meeting
of shareholders effective the 20th day of July, 1996:
Change of Corporate Name
WHEREAS, the Corporation has sought out, developed, or otherwise
acquired the rights to utilize new technologies in its backlit Skyway Ads
units that expand and increase the capabilities of this advertising medium;
and
WHEREAS, as a result of the implementation of these new technologies,
the name "Skyway Advertising, Inc." does not adequately describe the products
and services that the Corporation can now offer to its advertising customers;
NOW, THEREFORE, BE IT
RESOLVED, that the name of the Corporation shall be changed
to: Illuminated Media Inc.
and that Article I of the Articles of Incorporation shall be amended to reflect
said change. Effective as of the date first above written.
Robert H. Blank Rick Johnson
Ann E. Tatlock Sona T. Plumer
State of Minnesota
Department of State
Filed Aug. 12 1996
/s/ Joan Anderson Growe
Secretary of State
SECOND AMENDED ARTICLES OF INCORPORATION
OF
ILLUMINATED MEDIA INC.
The Undersigned, being of full age and for the purpose of forming a
corporation under Minnesota Statutes Chapter 302A, does hereby adopt the
following Articles of Incorporation:
ARTICLE I
Name
The name of this corporation shall be Illuminated Media Inc.
ARTICLE II
Registered Office
The location and address of this corporation's registered office in this
state shall be 15 South 5th Street, Suite 715, Minneapolis, Minnesota 55402.
ARTICLE III
Authorized Capital
The total authorized number of shares of this corporation is Ten Million
(10,000,000) shares. Common Stock shall have the par value of one cent ($.01)
per share. The Board of Directors has the authority to establish more than one
class or series of shares and to fix the relative rights and preferences of any
such different classes or series.
ARTICLE IV
Cumulative Voting Prohibition
Shareholders have no rights of cumulative voting.
ARTICLE V
Preemptive Rights Prohibition
Shareholders shall have no rights, preemptive or otherwise, to acquire any
part of any unissued shares or other securities
EXHIBIT 3.2
BYLAWS
OF
SKYWAY ADVERTISING, INC.
TABLE OF CONTENTS
Page
ARTICLE I - Offices 1
Section 1. Principal Executive Office 1
Section 2. Registered Office 1
ARTICLE II - Meetings of Shareholders 1
Section 1. P1ace of Meeting 1
Section 2. Regular Meetings 1
Section 3. Special Meetings 2
Section 4. Notice of Meetings 3
Section 5. Record Date 4
Section 6. Quorum 4
Section 7. Voting and Proxies 4
Section 8. Action Without Meeting by Shareholders 5
ARTICLE III - Director 5
Section 1. General Powers 5
Section 2. Number, Tenure, and Qualification . . 5
Section 3. Meetings 6
Section 4. Notice of Meetings 6
Section 5. Quorum and Voting 6
Section 6. Vacancies and New1y Created
Directorships 7
Section 7. Removal of Directors 7
Section 8. Committees 8
Section 9. Action in Writing 8
Section 10. Meeting by Means of Electronic
Communication 8
ARTICLE IV - Officers 9
Section 1. Number and Qualification 9
Section 2. Term of Office 9
Section 3. Removal and Vacancies 9
Section 4. Chief Executive Officer 9
Section 5. Chief Financial Officer 10
Section 6. Chairperson of the Board 10
Section 7. President 10
Section 8. Vice Presidents 10
Section 9. Secretary 11
Section 10. Treasurer 1l
Section 11. Delegation 11
TABLE OF CONTENTS
Page
ARTICLE V - Certificates and Ownership of Shares . 11
Section 1. Certificates 11
Section 2. Transfer of Shares 12
Section 3. Ownership 12
ARTICLE VI - Contracts, Loans, Checks, and Deposits 12
Section 1. Contracts 13
Section 2. Loans 13
Section 3. Checks, Drafts, etc. 13
Section 4. Deposits 13
ARTICLE VII - Miscellaneous 13
Section 1. Dividends 13
Section 2. Reserves 13
Section 3. Fiscal Year 14
Section 4. Amendments 14
Section 5. Shareho1der Agreements 14
BYLAWS
OF
SKYWAY ADVERTISING, INC.
ARTICLE I
Offices
Section l. Registered office.
The registered office of the corporation shall be
1ocated within the State of Minnesota as set forth in
the Articles of Incorporation. The registered office need not
be identical with the principal executive office of the corporation and
may be changed from time to time by the Board of Directors.
Section 2. Other Offices. The corporation may
have other offices including its principal business office, at such p1aces
inside and outside the State of Minnesota as the Board
of Directors may determine from time to time.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meeting. All meetings of the
shareholders of this corporation shall be held at its principal executive
office unless some other place for any such meeting inside or
outside the State of Minnesota is designated by the Board of
Directors in the notice of meeting. Any regular
or special meeting of the shareholders of the corporation
called by or held pursuant to a written demand of
shareholders shall be held in the county where the principal
executive office of the corporation is located.
Section 2. Regular Meetings. Regular meetings of
the shareholders of this corporation may be held at the discretion of the
Board of Directors on an annual or less frequent periodic
basis. The date, time and place of such meetings may be designated
by the Board of Directors in the notices
of meeting. At regular meetings the shareholders shall elect a Board
of Directors and transact such
other business as may be appropriate for action by shareholders. If a regular
meeting of shareholders
has not been held for a period of fifteen (15) months, one or more shareholders
holding not less than three percent (3%) of the voting power of all shares of
the corporation entitled to vote may call a
regular meeting of shareholders by delivering to the chief executive
officer or chief financial officer a
written demand for a regular meeting. Within thirty (30) days after
the receipt of such a written demand by the chief executive officer or chief
financial officer, the Board of Directors shall
cause a regular meeting of shareholders to be called. Such a meeting shall be
held on notice no later than
ninety (90) days after the receipt of such written demand. All of the expenses
of this process shall be paid by the corporation.
Section 3. Special Meetings. Special meetings of
the shareholders, for any purpose or purposes appropriate for action by
shareholders, may be called by the chief executive officer, by
the acting chief executive officer in the absence of the chief executive
officer, by the chief financial officer,
or by two or more members of the Board of Directors. The date, time and
place of such special meeting shall be fixed by the person or persons calling
the meeting and designated in the notice
of meeting.
A special meeting may also be called by one or more shareholders
holding ten percent (10%) or more of the voting power of all shares of the
corporation entitled to vote, subject to one exception. A
special meeting for the purpose of considering any action to
directly or indirectly facilitate or
effect a
business combination, including any action to change or otherwise affect the
composition of the Board
of Directors for that purpose, when called by
shareholders, must be called by shareholders
holding twenty-five percent (25%) or more of the
voting power of all shares entitled to vote.
The shareholders calling such meetings shall deliver to the chief
executive officer or chief financial officer a written demand for a
special meeting. Such a demand shall contain the
purpose or
purposes of the meeting. Within thirty
(30) days after the;receipt of such a written demand for a
special meeting of shareholders by the chief executive officer
or chief financial officer, the Board
of Directors shall cause a special meeting of
shareholders to be called. Such a meeting shall be held
on notice no later than ninety (90) days after the receipt of such written
demand. All the expenses of this
process shall be paid by the corporation.
Business transacted at any special meeting of the shareholders shall
be limited to the
purpose or
purposes stated in the notice of the meeting. Any business transacted at any
special meeting of
the
shareholders that is not included among the stated purposes of such meeting
shall be voidable by
or on
behalf of the corporation unless al1 of the shareholders have waived notice of
the meeting.
Section 4. Notice of Meetings. Except where a
meeting of shareholders is an adjourned
meeting and the date, time, and place of such meeting were announced at the
time of adjournment,
notice of all meettngs shall be given to each shareholder of record entitled to
vote at such meeting.
Such a notice shall provide the date, time and place of the shareholder
meeting and any other
information required
by law, desired by the Board of
Directors, or requested by the person or
persons
calling the meeting.
In the case of special meetings, the purpose thereof shall be given to
each shareholder of
record
entitled to vote at such meeting.
Notice of all such special meetings shall be provided not less
than
three (3) nor more than sixty (60) days prior to the meeting date.
In the event that a plan of
merger or exchange, or the sale or other disposition of all or
substantially all of the assets of the corporation is to be
considered at a meeting of shareholders,
notice of such meeting shall be given to
every shareholder, whether or not entitled to vote, not 1ess than
fourteen (14) days prior to the date of such meeting. Such notice
shall state the purpose of such
meeting, and, where a plan of merger or
exchange is to be considered, shall include a copy or a
short description of the plan.
Notice of all meetings shall be given to each eligible shareholder
either by oral communication, by mailing a copy of the notice to an address
designated by the shareholder or to the last known
address of the shareholder, by handing a copy to the
shareholder, or by any other delivery that conforms
to law. Notice by mail shall be deemed given when
deposited in the United States mail with sufficient
postage affixed. Notice shall be deemed received when it is given.
Any shareholder may waive notice of any meeting of shareholders.
Waiver of notice shall be effective whether given before, at, or after the
meeting and whether given orally, in writing, or by
attendance. Attendance by a shareholder at a meeting
is a waiver of their entitled notice of that
meeting, subject to two exceptions. Where a
shareholder objects at the beginning of the meeting to the transaction
of business because the meeting is not lawfully called or convened
and does not participate thereafter in the meeting, a shareholder does
not waive their right to notice. Similarly, where a shareholder objects
before a vote on an item of business because the item may not lawfully
be considered at that meeting and does not participate in the
consideration of that item at the meeting, a shareholder has not waived
their right to notice.
Section 5. Record Date. For the purpose of
determining shareholders entitled to notice of
and to vote at any meeting of shareholders or any
adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination or
shareholders for any other proper purpose, the Board of Directors
of the corporation may, but need not, fix a date as the record date
for any such determination of shareholders. Such a record date,
however, shall in no event be more than sixty (60) days prior to
any such intended action or meeting.
Section 6. Quorum. The holders of a majority of the
voting power of all shares of the corporation entitled to vote at a meeting
shall constitute a quorum at a meeting of the
shareholders. Such a quorum is a prerequisite to the
shareholders taking any action other than adjournment. If a
quorum is not represented at a meeting, the holders of a majority
of the voting power present in person or by proxy may adjourn the
meeting to a date, time, and place they shall announce at the time of
adjournment. Any business that might have been transacted at the adjourned
meeting had a quorum been present, may be transacted at the meeting held
pursuant to such an adjournment, granted a quoruin is represented.
If a quorum is present when a duly called or held meeting is convened,
the shareholders present may continue to transact business until adjournment,
even though the withdrawal of a number of shareholders originally represented
leaves less than the number otherwise required for a quorum.
Section 7. Voting and Proxies. At each meeting of
the shareholders, every shareholder shall be entitled to one vote in person or
by proxy for each share of capital stock held by such
shareholder, except as may be otherwise provided in the
Articles of Incorporation or the terms of the share or
as may be required to provide for cumulative voting
(if not denied by the Articles of Incorporation). No
appointment of a proxy, however, shall be valid for any
purpose more than eleven (1l) months after the
date of its execution, unless a longer period is
expressly provided in the appointment. Every
appointment of a proxy shall be in writing
(which shall include telegraphing, cabling, or telephotographic
transmission), and shall be filed with the Secretary of the
corporation before or at the meeting at which the appointment
is to be effective. An appointment of a proxy for shares held jointly by two
or more shareholders shall be valid if signed by any one of them, unless the
secretary of the corporation receives from any one of such shareholders
written notice either denying the authority of another of such
shareholders to appoint a proxy or appointing a dif ferent proxy.
All questions regarding the qualification of voters, the validity of
appointments of proxies, and the acceptance or rejection of votes shall
be decided by the presiding officer of the meeting. The shareholders
shall take action by the affirmative vote of the holders of a majority
of the voting power of the shares present, in person or represented by
proxy, and entitled to vote, except where a different vote is required by
law, the Articles of Incorporation, or these Bylaws.
Section 8. Action Without Meeting by Shareholders.
Any action required or permitted to be
taken at a meeting of the shareholders may be taken
without a meeting by written action signed
by all of the shareholders entitled to vote on such
action. Such written action shall be effective when signed by all
of the shareholders entitled to vote thereon or at such an effective
time as specified in the written action.
ARTICLE III
Directors
Section l. General Powers. Except as authorized by
the shareholders pursuant to a shareholder control agreement or unanimous
action, the business and affairs of the corporation
shall be managed by or under the direction of its Board
of Directors. The directors may exercise all such
powers and do all such things as may be exercised or done by the
corporation, subject to the provisions of applicable law, the Articles of
Incorporation, and these Bylaws.
Section 2. Number Tenure. and Qualification. The
number of directors which shall constitute the whole Board of Directors shall
be fixed from time to time by resolution of the shareholders,
subject to increase by resolution of the Board of Directors.
In the event that the shareholders fail to fix the number
of directors, the number of directors shall be the
number provided for in the Articles of Incorporation,
subject to increase by resolution of the
Board of Directors. No decrease in the number of directors
pursuant to this section shall effect the removal
of any director then in office except upon compliance
with the provisions of Section 7 of this Article.
Each director shall be elected at a regular meeting of shareholders
except as provided in Sections 6 and 7 of this Article. Such a director
shall hold office until the next regular meeting of
shareholders and thereafter until a successor is duly
elected and qualified. If a vacancy shall occur by reason
of death, resignation, or removal from office, however,
the director's role as officer terminates immediately upon
such action. Directors shall be natural persons, but need
not be shareholders.
Section 3. Meetings. Meetings of the Board of
Directors shall be held immediately after, and at the same place as,
regular meetings of shareholders. Other meetings of the Board of Directors
may be held at such times and places as shall from time to time be
determined by the Board of Directors.
Meetings of the Board of Directors also
may be called by the chief executive officer, by the
acting chief executive officer in the absence of the
chief executive officer of by any director. In such a case,
the person or persons calling such meeting may fix the date,
time, and place thereof, either inside or
outside the State of Minnesota, and sha1l cause
notice of meeting to be given.
Section 4. Notice of Meetings. If the date, time,
and place of a meeting of the Board of Directors has been announced at a
previous meeting, no notice is required. In all other cases,
however, at 1east three (3) days' notice of the meetings of the
Board of Directors shall be given to each
director.
Such notice shall state the date and time of the meeting and any other
information required by 1aw or
desired by the person or persons calling such meeting. If notice of the
meeting is required and such notice does not state the place of the
meeting, such meeting shall be held at the principal
executive office of the corporation. Notice of meetings of the
Board of Directors shall be given to directors in the
same manner provided in these Bylaws for giving notice
to shareholders of meetings of the shareholders.
Any director may waive notice of any meeting. A waiver of notice by
a director is effective whether given before, at, or after the meeting, and
whether given orally, in writing, or by attendance.
The attendance of a director at any meeting shall constitute' a waiver of
notice of such meeting, unless
such director objects at the
beginning of the meeting to the transaction of business on grounds
that the meeting is not lawfully called or convened and does not
participate thereafter in the meeting.
Section 5. Quorum and Voting. A majority of the
directors currently holding office shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. In
the absence of a quorum, a majority of the directors present may
adjourn the meeting from time to time until
a quorum is present. If a quorum is present
when a duly called or held meeting is convened, the
directors present may continue to transact business
until adjournment, even though the withdrawal of a
number of directors originally present leaves less
than the number otherwise required for a quorum.
The Board of Directors shall take action by the affirmative vote of a
majority of the directors present at any duly held meeting, except as to any
question upon which any different vote is
required by law, the Articles of Incorporation,
or these Bylaws. A director may give advance written consent
or objection to a proposal to be acted upon at a meeting of
the Board of Directors. As 1ong as the
proposal acted upon at the meeting is
substantially the same or has substantially the same effect as the
proposal to which the director has consented or objected, such
consent or objections shall be counted as a
vote for or against the proposal and shall be
recorded in the minutes of the meeting. Such consent or
objection shall not be considered in determining the
existence of a quorum.
Section 6. Vacancies and Newly Created Directorships.
Any vacancy occurring in the Board of Directors due to death, resignation,
removal, or disqualification, may be filled by the
affirmative vote of a majority of the directors
remaining in office, even though said remaining directors be less
than a quorum. In addition, any newly created directorship
resulting from an increase in the authorized
number of directors by action of the Board of
Directors may be filled by a majority vote of the directors
serving at the time of such increase. Any vacancy or newly
created directorship may be filled by
resolution of the shareholders. Each director elected
by the Board of Directors to either fill a vacancy or a
newly created directorship shall hold office until a qualified successor is
elected by the shareholders at the next
regular or special meeting of the shareholders.
Section 7. Removal of Directors. The entire Board
of Directors or any director or directors may be removed from office, with
or without cause, at any special meeting of the shareholders
duly called for that purpose as provided in these Bylaws.
Such a removal requires an affirmative vote
of the shareholders holding a majority of the
shares entitled to vote at an election of directors. At such
meeting, without further notice, the shareholders may fill any
vacancy or vacancies created by such removal as
provided in Section 6 of this Article.
In addition, any director may be removed at any time, with or without
cause, by the other members of the Board of Directors if: (i) the director was
appointed by the board to fill a vacancy; (ii)
the shareholders have not elected directors in
the interval between the time of the appointment
and the time of removal; and (iii) a majority of the
remaining directors present affirmatively vote to
remove the director, even though said remaining directors
may be less than a quorum.
Section 8. Committees. The Board of Directors,
by a resolution approved by the affirmative vote of a majority of the
directors then holding office, may establish one or more committees of
one or more persons. Such committees shall be given the authority of
the Board of Directors in the management of the business of the
corporation to the extent provided in the initial resolution. Such
committees, however, shall at all times be subject to the direction
and control of the Board of Directors.
Committee members need not be directors and shall be
appointed by the affirmative vote of a majority of the
directors present. A majority of the members of any committee shall
constitute a quorum for the transaction of business at a meeting of
any such committee.
In other matters of procedure, the provisions of these Bylaws shall
apply to committees and the members thereof to the same extent they apply to
the Board of Directors and directors. This shall include,
without limitation, the provisions with respect to meetings and notice thereof,
absent members, written actions, and valid acts. Each committee shall keep
regular minutes of its proceedings and reportthe same
to the Board of Directors.
Section 9. Action in Writing. Any action required
or permitted to be taken at a meeting of
the Board of Directors or of a lawfully constituted committee
thereof, which requires the
approval of the
shareholders, may be taken by written action signed by all of the directors
then in office or by all of the
members of such committee, as the case may be. However, if the action does
not require shareholder approval, such action shall be effective if signed
by the number of directors or members of such committee that would be
required to take the same action at a meeting at'which all directors or
committee members were present. If any 'written action is taken by less
than all directors or members, all directors
or members shall be notified immediately of its text and
effective date. The failure to provide such
notice, however, shall not invalidate such written action. A director who does
not sign or consent to the written action has no liability for the action or
actions taken thereby.
Section 10. Meeting by Means of Electronic
Communication. Members of the Board of Directors of the corporation, or
any committee designated by such Board, may participate in a
meeting ofsuch Board or committee by means of conference telephone
or similar means of communicationby which all persons participating
in the meeting can simultaneously hear each other. Such participation in
a meeting pursuant to this Section shall constitute presence in person at
such meeting. Meetings held pursuant to this Section, however, are still
subject to the notice, quorum, and voting requirements
as
provided in Sections 4 and 5 of this Article.
ARTICLE IV
Officers
Section 1. Number and Qualification. The officers of
the corporation shall consist of one or more natural persons elected by the
Board of Directors exercising the functions of the offices, however
designated, of chief executive officer and chief financial officer. The
Board of Directors may also appoint such other officers and assistant
officers as it may deem necessary. Except as provided in these Bylaws,
the Board of Directors shall fix the powers, duties, and compensation of
all officers. Officers may be, but need not be, directors of the
corporation. Any number of offices may be held by the same person.
Section 2. Term of Office. An officer shall hold
office until a successor shall have been duly elected, unless prior thereto
such officer shall have resigned or been removed from
office as hereinafter provided.
Section 3. Removal and Vacancies. Any officer or
agent elected or appointed by the Board of Directors shall hold office at
the pleasure of the Board of Directors and may be
removed, with or without cause, at any time by the vote of a majority of the
Board of Directors. Any vacancy in an office of the corporation shall be
filled by action of the Board of Directors.
Section 4. Chief Executive Officer. Unless provided
otherwise by a resolution adopted by the Board of Directors, the chief
executive officer shall have general active management of the busir;ess
of the corporation, in the absence of the Chairperson of the Board
or if the office of Chairperson of the Board is vacant, shall preside
at meetings of the shareholders and Board of Directors, shall see that
all orders and resolutions of the Board of Directors are carried into
effect, shall sign and deliver in the name of the corporation any
deeds, mortgages, bonds, contracts, or other instruments pertaining
to the business of the corporation, except in cases in which the
authority to sign and deliver is required by law to be
exercised by another person or is expressly delegated by the
Articles of incorporation, these Bylaws, or the Board of Directors
to some other officer or agent of the corporation, may maintain records
of and certify proceedings of the Board of Directors and shareholders, and
shall perform such other duties as may from time to time be prescribed by
the Board of Directors.
Section 5. Chief Financial Officer. Unless
provided otherwise by a resolution adopted by the Board of Directors,
the chief financial officer shall keep accurate financial records for
the corporation, shall deposit all monies, drafts, and checks in the
name of and to the credit of the corporation in such banks and
depositories as the Board of Directors shall designate from time
to time, shall endorse for deposit all notes, checks, and drafts received by
the corporation as ordered by the Board of Directors, making proper vouchers
therefor, shall disburse corporate funds and issue checks and drafts in
the name of the corporation as ordered by'the Board of Directors, shall
render to the chief executive officer and the Board of Directors, whenever
requested, an account of all such officer's transactions as chief financial
officer and of the financial condition of the corporation, and shall perform
such other duties as may be prescribed by the Board of DirectorS or the
chief executive officer from time to time.
Section 6. Chairperson of the Board. The Board of
Directors may elect a chairperson of the Board who, if elected, shall unless
otherwise provided by the Board of Directors, preside at all
meetings of the shareholders and of the Board of Directors and shall
perform such other duties as may be prescribed by the Board of Directors
from time to time.
Section 7. President. Unless otherwise determined
by the Board of Directors, the President shall be the chief executive officer
of the corporation. If an officer other than the President is designated
chief executive officer, the President, if any, shall have such powers and
perform such duties as the Board of Directors or the chief executive officer
may prescribe from time to time.
Section 8. Vice Presidents. The Vice President, if
any, or Vice Presidents in case there be more than one, shall have such powers
and perform such duties as the chief executive officer or the Board of
Directors may prescribe from time to time. in the absence of the President
or in the event of the president's death, inability, or refusal to act, the
Vice President, or in the event there be more than one Vice President, the
Vice Presidents in the order designated by the Board of
Directors, or, in the absence of any designation, in the order of
their election, shall perform the duties of the
President, and, when so acting, shall have all the powers of and be
subject to all of the restrictions upon the President.
Section 9. S ecretary. The Secretary shall attend all
meetings of the Board of Directors and of the shareholders and shall maintain
records of, and whenever necessary, certify all proceedings of
the Board of Directors and of the shareholders. The Secretary shall keep
the stock books of the corporation, when so directed by the Board of
Directors or other person or persons authorized to call such meetings,
shall give or cause to be given notice of meetings of the shareholders and of
meetings of the Board of Directors, and shall also perform such other duties
and have such other powers as the chief executive officer or the Board of
Directors may prescribe from time to time.
Section l0. Treasurer. Unless otherwise determined
by the Board of Directors, the Treasurer shall be the chief financial officer
of the corporation. If an officer other than the Treasurer is designated
chief financial officer, the Treasurer, if any, shall have such powers and
perform such duties as the chief executive officer or the Board of Directors
may prescribe from time to time.
Section 11. Delegation. Unless prohibited by a
resolution approved by the affirmative vote of a majority of the directors
present, an officer elected or appointed by the Board of Directors may
delegate in writing some or all of the duties and powers of such person's
office to other persons.
ARTICLE V
Certificates and Ownership of Shares
Section 1. Certificates. All shares of the
corporation shall be represented by certificates.
Each certificate shall contain on its face (a) the name of the corporation,
(b) a statement that the corporation is incorporated under the laws of the State
of Minnesota, (c) the name of the person to whom it is issued, and (d) the
number and class of shares, and the designation of the series, if any,
that the certificate represents. Certificates shall also contain any
other informatiqn required by law or desired by the Board of Directors, and
shall be in such form as shall be determined by the Board of Directors.
Such certificates shall be signed by the chief executive officer, by
the chief financial officer, or, unless otherwise limited by resolution of the
Board of Directors, by any other officer of the corporation. If a certificate
is signed (l) by a transfer agent or an assistant transfer agent or (2) by
a transfer clerk acting on behalf of the corporation and a registrar, the
signature of any such officer
ofthe corporation may be a facsimile. If a person signs or has a facsimile
signature placed upon a certificate while an officer, transfer agent, or
registrar of a corporation, the certificate may be
issued by the corporation, even if the person has ceased to have
that capacity before the certificate is issued, with the same
effect as if the person had that capacity at the date of its issue. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued with the number of shares and date of
issue shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation or the transfer agent
for transfer shall be cancelled, and no new certificate shall be issued until
the former certificate for a like number of shares shall have been surrendered
and cancelled, except that in case of a lost, destroyed, or mutilated
certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. The transfer of
shares of the corporation shall be made only on the stock transfer books of
the corporation by the holder of record thereof or by such holder's legal
representative, who shall furnish proper evidence of authority to transfer,
or by such holder's attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation, and on surrender
of such shares to the corporation or the transfer agent of the corporation.
Section 3. Ownership. Except as otherwise provided
in this Section, the person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for
all purposes. The Board of Directors, however, by a resolution
approved by the affirmative vote of a majority of directors then in
office, may establish a procedure whereby a shareholder may certify in
writing to the corporation that all or a portion of the shares registered
in the name of such shareholder are held for the account of one or
more beneficial owners. Upon receipt by the corporation of the writing,
the persons specified as beneficial owners, rather than the actual
shareholder, shall be deemed the shareholders for such purposes as are
permitted by the resolution of the Board of Directors and are specified in
the writing.
ARTICLE VI
Contracts. Loans. Checks, and Deposits
Section 1. Contracts. The Board of Directors may
authorize such officers or agents as they shall designate to enter into
contracts or execute and deliver instruments in the name of and on behalf of
the corporation, and such authority may be general or confined to specific
instances.
Section 2. Loans. The corporation shall not lend
money to, guarantee the obligation of, become a surety for, or otherwise
financially assist any person unless the transaction, or class of
transactions to which the transaction belongs, has been approved by the
affirmative vote of a majority of directors present, and (a) is in the
usual and regular course of business of the corporation, (b) is with, or
for the benefit of, a related corporation, an organization in which the
corporation has a financial interest, an organization with which the
corporation has a bus'iness relationship, or an organization to which
the corporation has the power to make donations, (c) is with, or for
the benefit of, an officer or other employee of the
corporation or a subsidiary, including an officer or
employee who is a director of the corporation or a subsidiary, and
may reasonably be expected, in the judgment of the Board of Directors,
to benefit the corporation, or (d) has been approved by the affirmative
vote of the holders of two-thirds of the outstanding shares, including
both voting and nonvoting shares.
Section 3. Checks Drafts, etc. All checks, drafts
or other orders for the payment of money, notes, or other evidences of
indebtedness issued in the name of the corporation shall be signed by such
officers or agents of the corporation as shall be designated and in such
manner as shall be determined from time to time by resolution of the Board
of Directors.
Section 4. Deposits. All funds of the corporation
not otherwise employed shallbe deposited from time to time to the credit of
the corporation in such banks or other financial institutions as the Board
of Directors may select.
ARTICLE VII
Miscellaneous
Section 1. Dividends. The Board of Directors from
time to time may declare, and the corporation may pay, dividends on its
outstanding shares in the manner and upon the terms and conditions provided
by law.
Section 2. Reserves. There may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, for equalizing
dividends, for repairing or maintaining any property of the corporation,
for the purchase of additional property, or for such other purpose as the
directors shall deem to be consistent with the interests of the corporation.
The Board of Directors may modify or abolish any such reserve.
Section 3. Fiscal Year. The fiscal year of the
corporation shall be such twelve-month period as is set by a resolution of
the Board of Directors, provided, however, that the first fiscal year of the
corporation may be a shorter period if permitted by law and set by a
resolution of the Board of Directors.
Section 4. Amendments. Except as limited by the
Articles of Incorporation, these Bylaws may be altered or amended by the
Board of Directors at any meeting of directors to the full extent permitted
by law, subject, however, to the power of the shareholders of this
corporation to alter or repeal such Bylaws.
Section 5. Shareholder Agreements. In the event of
any conflict or inconsistency between these Bylaws, or any amendment thereto,
and the terms of any shareholder control agreement as defined in Minnesota
Statutes Section 302A.457, whenever adopted, the terms of
such shareholder control agreement shall control.
* * * * *
The undersigned, Secretary of Skyway Advertising, Inc., a Minnesota
corporation, does hereby certify that the foregoing Bylaws are the Bylaws
adopted for the corporation by its Board of Directors by unanimous written
consent dated the 9th day of March 1993.
/s/ Robert H. Blank
Secretary
AMENDMENT NO. 1 TO BYLAWS
OF
SKYWAY ADVERTISING, INC.
By resolution duly adopted by the Board of Directors of Skyway
Advertising, Inc. by written action effective as of the 5th day of May,
1993, and consented to by all shareholders, the Bylaws of the corporation
were amended to include a new Article VIII which reads as follows:
ARTICLE VIII
Restriction of Transfer of Shares
Section 1. Coroorate and Shareholder Option. No voluntary or
involuntary transfer of shares of the common stock of the corporation or
securities convertible into common stock of the corporation, including any
gift or bequest, shall be made nor any sale or assignment thereof be
valid unless such shares or securities shall have first been offered in
writing to the corporation and second to the shareholders of the
corporation. The corporationshall have the right to purchase the
same within ten (10) days of receipt of notice of such
transfer, sale, or assignment as follows: (1) in the case
of a proposed sale, upon the same terms and conditions of any such
proposed sale; or (2) in the case of all other proposed
transfers or assignments, at the fair market value of such shares or securities
on the last day of the calendar month immediately preceding the date of
notice of such transfer, sale, or assignment. The fair market value
will be determined by mutual agreement of the transferring
shareholder and party or parties exercising the option; provided, however, that
if no mutual agreement can be reached, then the fair market value will be
determined by appraisal. Thecost of such appraisal will be borne equally by
the transferring shareholder and any optionees exercising the option. If the
corporation does not exercise its option within the aforesaid ten
(10) day period, the shareholders shall have an additional five (5) days
in which to purchase such shares or securities, on a pro rata basis,
upon the same terms and conditions as the
corporation. Notwithstanding anything herein to the contrary, to the extent
that an agreement has been entered into between the corporation
and the transferring shareholder which governs the purchase of such shares,
such agreement shall govern the terms and conditions thereof of
any such purchase.
Section 2. Renewal of Notice. Any transfer, sale, or assig:nment to
be made after the expiration of the aforesaid option period must be made upon
the same terms and conditions contained in the original notice of transfer to
the corporation and within an additional five (5) days after the
expirationthereof; otherwise, the transferring shareholder
must again offer the shares first to the corporation and second to the
corporation's shareholders as provided in Section 8.1 hereof.
Section 3. Exercise of Option. The corporation or the shareholders,
whichever is applicable, may exercise the option herein granted by depositing
within the prescribed option period, in cash, tee full purchase price with any
national or state chartered bank in Minneapolis, Minnesota. Within the
prescribed option period, the corporation or the shareholders exercising
the option shall give notice thereof to the transferring shareholder, or
the representative of such shareholder, as the case may be, by depositing
written notice in the United States mail addressed to
the last known address of such shareholder or representative. The bank
designated to hold the funds shall disburse them to the person entitled to
them upon the surrender of the certificate or certificates of the shares or
securities properly endorsed, plus the release in full by such person for
all claims he may have against the corporation on account of ownership of the
common stock or securities.
Section 4. Termination of Corporate and Shareholder Option. The
corporate and shareholder option described in this Article VIII shall
terminate:
(a) Upon the first sale of the corporation's common stock to
the public pursuant to either a registration statement filed with, and declared
effective by, the Securities and Exchange Commission or a registration with a
state securities commission; or
(b) Upon action of a majority of the total number of
the members of the Board of Directors terminating the option.
Section 5. Endorsement on Stock Certificates. An endorsement in
language substantially as follows shall be placed on each certificate of stock
or securities issued by the corporation:
"This certificate is subject to the stock transfer restrictions
contained in Article VIII of the Bylaws, which Bylaws are available for
inspection at the registered office of the corporation."
Except for the amendment described herein, the Bylaws of the
corporation remain unchanged.
I, Robert H. Blank, Secretary of Skyway Advertising, Inc., hereby
certify that this amendment to the Bylaws was adopted by the Board of
Directors of the corporation to be effective as of the 5th day of
Nov., 1993.
Robert H. B1ank, Secretary
EXHIBIT 4.2
WARRANT AGREEMENT
AGREEMENT, dated as of this ____ day of
__________, 199_, by and among ILLUMINATED MEDIA,
INC. a Minnesota corporation (the "Company"), NORWEST
BANK MINNESOTA, N.A., as Warrant Agent (the "Warrant
Agent"), and TUSCHNER & COMPANY, INC., a Minnesota
corporation ("Tuschner").
W I T N E S S E T H
WHEREAS, in connection with a public offering (the
"Offering") of up to 1,500,000 units ("Units"), each unit
consisting of one share of the Company's Common Stock, no
par value, and one Redeemable Common Stock Purchase
Warrant pursuant to an underwriting agreement (the
"Underwriting Agreement") dated __________, 199_, between
the Company and Tuschner, and the issuance to Tuschner or
its designees of a Unit Purchase Option to purchase additional
Units, dated as of ____________, 199_ (the "Unit Purchase
Option"), the Company will issue up to ______________
Redeemable Common Stock Purchase Warrants ("Warrants");
and
WHEREAS, the Company desires the Warrant Agent
to act on behalf of the Company, and the Warrant Agent is
willing to so act, in connection with the issuance, registration,
transfer exchange and redemption of the Warrants, the issuance
of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises
and the mutual agreements hereinafter set forth and for the
purpose of defining the terms and provisions of the Warrants
and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company,
the holders of certificates representing the Warrants, and the
Warrant Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following
terms shall have the following meanings, unless the context
shall otherwise require:
(a) "Tuschner Certificate" shall mean a certificate executed on behalf of
Tuschner by its Chairman of the Board,
President or a Vice President, and by its Secretary or an
Assistant Secretary, duplicate originals of which are delivered
to the Company and the Warrant Agent.
(b) "Common Stock" shall mean stock of the Company
of any class, whether now or hereafter authorized, which has
the right to participate in the distribution of earnings and assets
of the Company without limit as to amount or percentage,
which at the date hereof (including the shares of Common
Stock to be issued pursuant to the Underwriting Agreement)
consists of ______________ shares of Common Stock, no par
value.
(c) "Corporate Office" shall mean the office of the
Warrant Agent (or its successor) at which at any particular
time its principal business shall be administered, which office is
located at the date hereof at 90 South Seventh Street,
Minneapolis, Minnesota 55402.
(d) "Exercise Date" shall mean, as to any Warrant, the
date on which the Warrant Agent shall have received both (a)
the Warrant Certificate representing such Warrant, with the
exercise form thereon duly executed by the Registered Holder
thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the
United States of America equal to the applicable Purchase
Price.
(e) "Initial Warrant Exercise Date" shall mean
______________, 199_.
(f) "Purchase Price" shall mean the purchase price to be
paid upon exercise of each Warrant in accordance with the
terms hereof, which price shall be $2.75 per share, subject to
adjustment from time to time pursuant to the provisions of
Section 9 hereof.
(g) "Redemption Price" shall mean the price at which
the Company may, at its option, redeem the Warrants, in
accordance with the terms hereof, which price shall be $0.01
per Warrant, subject to adjustment from time to time pursuant
to the provisions of Section 9 hereof.
(h) "Registered Holder" shall mean the person in whose
name any certificate representing Warrants shall be registered
on the books maintained by the Warrant Agent pursuant to
Section 6.
(i) "Transfer Agent" shall mean American Securities
Transfer, Inc., as the Company's transfer agent, or its
authorized successor, as such.
(j) "Warrant Expiration Date" shall mean 5:00 P.M.
(Minneapolis time) on ________________, 2001, or the
Redemption Date as defined in Section 8, whichever is earlier;
provided that if such date shall in the State of Minnesota be a
holiday or a day on which banks are authorized to close, then
5:00 P.M. (Minnesota time) on the next following day which in
the State of Minnesota is not a holiday or a day on which
banks are authorized to close. Notwithstanding the foregoing,
as to the Warrants subject to the Unit Purchase Option, the
Warrant Expiration Date shall instead be five years after the
date of exercise of the portion of the Unit Purchase Option to
which the Warrants relate.
SECTION 2. Warrants and Issuance of Warrant
certificates.
(a) A Warrant shall initially entitle the Registered
Holder of the Warrant Certificate representing such Warrant
to purchase two shares of Common Stock upon the exercise
thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant
Certificates representing the number of Warrants sold pursuant
to the Underwriting Agreement shall be executed by the
Company and delivered to the Warrant Agent. Upon written
order of the Company signed by its Chairman of the Board,
President or a Vice President, and by its Secretary or an
Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent as
part of the Units.
(c) From time to time, up to the Warrant Expiration
Date, the Transfer Agent shall countersign and deliver stock
certificates in required whole number denominations
representing up to an aggregate of ______________ shares of
Common Stock, subject to adjustment as described herein,
upon the exercise of Warrants in accordance with this
Agreement.
(d) From time to time, up to the applicable Warrant
Expiration date, the Warrant Agent shall deliver Warrant
Certificates in required whole number denominations to the
persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement; provided that no
warrant certificates shall be issued except: (i) those initially
issued hereunder, (ii) those issued on or after the Initial
Warrant Exercise Date, upon the exercise of fewer than all
Warrants represented by any Warrant Certificate to represent
any unexercised Warrants held by the Registered Holder, (iii)
those issued upon any transfer or exchange pursuant to Section
6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; (v) those
issued pursuant to the Unit Purchase Option; and (vi) at the
option of the Company in such form as may be approved to
reflect any adjustment or change or adjustment in the Purchase
Price the number of shares of Common Stock purchasable
upon exercise of the Warrants, or the Redemption Price
Pursuant to Section 9.
(e) Pursuant to the terms of the Unit Purchase
Option, Tuschner may purchase up to _________ Units,
which include up to ________ Warrants. Notwithstanding
anything to the contrary contained herein, the Warrants
included in the Unit Purchase Option shall expire five years
after the date on which the Unit Purchase Option relating to
such Warrants is exercised and shall not be subject to
redemption by the Company.
SECTION 3. Form and Execution of Warrant
certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are
hereby incorporated herein) and may have such letters,
numbers, or other marks of identification or designation, and
such legends, summaries, or endorsements printed,
lithographed, or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any law
or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant
Certificates shall be dated the date of issuance thereof (whether
upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates) and issued in
registered form. Warrants shall be numbered serially with the
letter W.
(b) Warrant Certificates shall be executed on behalf of
the Company by its Chairman of the Board, President or Vice
President, and by its Secretary or an Assistant Secretary, by
manual signatures or by facsimile signatures printed thereon
and shall have imprinted thereon a facsimile of the Company's
seal. Warrant Certificates shall be countersigned by the
Warrant Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be
such officer of the Company before the date of issuance of the
Warrant Certificates or before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant
Certificates may nevertheless be countersigned by the Warrant
Agent, issued, and delivered with the same force and effect as
though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company. After
countersignature by the Warrant Agent, Warrant Certificates
shall be delivered by the Warrant Agent to the Registered
Holder without further action by the Company, except as
otherwise provided by Section 4(a) hereof.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered
Holder thereof at any time on or after the Initial Exercise Date,
but not after the Expiration Date, upon the terms and subject
to the conditions set forth herein and in the applicable Warrant
Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise
Date, and the person entitled to receive the securities
deliverable upon such exercise shall be treated for all purposes
as the holder upon exercise thereof as of the close of business
on the Exercise Date. As soon as practicable on or after the
Exercise Date, the Warrant Agent shall promptly remit the
payment received from the exercise of a Warrant to the
Company or as the Company may direct in writing and shall
notify the Company in writing of the exercise of the Warrants.
Promptly following, and in any event within five days after the
date of such notice from the Warrant Agent or such longer
period as shall be required to satisfy the Company of the
clearance of checks drawn on banks outside Minneapolis,
Minnesota delivered upon exercise, the Company shall give
notice to the Warrant Agent to cause to be issued and delivered
by the Transfer Agent promptly thereafter, to the person or
persons entitled to receive the same, a certificate or certificates
for the securities deliverable upon such exercise (plus a
certificate for any remaining unexercised Warrants of the
Registered Holder).
SECTION 5. Reservation of Shares; Listing; Payment of
Taxes.
(a) The Company covenants that it will at all times
reserve and keep available out of its authorized Common
Stocks solely for the purpose of issue upon exercise of
Warrants such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants
(including Warrants includable in Units subject to the Unit
Purchase Option). The Company covenants that all shares of
Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery, be duly and validly
issued, fully paid, nonassessable, and free from all taxes, liens,
and charges with respect to the issue thereof (other than those
which the Company shall promptly pay or discharge), and that
upon issuance such shares shall be listed on each national
securities exchange, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder
require registration with, or approval of, any governmental
authority under any federal securities law before such securities
may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably
possible, endeavor to secure such registration or approval. The
Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws.
With respect to any such securities, however, Warrants may
not be exercised by, or shares of Common Stock issued to, any
Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or
similar taxes, and other governmental charges that may be
imposed with respect to the issuance of Warrants, or the
issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common
Stock are to be delivered in a name other than the name of the
Registered Holder of the Warrant Certificate representing any
Warrant being exercised, then no such delivery shall be made
unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto,
if any.
(d) The Warrant Agent is hereby irrevocably authorized
to requisition the Company's Transfer Agent from time to
time for certificates representing shares of Common Stock
required upon exercise of the Warrants, and the Company will
authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of the Transfer
Agent of the Company for shares of Common Stock issuable
upon exercise of the Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other
warrant Certificates representing an equal aggregate number of
warrants of the same class or may be transferred in whole or in
part. Warrant Certificates to be exchanged shall be surrendered
to the Warrant Agent at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company
shall execute and the Warrant Agent shall countersigns issue
and deliver in exchange therefor the Warrant Certificate or
Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in
which, subject to such reasonable regulations as it may
prescribe, it shall register Warrant Certificates and the transfer
thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the
Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the
subscription form on the reverse thereof shall be duly
endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory
to the Company and the Warrant Agent, duly executed by the
Registered Holder or his attorney-in-fact duly authorized in
writing.
(d) A service charge may be imposed by the Warrant
Agent for any exchange or registration of transfer of Warrant
Certificates. In addition, the Company may require payment
by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection
therewith.
(e) All Warrant Certificates surrendered for exercise or
for exchange in case of mutilated Warrant Certificates shall be
promptly canceled by the Warrant Agent and thereafter
retained by the Warrant Agent until termination of this
Agreement or resignation as Warrant Agent, or, with the prior
written consent of Tuschner, disposed of or destroyed, at the
direction of the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and
treat the Registered Holder of any Warrant Certificate as the
absolute owner thereof and of each Warrant represented
thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized
officer of the Company or the Warrant Agent) for all purposes
and shall not be affected by any notice to the contrary. The
Warrants, which are being publicly offered in Units with
shares of Common stock pursuant to the Underwriting
Agreement, will be detachable from the Common Stock and
transferable separately therefrom from and after thirty (30)
days following the Initial Warrant Exercise Date.
SECTION 7. Loss or Mutilation. Upon receipt by the
Company and the Warrant Agent of evidence satisfactory to
them of the ownership of and loss, theft, destruction, or
mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to them, or (in the
case of mutilation) upon surrender and cancellation thereof, the
Company shall execute and the Warrant Agent shall (in the
absence of notice to the Company and/or Warrant Agent that
the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in
lieu thereof a new Warrant Certificate of like tenor
representing an equal aggregate number of Warrants.
Applicants for a substitute Warrant Certificate shall comply
with such other reasonable regulations and pay such other
reasonable charges as the Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) Subject to the provisions of paragraph 2(e) hereof, on
not less than 30 days notice given at any time after the initial
Exercise Date, the Warrants may be redeemed, at the Option
of the Company, at a redemption price of $0.01 per Warrant
provided the market price of the Common Stock receivable
upon exercise of such Warrant shall exceed 120% of the
Purchase Price. "Market price" for the purpose of this Section
8 shall mean (i) the average closing bid price of the Common
Stock for 10 consecutive trading days as reported by the
National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or (ii) if the Common Stock
is traded on a national securities exchange, the average reported
sale price for 10 consecutive trading days on the primary
exchange on which the Common Stock is traded. All Warrants
of a class, except those comprising the Unit Purchase Option,
must be redeemed if any of that class are redeemed.
(b) In case the Company shall desire to exercise its right
so to redeem the Warrants, it shall request Tuschner to mail a
notice of redemption to each of the Registered Holders of the
Warrants to be redeemed, first class, postage prepaid, not later
than the 30th day before the date fixed for redemption, at their
last address as shall appear on the records of the Warrants. Any
notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not
the Registered Holder receives such notice. The Company
agrees to pay Tuschner its reasonable fees and expenses.
(c) The notice of redemption shall specify the (i) the
redemption price, (ii) the date fixed for redemption, (iii) the
place where the Warrant Certificates shall be delivered and the
redemption price paid, (iv) that Tuschner will assist each
Registered Holder of a Warrant in connection with the exercise
thereof, and (v) that the right to exercise the Warrant shall
terminate at 5:00 P.M. (Minneapolis time) on the business day
immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrants shall be the
Redemption Date. Neither the failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a
holder (a) to whom notice was not mailed or (b) whose notice
was defective. An affidavit of the Warrant Agent or of the
Secretary or an Assistant Secretary of Tuschner or the
Company that notice of redemption has been mailed shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein.
(d) Any right to exercise a Warrant shall terminate at
5:00 P.M. (Minneapolis time) on the business day immediately
preceding the Redemption Date. On and after the Redemption
Dates, Holders of the Warrants shall have no further rights
except to receive, upon surrender of the Warrant, the
Redemption Price.
(e) From and after the date specified for redemption, the
Company shall, at the place specified in the notice of
redemption, upon presentation and surrender to the Company
by or on behalf of the Registered Holder thereof of one or
more Warrants to be redeemed, deliver or cause to be delivered
to or upon the written order of such Holder a sum in cash
equal to the redemption price of each such Warrant. From and
after the date fixed for redemption and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all
the Warrants called for redemption, such Warrants shall expire
and become void, and all rights hereunder and under the
Warrant Certificates, except the right to receive payment of the
redemption price, shall cease.
SECTION 9. Adjustment of Exercise Price and Number
of Shares of Common Stock or Warrants.
(a) (1) Subject to the exceptions referred to in Section
9(g) below, in the event the Company shall, at any time or
from time to time after the date hereof, sell any shares of
Common Stock for a consideration consisting solely of cash in
an amount per share less than the Purchase Price, or issue any
shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding
shares of Common Stock into a greater or lesser number of
shares (any such sale, issuance, subdivision or combination
being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in
effect immediately prior to such Change of Shares shall be
changed to a price (including any applicable fraction of a cent)
determined by dividing (i) the sum of (a) the total number of
shares of Common Stock outstanding immediately prior to
such Change of Shares, multiplied by the Purchase Price in
effect immediately prior to such Change of Shares, and (b) the
consideration, if any, received by the Company upon such sale,
issuance, subdivision or combination by (ii) the total number
of shares of Common Stock outstanding immediately after
such Change of Shares.
(2) Upon each adjustment of the Purchase Price
pursuant to this Section 9, the total number of shares of
Common Stock purchasable upon the exercise of each Warrant
shall (subject to the provisions contained in Section 9(b) hereof)
be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price immediately prior to such
adjustment multiplied by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such
adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of
the Purchase Price hereunder, to adjust the number of warrants
outstanding, in lieu of the adjustment in the number of shares
of Common Stock purchasable upon the exercise of each
Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to
purchase one share of Common Stock. Each Warrant held of
record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the
nearest tenth or hundredth, as the Company may determine to
be more appropriate) determined by multiplying the number
one by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. Upon each such
adjustment of the number of Warrants, the Redemption Price
in effect immediately prior to such adjustment also shall be
adjusted by multiplying such Redemption Price by a fraction,
the numerator of which shall be the Purchase Price in effect
immediately after such adjustment and the denominator of
which shall be the Purchase Price in effect immediately prior to
such adjustment. Upon each adjustment of the number of
Warrants pursuant to this Section 9, the Company shall, as
promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such
adjustment Warrant Certificates evidencing, subject to Section
11 hereof, the number of additional Warrants to which such
Holder shall be entitled as a result of such adjustment or, at the
option of the Company, cause to be distributed to such Holder
in substitution and replacement for the Warrant Certificates
held by him prior to the date of adjustment (and upon
surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such
Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization,
or other change of outstanding shares of Common Stock, or in
case of any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger
in which the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of
Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or
substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall
cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, by
exercising such Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or
other change, consolidations merger, sale or conveyance by a
holder of the number of shares of Common Stock that might
have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9.
The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations, and other changes of
outstanding shares of Common Stock and to successive
consolidations, mergers, sales, or conveyances.
(d) Notwithstanding of any adjustments or changes in
the Purchase Price or the number of shares of Common Stock
purchasable upon exercise of the Warrants, the Warrant
Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(d) hereof, continue to express
the Purchase Price per share, the number of shares purchasable
thereunder, and the Redemption Price therefor as the Purchase
Price per share, as the number of shares purchasable and the
Redemption Price therefor were expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant
to this Section 9, the Company will promptly prepare a
certificate signed by the Chairman of the Board or President,
and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of
Common Stock purchasable upon exercise of each Warrant
after such adjustment, and, if the Company shall have elected
to adjust the number of Warrants, the number of Warrants to
which the registered holder or each Warrant shall then be
entitled, and the adjustment in Redemption Price resulting
therefrom, and (iii) a brief statement of the facts accounting for
such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to Tuschner and
to each registered holder of Warrants at his or her last address
as it shall appear on the registry books of the Warrant Agent.
Neither the failure to mail such notice nor any defect therein
or in the mailing thereof shall affect the validity thereof, except
as to any holder to whom the Company fails to mail such
notice or except as to the holder to whom notice is given
defectively. The affidavit of an officer of the Warrant Agent or
the Secretary or an Assistant Secretary of the Company that
such notice has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
(f) For purposes of Sections 9(a) and 9(b) hereof the
following provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock
outstanding at any given time shall include shares of
Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares
shall not be considered a Change of Shares for purposes
of said sections.
(B) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase
or decrease of at least $.10 in such price; provided that
any adjustments which by reason of this clause (B) are
not required to be made shall be carried forward and
shall be made at the time of and together with the next
subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price
then in effect hereunder.
(C) In case of (1) the sale by the Company solely
for cash of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common
Stock or any securities convertible into or exchangeable
for Common Stock without the payment of any further
consideration other than cash, if any (such convertible
or exchangeable securities being herein called
"Convertible Securities"), or (2) the issuance without the
receipt by the Company of any consideration therefor,
of any rights, or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable upon the exercise of such rights,
warrants, or options shall consist solely of cash, whether
or not such rights, warrants, or options, or the right to
convert or exchange such Convertible Securities, are
immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of
such rights, warrants, or options or upon the conversion
or exchange of such Convertible Securities (determined
by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such
rights, warrants, or options, plus the consideration
received by the Company for the issuance or sale of such
rights, warrants, or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount
of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of
such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities issuable upon
the exercise of such rights, warrants or options) is less
than the Purchase Price in effect immediately prior to
the date of the issuance or sale of such rights, warrants
or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such
rights, warrants or options or upon the conversion or
exchange of such Convertible Securities (as of the date of
the issuance or sale of such rights, warrants or options)
shall be deemed to be outstanding shares of Common
Stock for purposes of Sections 9(a) and 9(b) hereof and
shall be deemed to have been sold for cash in an amount
equal to such price per share.
(D) In case of the sale by the Company solely for
cash of any Convertible Securities, whether or not the
right of conversion or exchange thereunder is
immediately exercisable, and the price per share for
which Common Stock is issuable upon the conversion
or exchange of such Convertible Securities (determined
by dividing (x) the total amount of consideration
received by the Company for the sale of such
Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than
such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable
upon the conversion or exchange of such Convertible
Securities) is less than the Purchase Price in effect
immediately prior to the date of the sale of such
Convertible Securities, then the total maximum number
of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities
(as of the date of the sale of such Convertible Securities)
shall be deemed to be outstanding shares of Common
Stock for purposes of Sections 9(a) and 9(b) hereof and
shall be deemed to have been sold for cash in an amount
equal to such price per share.
(E) If the exercise or purchase price provided for
in any right, warrant or option referred to in (C) above,
or the rate at which any Convertible Securities referred
to in (C) or (D) above are convertible into or
exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions
designed to protect against dilution), the Purchase Price
then in effect hereunder shall forthwith be readjusted to
such Purchase Price as would have obtained (1) had the
adjustments made upon the issuance or sale of such
rights, warrants, options, or Convertible Securities been
made upon the basis of the issuance of only the number
of shares of Common Stock theretofore actually
delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible
Securities, (2) had adjustments been made on the basis of
the Purchase Price as adjusted under clause (1) for all
transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such
rights, warrants, options or Convertible Securities, and
(3) had any such rights, warrants, options or Convertible
Securities then still outstanding been originally issued or
sold at the time of such change. On the expiration of
any such right, warrant, or option or the termination of
any such right to convert or exchange any such
Convertible Securities, the Purchase Price then in effect
hereunder shall forthwith be readjusted to such Purchase
Price as would have obtained (a) had the adjustments
made upon the issuance or sale of such rights, warrants,
options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of
Common Stock theretofore actually delivered (and the
total consideration received therefor) upon the exercise
of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities
and (b) had adjustments been made on the basis of the
Purchase Price as adjusted under clause (a) for all
transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such
rights, warrants, options or Convertible Securities.
(F) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights
or warrants to subscribe for or purchase, or any options
for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company
therefor shall be deemed to be the gross sales price
therefor without deducting therefrom any expense paid
or incurred by the Company or any underwriting
discounts or commissions or concessions paid or allowed
by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants
or to the number of shares of Common Stock purchasable
upon the exercise of each Warrant will be made, however,
(i) upon the grant or exercise of any stock options
which may hereafter be granted or exercised under any
other employee benefit plan of the Company;
(ii) upon the sale or exercise of the Warrants,
including without limitation the sale or exercise of any
of the Warrants comprising the Unit Purchase Option;
or
(iii) upon the issuance or sale of Common Stock
or Convertible Securities upon the exercise of any rights
or warrants to subscribe for or purchase, or any options
for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale
of the Warrants or were thereafter issued or sold; or
(iv) upon the issuance or sale of Common Stock
upon conversion or exchange of any Convertible
Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon
the issuance or sale of such Convertible Securities and
whether or not such Convertible Securities were
outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(v) upon any amendment to or change in the
terms of any rights or warrants to subscribe for or
purchase, or options for the purchase of, Common
Stock or Convertible Securities or in the terms of any
Convertible Securities, including, but not limited to, any
extension of any expiration date of any such right,
warrant or option, any change in any exercise or
purchase price provided for in any such right, warrant
or option, any extension of any date through which any
Convertible Securities are convertible into or
exchangeable for Common Stock or any change in the
rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock (other than
rights, warrants, options or Convertible Securities issued
or sold after the close of business on the date of the
original issuance of the Units (i) for which an
adjustment in the Purchase Price then in effect was
theretofore made or required to be made, upon the
issuance or sale thereof, or (ii) for which such an
adjustment would have been required had the exercise or
purchase price of such rights, warrants or options at the
time of the issuance or sale thereof or the rate of
conversion or exchange of such Convertible Securities,
at the time of the sale of such Convertible Securities, or
the issuance or sale of rights or warrants to subscribe for
or purchase, or options for the purchase of, such
Convertible Securities, been the price or rate as changed,
in which case the provisions of Section 9(f)(E) hereof
shall be applicable if, but only if, the exercise or
purchase price thereof, as changed, or the rate of
conversion or exchange thereof, as changed, consists
solely of cash or requires the payment of additional
consideration, if any, consisting solely of cash and the
Company did not receive any consideration other than
cash, if any, in connection with such change).
(h) As used in this Section 9, the term "Common Stock"
shall mean and include the Company's Common Stock
authorized on the date of the original issue of the Units and
shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon
the voluntary liquidation, dissolution or winding up of the
Company; provided, however, that the shares issuable upon
exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as
Common Stock on the date of the original issue of the Units,
or (i) in the case of any reclassification, change, consolidation,
merger, sale or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities or property provided
for in such section, or (ii) in the case of any reclassification or
change in the outstanding shares of Common Stock issuable
upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value, or from par
value to no par value, or from no par value to par value, such
shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in
the Purchase Price in effect hereunder is required pursuant to
Section 9, or as to the amount of any such adjustment, if
required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of
Directors of the Company.
(j) If and whenever the Company shall grant to the
holders of Common Stock, as such, rights or warrants to
subscribe for or to purchase, or any options for the purchase
of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to
purchase Common stock, the Company shall concurrently
therewith grant to each registered Holders of the Warrants all
of such rights, warrants or options to which each such holder
would have been entitled if, on the date of determination of
stockholders entitled to the rights granted by the Company,
such holder were the holder of record of the number of whole
shares of Common Stock then issuable upon exercise
(assuming, for purposes of this Section 9(j), that exercise of
Warrants is permissible during periods prior to the Initial
Warrant Exercise Date) of his Warrants. Such grant by the
Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to
this Section 9.
SECTION 10. Fractional Warrants and Fractional
Shares. (a) If the number of shares of Common Stock issuable
upon the exercise of each Warrant is adjusted pursuant to
Section 9 hereof the Company shall not be required to issue
fractions of shares upon exercise of the Warrants or otherwise,
or to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in
cash equal to such fraction multiplied by the current market
value of such fractional share, determined as follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or quoted on the NASDAQ
National Market System or Small Cap Market, the
current value shall be the last reported sale price of the
Common Stock on such exchange or NASDAQ on the
last business day prior to the date of exercise of this
Warrant or, if no such sale is made on such day, the
average closing bid and asked prices for such day on such
exchange or system; or
(2) If the Common Stock is not so listed or
admitted to unlisted trading privileges or quoted, the
current value shall be the mean of the last reported bid
and asked prices on NASDAQ or as reported by the
National Quotation Bureau, Inc. on the last business day
prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges or quoted, and
bid and asked prices are not so reported, the current
value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors
of the Company.
SECTION 11. Warrant Holders Not Deemed
Stockholders. No holder of Warrants shall, as such, be entitled
to vote or to receive dividends or be deemed the holder of
Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the
holder of Warrants, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock
to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such Holder shall have
exercised such Warrants and been issued shares of Common
Stock in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action
with respect to this Agreement are vested in the respective
Registered Holders of the Warrants, and any Registered Holder
of a Warrant, without consent of the Warrant Agent or of the
holder of any other Warrant, may, in his own behalf and for
his own benefit, enforce against the Company his right to
exercise his Warrants for the purchase of shares of Common
Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every
holder of a Warrant, by his acceptance thereof, consents and
agrees with the Company, the Warrant Agent and every other
holder of a Warrant that:
(a) The Warrants are transferable only on the registry
books of the Warrant Agent by the Registered Holder thereof
in person or by his attorney duly authorized in writing and
only if the Warrant Certificates representing such Warrants are
surrendered at the office of the Warrant Agent, duly endorsed
or accompanied by a proper instrument of transfer satisfactory
to the Warrant Agent and the Company in their sole
discretion, together with payment of any applicable transfer
taxes; and
(b) The Company and the Warrant Agent may deem
and treat the person in whose name the Warrant Certificate is
registered as the holder and as the absolute, true and lawful
owner of the Warrants represented thereby for all purposes,
and neither the Company nor the Warrant Agent shall be
affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If
the Company shall purchase or acquire any Warrant or
Warrants the Warrant Certificate or Warrant Certificates
evidencing the same shall thereupon be delivered to the
Warrant Agent and canceled by it and retired. The Warrant
Agent shall also cancel Common Stock following exercise of
any or all of the Warrants represented thereby or delivered to
it for transfer, split-up, combination or exchange.
SECTION 15. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant
Agent shall not, by issuing and delivering Warrant Certificates
or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the
Warrant Certificates or the Warrants represented thereby or of
any securities or other property delivered upon exercise of any
Warrant or whether any shares of stock issued upon exercise of
any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under
any duty or responsibility to any holder of Warrant
Certificates to make or cause to be made any adjustment of the
Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may
require any such adjustments, or with respect to the nature or
extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be
liable for any recital or statement of facts contained herein or
for any action taken, suffered or omitted by it in reliance on
any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties, (ii) be
responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in
this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement
except for its own negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with
counsel satisfactory to it (who may be counsel for the
Company) and shall incur no liability or responsibility for any
action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instruction, request,
direction, order or demand of the Company shall be
sufficiently evidenced by an instrument signed by the
Chairman of the Board, the President, any Vice President, the
Secretary, or any Assistant Secretary (unless other evidence in
respect thereof is herein specifically prescribed). The Warrant
Agent shall not be liable for any action taken, suffered or
omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it
to be genuine.
(e) The Company agrees to pay the Warrant Agent
reasonable compensation for its services hereunder and to
reimburse it for its reasonable expenses hereunder; it further
agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties
and powers hereunder except losses, expenses and liabilities
arising as a result of the Warrant Agent's negligence or willful
misconduct.
(f) In the event of a dispute under this Agreement
between the Company and Tuschner regarding proceeds
received by the Warrant Agent from the exercise of the
Warrants, the Warrant Agent shall have the right, but not the
obligation, to bring an interpleader action to resolve such
dispute.
(g) The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder
(except liabilities arising as a result of the Warrant Agent's own
negligence or willful misconduct), after giving 30 days' prior
written notice to the Company. At least 15 days prior to the
date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to
the Registered Holder of each Warrant Certificate at the
Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company
shall appoint a new warrant agent in writing. If the Company
shall fail to make such appointment within a period of 15 days
after it has been notified in writing of such resignation by the
resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any
new warrant agent, whether appointed by the Company or by
such a court, shall be a bank or trust company having a capital
and surplus, as shown by its last published report to its
stockholders, of not less than $10,000,000 or a stock transfer
company. After acceptance in writing of such appointment by
the new warrant agent is received by the Company, such new
warrant agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further
assurance, conveyance, act, or deed, the same shall be done at
the expense of the Company and shall be legally and validly
executed and delivered by the resigning Warrant Agent. Not
later than the effective date of any such appointment, the
Company shall file notice thereof with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Holder of each Warrant Certificate.
(h) Any corporation into which the Warrant Agent or
any new warrant agent may be converted or merged or any
corporation resulting from any consolidation to which the
Warrant Agent or any new warrant agent shall be a party or
any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement
without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent
under the provisions of the preceding paragraph. Any such
successor warrant agent shall promptly cause notice of its
succession a; warrant agent to be mailed to the Company and
to the Registers Holder of each Warrant Certificate.
(i) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hood or
sell Warrants or other securities of the Company and otherwise
deal with the Company in the same manner and to the same
extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other
legal entity.
SECTION 16. Modification of Agreement.
The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in
this Agreement (i) that they shall deem appropriate to cure any
ambiguity or to correct any defective or inconsistent provision
or manifest mistake or error herein contained or (ii) that they
may deem necessary or desirable and which shall not adversely
affect the interests of the Registered Holders of Warrant
Certificates; provided, however, that this Agreement shall not
otherwise be modified, supplemented or altered in any respect
except with the consent in writing of the Registered Holders of
Warrant Certificates representing not less than 50% of the
Warrants then outstanding, and provided, further, that no
change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or the Purchase Price
therefor, or the acceleration of the Warrant Expiration Date,
shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this
Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents
and other communications hereunder shall be in writing and
shall be deemed to have been made when personally served
against receipt or three days after being delivered or mailed first
class registered or certified mail, return receipt requested,
postage prepaid, as follows: if to the Registered Holder of a
Warrant Certificate, at the address of such holder as shown on
the registry books maintained by the Warrant Agent; if to the
Company, at 15 South Fifth Street, Suite 715, Minneapolis,
MN 55402, attention: President, or at such other address as
may have been furnished to the Warrant Agent in writing by
the Company; and if to the Warrant Agent, at its Corporate
Office; if to Tuschner, at One Financial Plaza, Suite 800, 120
South Sixth Street, Minneapolis, MN 55402, Attention:
President.
SECTION 18. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Minnesota, without reference to principles of conflict
of laws.
SECTION 19. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the
Warrant Agent, and their respective successors and assigns, and
the holders from time to time of Warrant Certificates. Nothing
in this Agreement is intended or shall be construed to confer
upon any other person any right, remedy or claim, in equity or
at law, or to impose upon any other person any duty, liability
or obligation.
SECTION 20. Termination. This Agreement shall
terminate at the close of business on the Expiration Date of all
the Warrants of such earlier date upon which all Warrants have
been exercises, except that the Warrant Agent shall account to
the Company for cash held by it and the provisions of Section
15 hereof shall survive such termination.
SECTION 21. Counterparts. This Agreement may be
executed in several counterparts, which taken together shall
constitute a single document.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the date first
above written.
ILLUMINATED MEDIA,
INC.
By
__________________________
President
TUSCHNER &
COMPANY, INC.
By
___________________________
President
NORWEST BANK
MINNESOTA, N.A.
By
_____________________________
____________________________
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
VOID AFTER _______________, ________
STOCK PURCHASE WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK OF
ILLUMINATED MEDIA, INC.
This certifies that FOR VALUE RECEIVED,
___________________________ or registered assigns (the
"Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants ("Warrants")
specified above. Each Warrant initially entitles the Registered
Holder to purchase, subject to the terms and conditions set
forth in this Certificate and the Warrant Agreement (as
hereinafter defined), two fully paid and nonassessable share of
Common Stock, no par value, of Illuminated Media, Inc., a
Minnesota corporation (the "Company"), at any time between
_____________, 199_ and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof
duly executed, at the corporate office of Norwest Bank
Minnesota, N.A. as warrant agent, or its successor (the
"Warrant Agent"), accompanied by payment of $2.75 per share
(the "Purchase Price") in lawful money of the united States of
America in cash or by official bank or certified check made
payable to the Company.
This Warrant Certificate and each Warrant represented
hereby are issued pursuant to and are subject in all respects to
the terms and conditions set forth in the Warrant Agreement
dated ___________, 199__ (the "Warrant Agreement"), by and
among the Company, the Warrant Agent, and Tuschner and
Company., Inc.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price or the number of
shares of Common Stock subject to purchase upon the exercise
of each Warrant represented hereby, and the Redemption Price
are subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the
option of the Registered Holder, but no fractional shares of
Common Stock will be issued. In the case of the exercise of less
than all the Warrants represented hereby, the Company shall
cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall
countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M.,
Minneapolis time on _________, ______, or such earlier date
on which the Warrants shall be redeemed. If such date shall in
the State of Minnesota be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall
mean 5:00 P.M., Minneapolis time, the next following day
which in the State of Minnesota is not a holiday or a day on
which banks are authorized to close.
The Company shall not be obligated to deliver any
securities pursuant to the exercise of this Warrant unless a
registration statement under the Securities Act of 1933, as
amended, with respect to such securities is effective. The
Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the
same to become effective and to keep such registration
statement current while any of the Warrants are outstanding.
This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the
surrender hereof by the Registered Holder at the corporate
office of the Warrant Agent, for a new Warrant Certificate or
Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant
certificates to represent such number of Warrants as shall be
designated by such Registered Holder at the time of such
surrender. Upon due presentment with any tax or other
governmental charge imposed in connection therewith for
registration of transfer of this Warrant Certificate at such
office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants will be
issued to the transferee in exchange therefor, subject to the
limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby,
the Registered Holder shall not be entitled to any rights of a
shareholder of the Company, including, without limitation,
the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the
Warrant Agreement.
This Warrant may be redeemed at the option of the
Company, at a redemption price of $0.10 per Warrant at any
time after _____ _, 199_, provided that the market price (as
defined in the Warrant Agreement) for the securities issuable
upon exercise of such Warrant shall exceed 120% of the
Purchase Price. Notice of redemption shall be given not later
than the 30th day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date
fixed for redemption, the Registered Holder shall have no
rights with respect to this Warrant except to receive the $0.01
per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer
hereof, the Company and the Warrant Agent may deem and
treat the Registered Holder as the absolute owner hereof and of
each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the
Warrant Agent) for all purposes and shall not be affected by
any notice to the contrary.
This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of
Minnesota.
This Warrant Certificate is not valid unless
countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused
this Warrant Certificate to be duly executed, manually or in
facsimile by two of its officers thereunto duly authorized and a
facsimile of its corporate seal to be imprinted hereon.
SIGNATURES
[Corporate Seal]
To be Executed by the Registered Holder in Order to Exercise
Warrants
The undersigned Registered Holder hereby irrevocably
elects to exercise Warrants represented by this Warrant
Certificate, and to purchase the securities is issuable upon the
exercise of such Warrants, and requests that certificates for such
securities shall be issued in the name of
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER]
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
[please print or type name and address]
and be delivered to
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the warrants
evidenced by this Warrant Certificate, that a new Warrant
Certificate for the balance of such Warrants be registered in the
name of and delivered to the Registered Holder at the address
stated below.
The undersigned represents that the exercise of the
within Warrant was solicited by a member of the National
Association of Securities Dealers, Inc. If not solicited by an
NASD member, please write "unsolicited" in the space below.
Unless otherwise indicated, by listing the name of another
NASD member firm, it will be assumed that the exercise was
solicited by Tuschner & Co., Inc.
Dated: _____________________ __________________________________
Name of NASD Member, if other
than Tuschner & Co., Inc.
__________________________________
Signature of Registered Holder
__________________________________
__________________________________
Address
__________________________________
Taxpayer Identification Number
__________________________________
Signature Guaranteed
THE SIGNATURE ON THE ASSIGNMENT OR THE
SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS
WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST
COMPANY OR A MEMBER FIRM OF THE
MINNESOTA STOCK EXCHANGE, AMERICAN STOCK
EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
EXHIBIT 4.3
NEITHER THIS DEBENTURE NOR THE UNDERLYING COMMON
SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS
DEBENTURE UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH NOTE OR SHARES UNDER
THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR
ITS AGENTS, STATING THAT IN THE OPINION OF THE
ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii)
THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933.
ILLUMINATED MEDIA INC.
a Minnesota corporation
10% SUBORDINATED
DEBENTURE DUE , 1996
Section 1. Terms. Skyway Advertising, Inc., a Minnesota corporation
("Corporation"), which term includes any successor corporation, for value
received, hereby promises to pay to ("Holder"), or Holder's
assigns, the principal sum of dollars ($
) on , 1996, together with interest on the outstanding principal
amount at the rate of 10% per annum.
Section 2. Payments. Payments of principal and interest shall be made
in lawful money of the United States of America to Holder at the address
provided to the Corporation by the Holder, as appears on this instrument
below or at such other addresses as sent by Holder to the Corporation by
registered US mail at least twenty (20) days before said payment date.
Section 3. Default. The occurrence of one or more of the following
events shall constitute an event of default:
3.1 Continued nonpayment of the interest due on this debenture for more
than thirty (30) days beyond the payment date when due.
3.2 The nonpayment of the principal of this debenture when the same
shall have become due and payable.
3.3 The entry of a decree or order by a court having jurisdiction in the
premises adjudging the Corporation a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of or in respect of the Corporation under the
federal Bankruptcy Act or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, or trustee of the Corporation, or
any substantial part if its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of sixty (60) consecutive days.
3.4 The institution by the Corporation of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under the federal
Bankruptcy Act or any other applicable federal or state law, or the consent
by it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, or trustee of the Corporation, or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the
Corporation in furtherance of any such action.
3.5 Default in the obligation of the Corporation for borrowed money,
other than this debenture, which shall continue for a period of thirty (30)
days.
Section 4. Acceleration. At the option of the Holder, and without
demand or notice, all principal and any unpaid interest shall become
immediately due and payable upon a default as set forth in Section 3
above.
Section 5. Subordination.
5.1 The rights of the Holder under the terms of this debenture shall be
subordinated to:
5.1.1 the principal of, premium, if any, and accrued and unpaid interest
(whether accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Corporation) on (i) any secured indebtedness
of the Corporation for money borrowed, whether outstanding on the date
of execution of this debenture or thereafter created, incurred or assumed,
(ii) guarantees by the Corporation of any secured indebtedness for money
borrowed by any other person, whether outstanding on the date of
execution of this debenture or thereafter created, incurred or assumed, (iii)
any secured indebtedness evidenced by notes, debentures, bonds or other
instruments of indebtedness for the payment of which the Corporation is
responsible or liable, by guarantees or otherwise, whether outstanding on
the date of execution of this debenture or thereafter created, incurred or
assumed, (iv) obligations of the Corporation under any agreement to lease,
or lease of, any real or personal property, whether outstanding on the date
of execution of this debenture or thereafter created, incurred or assumed,
5.1.2 any other secured indebtedness, liability, or obligation,
contingent or otherwise, of the Corporation and any guarantee,
endorsement, or other contingent obligation in respect thereof, whether
outstanding on the date of execution of this debenture or thereafter created,
incurred or assumed, and
5.1.3 modifications, renewals, extensions, and refundings of any such
indebtedness, liabilities, or obligations; unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such indebtedness, liabilities, or obligations or such
modification, renewal, extension, or refunding thereof, or the obligations
of the Corporation pursuant to such a guarantee, are not superior in right of
payment to the debentures.
5.2 In the event that the assets of the Corporation are insufficient to
satisfy this debenture and all other debentures issued contemporaneously
by the Corporation, the available assets of the Corporation shall be
distributed pro rata to all such Holders based on the total principal and
interest then due to each such Holder.
5.3 The rights of the Holder, under the terms of this debenture shall be
superior to any obligation due any holder of the common shares of the
Corporation arising solely out of the fact that such person is an owner of
the common shares of the Corporation.
Section 6. Restrictions on Transfer. This debenture has not been
registered under the Securities Act of 1933. This debenture, or any right
hereunder, may not be enforced against the Corporation by any Holder,
except the original Holder herein, (i) unless there is an effective
registration covering such note or underlying right under the Securities
Act of 1933 and applicable state securities laws, (ii) unless the
Corporation receives an opinion of an attorney, licensed to practice within
the United States, that the transfer of the debenture, or any underlying
right, complies with the requirements of the Securities Act of 1933 and
any relevant state securities law, or (iii) unless the transfer is made
pursuant to Rule 144 under the Securities Act of 1933.
Section 7. Notices. All notices and other communications required or
permitted under this debenture shall be validly given, made, or served if in
writing and delivered personally or sent by registered mail, to the
Corporation at the following address:
Skyway Advertising, Inc.
Suite 715
15 South 5th Street
Minneapolis, Minnesota 55402
All notices and other communications required or permitted under this
debenture shall be validly given, made or served if in writing and
delivered personally or sent by registered mail, to the Holder at the
following address:
___________________
___________________
___________________
Section 8. Pronouns. Any masculine personal pronoun shall be
considered to mean the corresponding feminine or neuter personal
pronoun, as the context requires.
Section 9. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, United
States of America.
Section 10. Titles and Captions. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part
of the context nor effect the interpretation of this Agreement.
Section 11. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which
the designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin
to run on the next day which is not a Saturday, Sunday, or legal holiday, in
which event the period shall run until the end of the next day thereafter
which is not a Saturday, Sunday, or legal holiday.
Section 12. Presumption. This Agreement or any section thereof shall
not be construed against any party due to the fact that said Agreement or
any section thereof was drafted by said party.
Section 13. Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such
action as may be necessary or appropriate to achieve the purposes of the
Agreement.
Section 14. Parties in Interest. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
Section 15. Attorney Fees. If suit or action is instituted in connection
with any controversy arising out of this debenture, or in the enforcement
of any rights hereunder, the prevailing party shall be entitled to recover in
addition to costs such sums as the court may adjudge as reasonable
attorney fees, including attorney fees of any appeal.
IN WITNESS WHEREOF, Robert H. Blank, as Chairman of Illuminated
Media Inc., has executed this debenture to be effective as of the ____ day
of _______________, 19__.
Illuminated Media Inc..
a Minnesota corporation
by:_______________________________
Robert H. Blank, Chairman and CEO
EXHIBIT 4.4
VOID AFTER 5:00 P.M. CENTRAL STANDARD TIME, ON
NOVEMBER 10, 1998.
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
COMPANY WILL NOT TRANSFER THIS WARRANT OR THE
WARRANT STOCK UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION COVERING SUCH WARRANT OR SUCH
WARRANT STOCK, AS THE CASE MAY BE, UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATES
SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR
ITS AGENTS, STATING THAT IN THE OPINION OF THE
ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii)
THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933.
ILLUMINATED MEDIA INC.
(a Minnesota corporation)
Warrant for the Purchase of 7,000 Shares
of Common Stock
par value $.01 per share
FOR VALUE RECEIVED, Illuminated Media Inc. (the "Company"), a
Minnesota corporation, hereby certifies that ("Holder"), is
entitled, subject to the provisions of this Warrant, to purchase from the
Company at any time, or from time to time during the period commencing
on the date hereof and expiring at 5:00 p.m. Central Standard Time, on
November 10, 1998 ("Expiration Date"), up to fully
paid and non-assessable shares of Common Stock at a per share price of
one-half of the per share offering price of the common stock issued in the
initial public offering of the Common Stock of the Company to take place
on or after December 31, 1995, or at times prior to such offering but after
January 31, 1996, at $.50 (the "Exercise Price").
The term "Common Stock" means the Common Stock, par value $.01 per
share, of the Company as constituted on September 10, 1996 (the "Base
Date"), together with any other equity securities that may be issued by the
Company in respect thereof or in substitution therefor. The number of
shares of Common Stock to be received upon the exercise of this Warrant
may be adjusted from time to time as hereinafter set forth. The shares of
Common Stock deliverable or delivered upon such exercise, as adjusted
from time to time, are hereinafter referred to as "Warrant Stock."
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant certificate, and (in
the case of loss, theft or destruction) of satisfactory indemnification, and
upon surrender and cancellation of this Warrant certificate, if mutilated,
the Company shall execute and deliver a new Warrant certificate of like
tenor and date.
Section 1. Exercise of Warrant. This Warrant may be exercised,
subject to the requirements set forth below, in whole, or in part, at any
time during the period commencing on the date hereof and expiring at
5:00 p.m. Central Standard Time on the Expiration Date set forth above,
or, if such day is a day on which banking institutions in Minneapolis,
Minnesota are authorized by law to close, then on the next succeeding day
that shall not be such a day, by presentation and surrender of this Warrant
certificate to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Warrant Exercise Form attached
hereto duly executed and accompanied by payment (either in cash or by
certified or official bank check, payable to the order of the Company) of
the aggregate Exercise Price for the number of shares specified in such
form and instruments of transfer, if appropriate, duly executed by the
Holder. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant certificate for cancellation, execute
and deliver a new Warrant certificate evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder. Upon
receipt by the Company of this Warrant certificate, together with the
Exercise Price, at its office, or by the stock transfer agent of the Company
at its office, if any, in proper form for exercise as described above,
together with an agreement to comply with the restrictions on transfer and
related covenants contained herein and a representation as to investment
intent and any other matter required by counsel to the Company, signed by
the Holder (and if other than the original Holder accompanied by proof,
satisfactory to counsel for the Company, of the right of such person or
persons to exercise the Warrant), the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, even if the stock transfer books of the Company shall then be
closed or certificates representing such shares of Common Stock shall not
have been delivered to the Holder. The Holder shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on exercise of this
Warrant. The Company shall promptly thereafter issue certificate(s)
evidencing the Common Stock so purchased.
Section 2. Reservation of Shares. The Company shall at all times
reserve for issuance and delivery upon exercise of this Warrant all shares
of Common Stock or other shares of capital stock of the Company (and
other securities) from time to time receivable upon exercise of this
Warrant. All such shares (and other securities) shall be duly authorized
and, when issued upon exercise, shall be validly issued, fully paid and
non-assessable.
Section 3. No Fractional Shares. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant, but the Company shall pay the Holder an amount equal to the fair
market value of such fractional share of Common Stock in lieu of each
fraction of a share otherwise called for upon any exercise of this Warrant.
For purposes of this Warrant, the fair market value of a share of Common
Stock shall equal the closing sale price (or if not available the average of
the closing bid and asked prices) on the business day prior to exercise of
this Warrant, or, if the Common Stock is then not publicly traded, then the
price determined in good faith by the Board of Directors of the Company.
Section 4. Transfer.
4.1 Securities Laws. Neither this Warrant nor the Warrant Stock have
been registered under the Securities Act of 1933. The Company will not
transfer this Warrant or the Warrant Stock unless (i) there is an effective
registration covering such Warrant or such shares, as the case may be,
under the Securities Act of 1933 and applicable states securities laws, (ii)
it first receives a letter from an attorney, acceptable to the Company's
board of directors or its agents, stating that in the opinion of the attorney
the proposed transfer is exempt from registration under the Securities Act
of 1933 and under all applicable state securities laws, or (iii) the transfer is
made pursuant to Rule 144 under the Securities Act of 1933.
4.2 Conditions to Transfer. Prior to any such proposed transfer, and as
a condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if
requested by the Company, deliver to the Company (i) an investment
covenant signed by the proposed transferee, (ii) an agreement by such
transferee that the restrictive investment legend set forth above be placed
on the certificate or certificates representing the securities acquired by
such transferee, (iii) an agreement by such transferee that the Company
may place a "stop transfer order" with its transfer agent or registrar, and
(iv) an agreement by the transferee to indemnify the Company to the same
extent as set forth in the next succeeding paragraph.
4.3 Indemnity. The Holder acknowledges that the Holder understands
the meaning and legal consequences of this Section, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives
and each officer and director thereof from and against any and all loss,
damage or liability (including all attorneys' fees and costs incurred in
enforcing this indemnity provision) due to or arising out of (a) the
inaccuracy of any representation or the breach of any warranty of the
Holder contained in, or any other breach of, this Warrant, (b) any transfer
of any of this Warrant or the Warrant Stock in violation of the Securities
Act, the Securities Exchange Act of 1934, as amended, or the rules and
regulations promulgated under either of such acts, (c) any transfer of this
Warrant or any of the Warrant Stock not in accordance with this Warrant
or (d) any untrue statement or omission to state any material fact in
connection with the investment representations or with respect to the facts
and representations supplied by the Holder to counsel to the Company
upon which its opinion as to a proposed transfer shall have been based.
4.4 Holdback Period and Transfer. Except as specifically restricted
hereby, this Warrant and the Warrant Stock issued may be transferred by
the Holder in whole or in part at any time or from time to time. In the
event that the Company publicly offers shares of its Common Stock, the
Warrant Stock may not be sold from the date of the Company's initial
public offering of securities for a period ending six months after the
conclusion of such initial public offering. Upon surrender of this Warrant
certificate to the Company or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new
Warrant certificate in the name of the assignee named in such instrument
of assignment, and this Warrant certificate shall promptly be canceled.
Any assignment, transfer, pledge, hypothecation or other disposition of
this Warrant attempted contrary to the provisions of this Warrant, or any
levy of execution, attachment or other process attempted upon this
Warrant, shall be null and void and without effect.
Section 4.5. Transfer to Trust. Notwithstanding the foregoing, the
Holder shall be entitled to transfer the entire Warrant, on or prior to
February 28, 1996, to a Trust, the beneficiaries of which are descendants
of the Holder, which Trust shall succeed to all rights and related
obligations of the Holder under this Warrant, and shall thereafter be
considered the Holder for all purposes hereof.
Section 5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at
law or in equity, and the rights of the Holder are limited to those expressed
in this Warrant.
Section 6. Anti-Dilution Provisions.
6.1 Stock Splits, Dividends, Etc.
6.1.1 If the Company shall at any time subdivide its outstanding
shares of Common Stock (or other securities at the time receivable upon
the exercise of the Warrant) by recapitalization, reclassification or split-up
thereof, or if the Company shall declare a stock dividend or distribute
shares of Common Stock to its stockholders, the number of shares of
Common Stock subject to this Warrant immediately prior to such
subdivision shall be proportionately increased, and if the Company shall at
any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination thereof, the number of
shares of Common Stock subject to this Warrant immediately prior to such
combination shall be proportionately decreased. Any such adjustment and
adjustment to the Exercise Price pursuant to this Section shall be effective
at the close of business on the effective date of such subdivision or
combination or if any adjustment is the result of a stock dividend or
distribution then the effective date for such adjustment based thereon shall
be the record date therefor.
6.1.2 Whenever the number of shares of Common Stock
purchasable upon the exercise of this Warrant is adjusted, as provided in
this Section, the Exercise Price shall be adjusted to the nearest cent by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of
Common Stock purchasable upon the exercise immediately prior to such
adjustment, and (y) the denominator of which shall be the number of
shares of Common Stock so purchasable immediately thereafter.
6.2 Adjustment for Reorganization, Consolidation, Merger, Etc. In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this
Warrant) after the Base Date or in case after such date the Company (or
any such other corporation) shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Holder of this Warrant upon
the exercise as provided in Section 1 at any time after the consummation
of such reorganization, consolidation, merger or conveyance, shall be
entitled to receive,d in lieu of the securities and property receivable upon
the exercise of this Warrant prior to such consummation, the securities or
property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately
prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property received upon the exercise of this
Warrant after such consummation.
6.3 Certificate as to Adjustments. In each case of an adjustment in the
number of shares of Common Stock receivable on the exercise of this
Warrant, the Company at its expense shall promptly compute such
adjustment in accordance with the terms of the Warrant and prepare a
certificate executed by an officer of the Company setting forth such
adjustment and showing the facts upon which such adjustment is based.
The Company shall forthwith mail a copy of each such certificate to each
Holder.
6.4 Notices of Record Date, Etc. In case:
6.4.1 the Company shall take a record of the holders of its
Common Stock (or other securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to receive any
dividend (other than a cash dividend at the same rate as the rate of the last
cash dividend theretofore paid) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities, or to receive any other right; or
6.4.2 of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company
shall mail or cause to be mailed to each Holder a notice specifying, as the
case may be, (A) the date on which a record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (B) the date on which
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any,
to be fixed, as to which the holders of record of Common Stock (or such
other securities at the time receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
twenty (20) days prior to the date therein specified, and this Warrant may
be exercised prior to said date during the term of the Warrant.
Section 7. Legend and Stop Transfer Orders. Unless the shares of
Warrant Stock have been registered under the Securities Act, upon
exercise of any of this Warrant and the issuance of any of the shares of
Warrant Stock, the Company shall instruct its transfer agent, if any, to
enter stop transfer orders with respect to such shares, and all certificates
representing shares of Warrant Stock shall bear on the face thereof
substantially the following legend, insofar as is consistent with Minnesota
law:
This certificate has not been registered under the Securities
Act of 1933. The Company will not transfer this certificate
unless (i) there is an effective registration covering the
shares represented by this certificate under the Securities
Act of 1933 and all applicable state securities laws, (ii) it
first receives a letter from an attorney, acceptable to the
board of directors or its agents, stating that in the opinion of
the attorney the proposed transfer is exempt from
registration under the Securities Act of 1933 and under all
applicable state securities laws, (iii) the transfer is made
pursuant to Rule 144 under the Securities Act of 1933.
Section 8. Registration. Upon demand of holders of a majority of the
Warrants (or Warrant Stock issued upon the exercise thereof) issued as
part of this Warrant, at any time after six months after the closing of an
initial public offering of the Company's securities registered under the
Securities Act of 1933, as amended, the Company shall, on one occasion,
register for sale under such Act the Warrants and Warrant Stock. The
Company shall use reasonable efforts to keep such registration effective
for twelve months.
Section 9. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Warrant or the Exercise Price
shall be adjusted as required by the provisions hereof, the Company shall
forthwith file with its Secretary or Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon
exercise of this Warrant and the adjusted Exercise Price determined as
herein provided and setting forth in reasonable detail such facts as shall be
necessary to show the reason for and the manner of computing such
adjustments. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall,
forthwith after each such adjustment, mail by certified mail a copy of such
certificate to the Holder.
Section 10. Notice. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt, if to
the Holder, at his address as shown on the books of the Company, and if to
the Company, at its principal office, Suite 715, 15 South 5th Street,
Minneapolis, Minnesota 55402. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given
at the time of receipt thereof.
Section 11. Binding Effect. The provisions of this Warrant shall be
binding upon and inure to the benefit of (1) the parties hereto, (2) the
successors and assigns of the Company, (3) if the Holder is a corporation,
partnership, or other business entity, the successors and assignee of the
Holder, and (4) if the Holder is a natural person, the assignees, heirs, and
personal representative of the Holder.
Section 12. Pronouns. Any masculine personal pronoun shall be
considered to mean the corresponding feminine or neuter personal
pronoun, as the context requires.
Date:
ILLUMINATED MEDIA INC.
by:
Its:
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing shares of Common Stock of Illuminated
Media Inc. and hereby makes payment of $ in payment
therefor.
Date:
Signature:
EXHIBIT 4.5
EXTENSION AGREEMENT
This agreement is made this ___ day of January 1997 by and between Sona
Plummer ("Lender " or "Holder") and Illuminated Media Inc. (fka Skyway
Advertising, Inc.) ("Skyway " or "Corporation").
Whereas, the parties hereto are parties to the following agreement due January
10. 1997, 1997.
1) $30,000.00 Subordinated Debenture
and;
Whereas, the parties wish to extend the due date of the Debenture referenced
above: and
Whereas, both parties hereto have acknowledged the receipt of good and valuable
consideration for the covenants, promises, performances and obligations
undertaken, or to be undertaken in fulfillment of this Agreement;
NOW, THEREFORE, IT IS HEREBY AGREED:
1) All prior agreements between the parties, including, but not limited to the
above referenced Debenture, are incorporated herein by reference.
2) The term of the Debenture referenced above shall be extended to February 28,
1997
3) Illuminated Media Inc shall file a Registration Statement and commence an
Initial Public Offering of its Common Stock as soon as is reasonably
practicable after the end of its fiscal year on February 29, 1996.
4) To the extent any previous agreement of the parties hereto, including, but
not limited to those agreements referenced above, are inconsistent with the
terms of this agreement, all such prior agreements are superseded by the
terms hereof to the extent of any such inconsistency.
Dated: January ___, 1997 Illuminated Media Inc
________________________ By:_______________________
EXHIBIT 10.1
STOCK REDEMPTION AGREEMENT
THIS AGREEMENT is made this 18th day of November, 1995, by and between
LEASE COMPANIES (hereinafter "Lease Companies"), MICHAEL W. LEASE, MARK W.
LEASE and SKYWAY ADVERTISING, INC. (hereinafter "Skyway").
RECITALS
WHEREAS, Lease Companies is a Minnesota partnership with offices at 19
East Depot Street, Litchfield, Minnesota 55355 whose business is to provide
management services to various business entities; and
WHEREAS, Lease Companies has two (2) general partners, Michael W. Lease
and Mark W. Lease; and
WHEREAS, Lease Companies has provided management related functions for
the benefit of and under contract to Skyway and is owed fees for management
services performed; and
WHEREAS, Lease Companies has extended credit to Skyway in the
cumulative amount of Sixteen Thousand and no/lOO Dollars ($16,000.00); and
WHEREAS, Michael W. Lease and Mark W. Lease are majority shareholders
of Skyway, holding 220,000 shares of Skyway stock respectively; and
WHEREAS, Skyway desires to retire the respective shares now owned by
Michael W. Lease and Mark W. Lease, who are mutually desirous of such an
arrangement, and to retire obligations owed to Lease Companies, subject to
the terms and conditions set forth" below;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein, and for good and valuable consideration, the
amount of which is established below, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Skyway Financial Obligation to Lease Companies. Skyway agrees to pay Lease
Companies the sum of One Hundred Nine Thousand Three Hundred and no/lOO
Dollars ($109,300.00) which sum represents the following:
a. Management Fees. Accrued management fees are owed to Lease
Companies in the sum of Ninety-three Thousand Three Hundred and no/lOO
Dollars ($93,300.00);
b. Retirement of Debt to Lease Companies. An additional Sixteen
Thousand and no/lOO Dollars ($16,000.00) owed to Lease Companies, by reason
of two loans, the first of which was entered into on the 19th day of
September, 1995, in the amount of $6,000.00, as evidenced by promissory
note of said date and the second loan which was entered into on the 22nd
day of September, 1995, in the amount of $10,000.00, as evidenced by
promissory note of said date.
2. Skyway Financial Obligation to Mark W. Lease and Michael W. Lease. In
addition to payment to Lease Companies, Skyway agrees to pay Mark W. Lease
the sum of Eighty-eight Thousand and no/lOO Dollars ($8&, 000.00) and further
agrees to pay Michael W. Lease the sum of
Eighty-eight Thousand and no/lOO Dollars ($88,000.00), in exchange for
retirement and redemption of the 220,000 respective shares of stock held
by each.
3. Terms of Payment.
a. Down Payment. At the time of closing, Skyway Advertising shall
deliver two certified bank checks, one payable to Lease Companies in the
amount of Sixteen Thousand and no/lOO Dollars ($16,000.00), which sum shall
represent the retirement of the $16,000.00 debt, referenced at paragraph 1(b)
above, due and owing to Lease Companies, and the second, payable to Mark W.
Lease and Michael W. Lease in the amount of Eighty-four Thousand and no/lOO
Dollars ($84,000.00) which sum shall be applied toward the retirement of
105,000 shares of stock held by Mark W. Lease, retired at per share, as
well as 105,000 shares of stock held by Michael W. Lease, retired $0.40
per share.
b. Promissory Note. Lease Companies, Mark W. Lease and Michael W.
Lease, shall finance the remaining balance of the purchase price of One
Hundred Eighty-five Thousand Three Hundred and no/lOO Dollars ($185,300.00)
in accordance with the terms and conditions of the two (2) Promissory Notes
executed simultaneously herewith. Any breach under this Agreement and
obligations herein shall be deemed a default under the Promissory Notes.
This remedy is cumulative of all other remedies provided by law or in
equity.
4. Security Agreements. Skyway's obligations hereunder are in addition to
those within the Security Agreements executed simultaneously hereto.
5. Miscellaneous.
a. Option to convert. Lease Companies, Mark W. Lease and Michael W.
Lease shall each have the unqualified option, anytime prior to December 1, 1997,
to purchase Skyway shares,in lieu of current and/or future payments due to each
pursuant to and in accordance with therespective Promissory Notes executed this
date.
Any election to convert current and/or future payments into stock
shall be made in writing and delivered to Skyway at its corporate address.
The purchase price option to elect for said election is hereby established
by the parties at $0.40 per share. This option is strictly limited to
that number of shares which can be purchased by the parties at the purchase
price, based upon the remaining principal balance of the parties' respective
Promissory Note.
b. Law Governing. The parties agree that this agreement has been
entered into pursuant to the laws of Minnesota, and that Minnesota law sha11
govern any future interpretation issues, disputes of any nature or questions
of law.
c. Venue. This contract has been negotiated in, and the transaction
closed, at Meeker County, Minnesota. The parties agree that for purposes of
any subsequent dispute, venue shall be vested and lie solely in Meeker County
District Court.
d. Parol Evidence. This agreement, coupled with the Promissory
Note, Security Agreement, Personal Guaranty and UCC-1, constitutes a full,
final and integrated expression of the parties agreement. Any prior or
contemporaneous oral negotiations not expressed herein are of no
effect.
e. Opportunity to Seek Advice of Legal Counsel and Accountants. The
parties hereby agree that each party had ample opportunity to discuss this
agreement with legal counsel; have satisfied themselves that said agreement
is in their best interests; have sought advice from their
accountants as to
all potential tax ramifications necessitated or triggered by this agreement.
This agreement is executed this 28th day of November, 1995.
SKYWAY ADVERTISING INC.
By:/s/ Robert H. Blank
Subscribed and sworn to before me DAVID G. BERRY
this 28th day of November, 1995
/s/ David G. Berry
Notary Public
LEASE COMPANIES
By:/s/ Mark W. Lease
Its: Partner
Subscribed and sworn to before me
this 28th day of November 1995. DAVID G. BERRY
NOTARY PUBLIC MINNESOTA
/s/ David G. Berry My comm. Exp.Jan.21.2000
Notary Public
Michael W. Lease
subscribed and sworn to before me
this 28th day of November, 1995. DAVID G. BERRY
NOTARY PUBLIC MINNESOTA
My Comm. EXP. Jan. 31, 2000
/s/ David G. Berry
Notary Public
Mark W. Lease
Subscribed and sworn to before me
this 28th day of November, 1995. DAVID G. BERRY
NOTARY PUBLIC MINNESOTA
/s/ David G. Berry My Comm. Exp. Jan. 31, 2000
Notary Public
PROMISSORY NOTE
MICHAEL W. LEASE
$ 46,000.00
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the order of Michael W. Lease, ("Michael W. Lease"), at 19 East Depot Street,
Litchfield, Minnesota 55355, or at such other address as the holder hereof
advises in writing from time to time, the principal sum of Forty-six Thousand
and no/lOO Dollars ($46,000.00) together with interest thereon,
as hereinafter described.
The principal of this Note from day to day unpaid shall bear interest
at a rate of eleven percent (11%) per annum and such interest shall be
computed on the basis of a year of 365 or 366 days, as the case may be,
and on actual days elapsed. Interest sahll commence on December l, 1995.
The principal and interest of this Note shall be payable in 84 equal
monthly installments, commencing April 1, 1996, and continuing on the 1st day
of each month thereafter until this Note is paid in full; provided however,
that the first three (3) installments will be interest only payments.
Any payments of principal and interest due hereunder which are not
paid when due, and other amounts which may be owed by Maker hereunder,
including without limitation attorney's fees, shall bear interest at the
highest lawful rate and, if no highest lawful rate is established by law, at
the rate of eighteen percent (18%) per annum. The provisions of this
paragraph shall not be construed as waiving the right of the holder hereof
to punctual payment of principal or interest, or any part thereof, when due
hereunder.
Maker may prepay all or any part of the principal or accrued interest
at any time and from time to time, without premium or penalty, by providing
Michael W. Lease with fifteen (15) days written notice of his intention to
prepay; provided nonetheless, that Maker's right to prepay remains subject
to Michael Lease's unqualified -option to convert balance due under this
Promissory Note into Skyway shares as established in accordance with
provision 5(a) of that Stock Redemption Agreement, executed simultaneous
herewith, such that Maker is precluded from obviating or attempting to
obviate Lease's right to convert loan balance into Skyway shares by making
prepayment, whether partial or full. All partial prepayments shall be
applied first to accrued and unpaid interest and then to principal
in the inverse order of maturity.
The holder hereof may declare the entire unpaid principal of and
accrued interest on this Note immediately due and payable, foreclose any
liens or security interests securing all or any part hereof, offset against
this Note any sum or sums owed by the" holder hereof to Maker, or
exercise any other right of remedy to which the holder hereof may be entitled by
agreement, at law, or in equity, if (a) Maker fails or refuses to pay any part
of the principal or accrued interest when due, (b) a default should occur under
this Note or under any agreement, document, instrument securing or assuring
payment of any part hereof or executed in connection herewith, or (c) Maker
shall become insolvent, voluntarily or involuntarily be made the subject of
any proceeding provided for by any bankruptcy or similar debtor relief laws.
Each right and remedy available to the holder hereof shall be cumulative of
and in addition to each other such right and remedy. No delay on the part
of the holder hereof in the exercise of any right or remedy available to the
holder hereof shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or remedy preclude other or further
exercise thereof or exercise of any other such right or remedy.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceedings, Maker agrees to pay all
court costs, reasonable attorneys' fees and other costs of collection of the
holder hereof.
Any provision herein, or in any document or agreement securing this
Note or in any other document executed in connection herewith, or in any
other agreement or commitment, whether written or oral, express or implied,
to the contrary notwithstanding, no holder hereof shall in any
event be entitled to receive or collect, nor shall or may amounts
received hereunder be credited so that any holder hereof shall be paid
as interest a sum greater than the maximum amount
permitted by applicable law to be charged to the person, firm, or
corporation primarily obligated to pay this Note at the time in
question. If any construction of this Note, any document or
agreement securing this Note, 6r in any and all other papers,
agreements, or commitments' indicated a different right
given to holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that
this Note and all other instruments securing the payments of this Note
shall in allthings comply with applicable law, and proper adjustment
shall automatically be made accordingly. In the event any holder
hereof ever receives, collects, or applies as interest any sum in
excess of the maximum legal rate, such excess amount shall be applied
to the reduction of the unpaid principal balance of this Note in the
inverse order of maturity, and if this Note is paid in full, any
remaining excess shall be paid to Maker. In determining whether
or not the interest paid or payable under any specific contingency
exceeds the highest lawful rate, Maker and holder hereof shall, to the
maximum extent permitted under applicable law, (a) characterize any
nonprincipal payment as an expense, fee, or premium rather than as
interest, (b) exclude voluntary prepayments and the effects thereof,
and (c) "spread" the total amount of interest throughout the entire
term of this Note so that the interest rate is uniform throughout
the entire term of this Note; provided that, if this Note is paid and performed
in full prior to the end of the full contemplated term hereof, and if the
interest received for the actual period of existence hereof exceeds the
maximum lawful rate, the holder hereof shall refund to
Maker the amount of such excess or credit the amount against the
principal balance of this Note at the time in question.
Each Maker, co-maker, endorser, surety, and guarantor hereby waives
demand for payment, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of dishonor, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of
intent to foreclose on any collateral securing this Note,
and all other notices as to this Note and
diligence in collection as to each and every payment due hereunder, and
agrees that without any notice the holder
hereof may take additional security herefor or
may release any or all security hereof, or alone, or
together with any present or future owner or owners
of any property covered by any instrument
or agreement given to secure this Note,
may from time to time extend, renew or otherwise modify
the date or dates or amount or amounts of payment
above recited, or the holder hereof may from
time to time release any part or parts of the
property and interests securing this Note, with or without
consideration, and that in any such case, each Maker,
co-maker, endorser, surety, and guarantee
shall continue to be bound hereby and to be
liable to pay the unpaid balance of the indebtedness
evidenced hereby, as so additionally secured, extended,
renewed, or modified, notwithstanding any such
release.
Should this Note be signed or endorsed by more than one person or
entity, all of the obligations contained herein shall be considered the
joint and several obligations of each Maker,
co-maker, endorser, surety, and guaranty hereof.
This Note may be secured by certain collateral more fully described in
a Security Agreement executed by Maker and delivered to Michael W. Lease.
Maker shall deliver to the holder hereof such financial and operating
statements as the holder hereof may request from time to time, and in such
form as is reasonably acceptable to such
holder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA FOR ALL PURPOSES.
This Note is executed this 28th day of November, 1995.
MAKER:
SKYWAY ADVERTISING
INC.
By:/s/ Robert H. Blank
Its Exec. Vice President
PROMISSORY NOTE
MARK W. LEASE
$ 46,000.00
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the
order of Mark W. Lease, ("Mark Lease"), at 19 East Depot Street, Litchfield,
Minnesota 55355,
or
at such other address as the holder hereof advises in writing from time to time,
the principal sum
of Forty-six Thousand and no/lOO Dollars ($46,000.00) together with interest
thereon, as hereinafter described.
The principal of this Note from day to day unpaid shall bear interest
at a rate of eleven percent (11%) per annum and such interest shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and on actual
days elapsed. Interest shall commence on December l, 1995.
The principal and interest of this Note shall be payable in 84 equal
monthly installments, commencing April 1, 1996, and continuing on the 1st day
of each month thereafter until this Note is
paid in full; provided however, that the first three (3)
installments will be interest only payments.
Any payments of principal and interest due hereunder which are not
paid when due, and other amounts which may be owed by Maker hereunder,
including without limitation attorney's fees, shall bear interest at the
highest lawful rate and, if no highest lawful rate is established by law,
at the rate of eighteen percent (18%) per annum. The provisions of this
paragraph shall not be construed as waiving the right of the holder hereof
to punctual payment of principal or interest, or any part
thereof, when due hereunder.
Maker may prepay all or any part of the principal or accrued interest
at any time and from time to time, without premium or penalty, by providing
Mark W. Lease with fifteen (15) days written notice of his intention to
prepay; provided nonetheless, that Maker's right to prepay
remains subject to Mark Lease's unqualified option to convert balance due
under this Promissory Note into Skyway shares as established in accordance
with provision 5(a) of that Stock Redemption Agreeement, executed
simultaneous herewith, such that Maker is precluded from obviating or
attempting to obviate Lease's right to convert loan balance into Skyway
shares by making prepayment, whether partial or full. All partial
prepayments shall be applied first to accrued and unpaid interest and
then to principal in the inverse order of maturity.
The holder hereof may declare the entire unpaid principal of and
accrued interest on this Note immediately due and payable, foreclose any
liens or security interests securing all or any
part hereof, offset against this Note any sum or sums owed by the
holder hereof to Maker, or exercise any other right of remedy to
which the holder hereof may be entitled by agreement, at law, or in
equity, if (a) Maker fails or refuses to pay any part of the principal or
accrued interest when due, (b) a default should occur under this Note or
under any agreement, document, instrument securing or assuring payment of
any part hereof or executed in connection herewith, or (c) Maker shall become
insolvent, voluntarily or involuntarily be made the subject of any proceeding
provided for by any bankruptcy or similar debtor relief laws. Each right
and remedy available to the holder hereof shall be cumulative of and in
addition to each other such right and remedy. No delay on the part of the
holder hereof in the exercise of any right or remedy available to the holder
hereof shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or remedy preclude other
or further exercise thereof or exercise of any other such right or
remedy.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceedings, Maker agrees to pay all
court costs, reasonable attorneys' fees and other costs of collection of
the holder hereof.
Any provision herein, or in any document or agreement securing this
Note or in any other document executed in connection herewith, or in any
other agreement or commitment, whether written or oral, express or implied,
to the contrary notwithstanding, no holder hereof shall in any
event be entitled to receive or collect, nor shall or may amounts received
hereunder be credited so that any holder hereof shall be paid as interest a .
sum greater than the maximum amount permitted by
applicable law to be charged to the person, firm, or corporation
primarily obligated to pay this Note at the time in question. If
any construction of this Note, any document or agreement securing
this Note, or in any and all other papers, agreements, or commitments
indicated a different right given to holder hereof to ask for, demand,
or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and
control, it being the intention of the
parties that this Note and all other instruments securing
the payments of this Note shall in all things
comply with applicable law, and proper adjustment shall automatically be made
accordingly. In the event any holder hereof ever receives, collects, or
applies as interest any sum in excess of the
maximum legal rate, such excess amount shall be applied to the reduction
of the unpaid principal balance of this Note in the inverse order of
maturity, and if this Note is paid in full, any remaining
excess shall be paid to Maker. In determining whether or not
the interest paid or payable under any specific contingency exceeds
the highest lawful rate, Maker and holder hereof shall, to the
maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee, or premium rather
than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) "spread" the total amount of interest throughout
the entire term of this Note so that the interest
rate is uniform throughout the entire term of this Not,e;
provided that, if this Note is paid and performed in full prior
to the end of the full contemplated term hereof, and if the interest received
for the actual period of existence hereof exceeds the maximum lawful rate,
the holder hereof shall refund to Maker the amount of such excess or credit
the amount against the principal balance of this Note at the time in
question.
Each Maker, co-maker, endorser, surety, and guarantor hereby waives
demand for payment, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of dishonor, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of intent to foreclose
on any collateral securing this Note, and all other notices as to this Note
and diligence in collection as to each and every payment due hereunder, and
agrees that without any notice the holder hereof may take additional
security herefor or may release any or all security hereof, or alone,
or together with any present or future owner or owners of any property covered
by any instrument or agreement given to secure this Note, may from time to
time extend, renew or otherwise modify the date or dates or amount or amounts
of payment above recited, or the holder hereof may from time to time release
any part or parts of the property and interests securing this Note, with or
without consideration, and that in any such case, each Maker, co-maker,
endorser, surety, and guarantee shall continue to be bound hereby and to
be liable to pay the unpaid balance of the indebtedness evidenced hereby,
as so additionally secured, extended, renewed, or modified,
notwithstanding any such release.
Should this Note be signed or endorsed by more than one person or
entity, all of the obligations contained herein shall be considered the
joint and several obligations of each Maker, co-maker, endorser, surety,
and guaranty hereof.
This Note may be secured by certain collateral more fully described in
a Security Agreement executed by Maker and delivered to Mark W. Lease.
Maker shall deliver to the holder hereof such financial and
operating statements as the holder hereof may request from time to time,
and in such form as is reasonably acceptable to such
holder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA FOR ALL PURPOSES.
This Note is executed this 28th day of November, 1995.
MAKER:
SKYWAY ADVERTISING INC.
By:/s/ Robert H. Blank
Its: Exec. Vice President
PROMISSORY NOTE
LEASE COMPANIES
$ 93,300.00
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay
to the order of Lease Companies, a Minnesota Partnership ("Lease Companies"),
at 19 East Depot Street, Litchfield, Minnesota 55355, or at such other address.
as the holder hereof advises in writing from time to time, the principal sum of
Ninety-three Thousand Three Hundred and no/lOO Dollars ($93,300.00) together
with interest thereon, as hereinafter described.
The principal of this Note from day to day unpaid shall bear interest
at a rate of eleven percent (11%) per annum and such interest shall be computed
on the basis of a year of 365 or 366 days, as the case may be, and on actual
days elapsed. Interest shall commence on December l, 1995.
The principal and interest of this Note shall be payable in 84 equal
monthly installments, commencing April l, 1996, and continuing on the 1st
day of each month thereafter until this Note is paid in full; provided
however, that the first three (3) installments will be interest only payments.
Any payments of principal and interest due hereunder which are not paid
when due, and other amounts which may be owed by Maker hereunder, including
without limitation attorney's fees, shall bear interest at the highest lawful
rate and, if no highest lawful rate is established by law, at the
rate of eighteen percent (18%) per annum. The provisions of this
paragraph shall not be construed as waiving the right of the holder
hereof to punctual payment of principal or interest, or any part
thereof, when due hereunder.
Maker may prepay all or any part of the principal or accrued interest
at any time and from time to time, without premium or penalty, by providing
Lease Companies with fifteen (15) days written notice of his intention to
prepay; provided nonetheless, that Maker's right to prepay remains subject
to Lease Companies' unqualified option to convert balance due under this
Promissory Note into Skyway shares as established in accprdance with
provision 5(a) of that Stock Redemption Agreement, executed simultaneous
herewith, such that Maker is precluded from obviating or attempting to
obviate Lease's right to convert loan balance into Skyway shares by making
prepayment, whether partial or full. All partial prepayments shall be
applied first to accrued and unpaid interest and then to principal in
the inverse order of maturity.
The holder hereof may declare the entire unpaid principal of and
accrued interest on this Note immediately due and payable, foreclose any
liens or security interests securing all or any part hereof, offset against
this Note any sum or sums owed by the holder hereof to Maker, or exercise
any other right of remedy to which the holder hereof may be entitled by
agreement, at law, or in equity, if (a) Maker fails or refuses to pay any
part of the principal or accrued interest when due, (b) a default should
occur under this Note or under any agreement, document, instrument securing or
assuring payment of any part hereof or executed in connection herewith, or (c)
Maker shall become insolvent, voluntarily or involuntarily be made the subject
of any proceeding provided for by any bankruptcy or similar debtor relief
laws. Each right and remedy available to the holder hereof shall
be cumulative of and in addition to each other such right and remedy.
No delay on the part of the holder hereof in the exercise of any right or
remedy available to the holder hereof shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right or remedy preclude other or further exercise thereof or exercise
of any other such right or remedy.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceedings, Maker agrees to pay all court
costs, reasonable attorneys' fees and other costs of collection of the holder
hereof.
Any provision herein, or in any document or agreement securing this
Note or in any other document executed in connection herewith, or in any
other agreement or commitment,
whether
written or oral, express or implied, to the contrary notwithstanding, no holder
hereof shall in any event be entitled to receive or collect, nor shall or may
amounts received hereunder be credited so that any holder hereof shall be paid
as interest a sum greater than the maximum amount permitted by
applicable law to be charged to the person, firm, or corporation
primarily obligated to pay this Note at the time in question. If
any construction of this Note, any document or agreement securing this
Note, e'r in any and all other papers, agreements, or commitments'
indicated a different right given to holder hereof to ask for,
demand, or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and control,
it being the intention of the parties that this Note and all other
instruments securing the payments of this Note shall in all
things comply with applicable law, and proper adjustment shall
automatically be made accordingly. In the event any holder hereof
ever receives, collects, or applies as interest any sum in excess of the
maximum legal rate, such excess amount shall be applied to the reduction
of the unpaid principal balance of this Note in the inverse order of
maturity, and if this Note is paid in full, any remaining excess shall
be paid to Maker. In determining whether or not the interest paid or
payable under any specific contingency exceeds the highest lawful rate,
Maker and holder hereof shall, to the maximum extent permitted under
applicable law, (a) characterize any nonprincipal payment as an expense,
fee, or premium rather than as interest, (b) exclude voluntary prepayments
and the effects thereof, and (c) "spread" the total amount of interest
throughout the entire term of this Note so that the interest
rate is uniform throughout the entire term of this Note; provided that, if this
Note is paid and performed in full prior to the end of the full contemplated
term hereof, and if the interest received for the actual period of existence
hereof exceeds the maximum lawful rate, the holder hereof
shall refund to Maker the amount of such excess or credit the
amount against the principal balance of this Note at the time in question.
Each Maker, co-maker, endorser, surety, and guarantor hereby waives
demand for payment, presentment for payment, notice of nonpayment, protest,
notice of protest, notice of dishonor, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of
intent to foreclose on any collateral securing this Note, and
all other notices as to this Note and diligence in collection as
to each and every payment due hereunder, and agrees that without any
notice the holder hereof may take additional security herefor or may
release any or all security hereof, or alone, or together with any
present or future owner or owners of any property covered by any
instrument or agreement given to secure this Note, may from time to
time extend, renew or otherwise modify the date or dates or amount
or amounts of payment above recited, or the holder hereof may from
time to time release any part or parts of the property and interests securing
this Note, with or without consideration, and that in any such case, each
Maker, co-maker, endorser, surety, and guarantee shall continue to be bound
hereby and to be liable to pay the unpaid balance of the indebtedness
evidenced hereby, as so additionally secured, extended, renewed, or modified,
notwithstanding any such release.
Should this Note be signed or endorsed by more than one person or
entity, all of the obligations contained herein shall be considered the
joint and several obligations of each Maker, co-maker, endorser, surety,
and guaranty hereof.
This Note may be secured by certain collateral more fully described in
a Security Agreement executed by Maker and delivered to Lease Companies.
Maker shall deliver to the holder hereof such financial and operating
statements as the holder hereof may request from time to time, and in such
form as is reasonably acceptable to such holder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA FOR ALL PURPOSES.
This Note is executed this 28th day of November, 1995.
MAKER:
SKYWAY ADVERTISING INC.
By:/s/ Robert H. Blank It Exec. Vice President
GUARANTY
LEASE COMPANIES
THIS GUARANTY is made as of the date set forth on the signature page
hereof by the undersigned (hereinafter referred to as "Guarantor" whether one
or more) in favor of Lease Companies, a Minnesota Partnership ("Lease
Companies").
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, and in order to induce Lease Companies to extend credit to the
persons or entities listed under paragraph 10(e), below (collectively,
whether one or more, the "Borrowers"), but without requiring Lease Companies
to extend such credit, Guarantor guarantees to Lease Companies
the due and punctual payment and performance when due (whether by the
terms thereof or as the result of any power to accelerate) of the
Obligations (as that term is hereinafter defined). All
payments on this Guaranty shall be in lawful money of the United States
and shall be made to Lease Companies at its office at 19 East Depot Street,
Litchfield, Minnesota 55355, or at such other place as Lease Companies shall
from time to time advise in writing.
l. Obligations. The Obligations (herein so called) guaranteed hereby
are all indebtedness, obligations, and liabilities of any kind of Borrowers or
any one or more of them to Lease Companies and due fulfillment and performance
of all obligations now or hereafter owed by Borrowers or any one or more of
them to Lease Companies.
2. Nature of Guaranty. This guaranty is an irrevocable, absolute,
complete and continuing guaranty of payment and not a guaranty of collection.
The liability of Guarantor for the payment of the Obligations guaranteed
hereby shall be primary and not secondary. Guarantor hereby acknowledges
and agrees that the liability of all persons to pay and satisfy the Obligations
pursuant to their respective guaranties (including Guarantor's obligations
hereunder) shall be joint and several.
3. Guarantor's Waivers. Guarantor hereby waives presentment, demand,
notice of non-payment and notice of protest, dishonor, notice of default,
notice of intent to accelerate, notice acceleration, notice of intent to
proceed against co1lateral, or any other notice whatsoever on or with
respect to any and all of the Obligations, and also notice of acceptance of
this Guaranty, acceptance on the party of Lease Compaines being conclusively
presumed by its request for this Guaranty and delivery of the same to it.
Guarantor further waives any right to require Lease Companies, and it shall
not be necessary for Lease Companies in order to enforce payment by Guarantor
hereunder, to first (a) proceed against Borrowers or any other person liable
on the Obligations, (b) proceed against or exhaust any security given to
secure the Obligations, (c) have Borrowers joined with Guarantor in
any suit arising out of this Guaranty and/or any of the Obligations, or
(d) pursue any other remedy in Lease Companies' power whatsoever. Lease
Companies shall not be required to mitigate damages or take any action to
reduce, collect, or enforce the Obligations. Guarantor further waives any
defense arising by reason of any disability, lack of corporate authority or
power, or other defense of Borrowers or any other guarantors of any of the
Obligations, and shall remain liable hereon regardless of whether Borrowers
or any other guarantors be found not liable thereon for any reason.
Guarantor hereby waives all rights of subrogation and contribution
against Borrowers and waives any right to enforce any remedy which
Lease Companies now has or may hereafter have against Borrowers, and
waives any benefit of any right to participate in any security now or
hereafter held by Lease Companies.
4. Payment. Guarantor will, within twenty (20) business days of his
receipt of a notice from Lease Companies of the failure of Borrowers to pay
an Obligations at maturity, pay to Lease Companies the amount due and unpaid
by Borrowers and guaranteed hereby. The failure of Lease Companies to give
this notice shall not in any way release Guarantor hereunder.
5. Lease Companies' Expenses. If Guarantor fails to pay the
Obligations after notice from Lease Companies of Borrower's failure to
pay any Obligations at maturity, and if Lease Companies obtains the
services of an attorney for collection of amounts owing by Guarantor hereunder,
Guarantor agrees to pay to Lease Companies the reasonable attorneys' fees and
its reasonable costs and expenses which are incurred by Lease Companies in
connection therewith.
6. Events and Circumstances Not Reducing or Discharging Guarantor's
Obligations. Guarantor hereby consents and agrees to each of the following,
and agrees that Guarantor's obligations under this Guaranty Agreement shall
not be released, diminished, impaired, reduced, or adversely affected by any
of the following, and waives any rights (including, without limitation,
rightsto notice) whic'h Guarantor might otherwise have as a result of or
in connection with any of the following:
(a) Modifications, etc. Any renewal, extension, modification,
alteration, rearrangement, forbearance, or compromise of all or any
party of the Obligations or any instrument evidencing
the Obligations or executed in connection therewith, or any contract
or understanding between Borrowers or any one or more of them and
Lease Companies, or any other parties, pertaining to the
Obligations;
(b) Release of Obligors. Any full or partial release of the liability
of Borrowers or any one or more of them on the Obligations or any part thereof,
or of any co-guarantors, or any other person or entity now or hereafter liable,
whether directly or indirectly, jointly, severally, or jointly and severally
, to pay, perform, guarantee, or assure the payment of the Obligations or any
part thereof r
(c) Release of Collateral. Any release of, failure to perfect, or
failure to maintain perfection of any lien or security interest against any
property of Borrowers securing the Obligations; or
(d) Other Actions Taken or Omitted. Any other action taken or omitted
to be taken with respect to the Obligations or the security and collateral
therefor, whether or not such action or omission prejudices Guarantor or
increases the likelihood that Guarantor will be required to pay
the Obligations pursuant to the terms hereof; it is the unambiguous
and unequivocal intention of Guarantor that Guarantor shall be obligated
to pay the Obligations when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or
uncontemplated, and whether or not particularly described herein, except for
the full and final payment and satisfaction of the Obligations.
7. Default. If Guarantor fails to pay Lease Companies in accordance
with S4 hereof or fails to perform any of its other covenants provided herein,
Guarantor shall be in default hereunder, and Lease Companies shall have the
right to declare all amounts guaranteed hereby to be due and payable as if
all the Obligations had reached maturity, in which case Guarantor shall promptly
pay to Lease Companies all such amounts.
8. Financial Statements. Guarantor covenants and agrees that so long
as any part of the Obligation remain outstanding, Guarantor shall furnish to
Lease Companies such financial statements as Lease Companies may request from
time to time.
9. Subordination. Guarantor hereby subordinates any and all
indebtedness Borrowers, or any one or more of them, now or hereafter
owes to Guarantor to the Obligations, and agrees with Lease Companies
that Guarantor shall not demand or accept any payment of principal or
interest from Borrowers, shall not claim any offset or other reduction
of Guarantor's Obligations hereunder because of any such indebtedness
and shall not take any action to obtain any of the collateral securing the
Obligations; provided, however, that, if Lease Companies so requests, any
indebtedness of Borrowers to Guarantor shall be collected, enforced and
received by Guarantor as trustee for Lease Companies and shall be paid
over to Lease Companies on account of the Obligations, but without reducing
or effecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
10. Miscellaneous.
(a) Governing Law. This Guaranty is a contract made under and shall
be construed in accordance with and governed by the laws of the State of
Minnesota.
(b) Further Assurances. Guarantor agrees to execute and deliver to
Lease Companies all such documents and to take all other action as may be
reasonably requested by Lease Companies to more fully vest in and assure
Lease Companies of all of the rights, powers, privileges, and remedies
herein intended to be granted to or conferred upon Lease Companies.
(c) Notices. Whenever Lease Companies shall choose or be required to
give any notice to Guarantor, such notice may be given personally or by
certified or registered mail, and any notice so sent shall be deemed to
have been given on the date received, if given personally, or on the date
such notice is deposited in the United States Mail, postage prepaid,
addressed to Guarantor at the address set forth below the Guarantor's
signature to this Guaranty, if sent by mail. The address for
notices may be changed by Guarantor only upon the actual receipt by
Lease Companies of a written designation of a new address of notice.
(d) Invalid Provisions. If any provision of this Guaranty is held to
be illegal, invalid, or unenforceable under present or future laws, such
provision shall be severable and the remaining provisions of this Guaranty
shall remain in full force and effect and shall nqt be affected by the
illegal, invalid, or unenforceabl'e provision or by its severance.
(e) Identity of Borrowers. The following list identifies the entities
or persons who, as Borrowers, are the parties whose debts are guaranteed in
this Guaranty:
SKYWAY ADVERTISING INC.
l2 South 6th Street
Suite 1126
Minneapolis, MN 55402
WITNESS THE EXECUTION HEREOF, this 28th day of November, 1995.
GUARANTOR:
/s/ Robert H. Blank, Individually
Robert H. Blank
Address:___
SECURITY AGREEMENT
LEASE COMPANIES
THIS SECURITY AGREEMENT (the "Agreement") is made as of the date set
forth on the signature page hereof, by and between LEASE COMPANIES ("Lease
Companies"), with its principal place of business at 19 East Depot Street,
Litchfield, Meeker County, Minnesota 55355, and the undersigned debtor
("Debtor").
WHEREAS, Lease eompanies is extending credit to Debtor which debt or
debts may be evidenced by one or more promissory notes executed simultaneously
herewith and delivered by Debtor to Lease Companies (the "Note"); and
WHEREAS, Debtor has agreed to grant Lease Companies a security interest
in certain collateral owned by Debtor as more fully set forth herein.
NOW THEREFORE, for and in consideration of the premises, and the mutual
promises and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Debtor and Lease Companies hereby agree as follows:
I. DEFINITIONS.
1.1 Defined Terms. When used herein, the following terms shall have
the following meanings:
(a) "Collateral" shall mean all property and interests in property in
which a security interest is granted to Lease Companies by Debtor hereunder;
(b) "Financing Agreements" shall mean all agreements, instruments, and
documents executed and/or delivered to Lease Companies pursuant hereto or
evidencing or securing or executed in connectiqn with any of the Obligations,
including, without limitation, security agreements, notes, guarantees,
financing statements, and all other written matter whether heretofore,
now, or hereafter executed, together with all agreements and documents
referred to therein or contemplated thereby;
(c) "Obligations" shall mean all liabilities, obligations, and
indebtedness of any and every kind and nature (including, without
limitation, future advances made to or for the benefit of Debtor),
heretofore, now, or hereafter owing, arising, due or payable from Debtor
to Lease Companies, howsoever evidenced, created, incurred, acquired, or
owing, whether primary, secondary, direct, contingent, fixed or otherwise,
including obligations of performance, and whether arising under
this Agreement, the Note, or any one or more of the Financing Agreements
or by oral agreement or operation of law and whether evidenced by the Note,
other promissory notes, or by other evidences of indebtedness; and
(d) "UCC" shall mean Mn. Stat. S336.9-1O1 to 336.9-508.
1.2 Other Terms. All other terms contained in this Agreement, where
the context so indicates (unless otherwise specifically defined herein), shall
have the meaning provided in Minnesota Commerce Code to the extent the same
are used or defined therein.
II. SECURITY INTEREST.
2.1 Security Interest. To secure payment and performance of the
Obligations, Debtor hereby grants to Lease Companies a continuing security
interest in and to all of Debtor's now owed and hereafter existing or
acquired personal property including, without limitation:
(a) All inventory, equipment and accounts receivable now or hereafter
owned by Debtor;
(b) All present and future accounts, cash, money, deposit accounts,
policies of insurance (casualty, liability, life, business interruption,
etc), contract rights and lease agreements, general intangibles, chattel
paper, documents, instruments, notes receivable, cash and non-cash proceeds
and other rights, benefits, powers, privileges and remedies of Debtor
arising from or by virtue of, or from the voluntary or involuntary sale,
lease or other disposition of, or collections with respect to, or
insurance or bonding proceeds payable with respect to,;or claims
against any individual, firm, corporation, associations partnership,
joint venture, trust, governmental entity or any other entity (a "Person")
(and proceeds thereof) with respect to, all or any part of the property
heretofore described;
(c) All present and future security in favor of the Debtor for the
payment or performance by any Person of obligations owed to such Debtor
under or in connection with any of the property heretofore described and
goods that gave or will give rise to any of the property heretofore described
or are evidenced, identified, or represented therein or thereby; and
(d) All products, replacements, and proceeds of, and accessions to, any
of the foregoing property and interests in property, together with all of
Debtor's books and records relating to any of the foregoing property.
2.2 Financing Statements. Debtor will execute and deliver to Lease
Companies such financing statements or amendments thereof or supplements
thereto and such other instruments, or documents, and
pay all connected costs, as Lease Companies may from
time to time require in order to preserve,
protect, and maintain the security interests
hereby granted and the perfection thereof, as a first and prior
perfected security interest in each item of Collateral.
Debtor shall hold in trust for the benefit of Lease
Companies, and promptly deliver to Lease Companies,
all Collateral for which possession by Lease
Companies is necessary for perfection of Lease
Companies' security interest or advisable for the protection or
preservation of Lease Companies' first and prior perfected security
interest therein.
III. DEBTOR'S COVENANTS.
3.1 Covenants. Until performance, payment, and/or satisfaction in
full of the Obligations, Debtor covenants and agrees as follows:
(a) Maintenance and Inspection of Records. Debtor will at all times
keep accurate and complete records and books of account with respect to all of
Debtor's- business activities, in accordance with sound
accounting practices and generally accepted accounting procedures.
Such records and accounts shall be maintained at the principal offices
of Debtor. Lease Companies, or any person or persons designated by
it, shall have the right, from time to time, to call upon reasonable
prior notice at Debtor's place or places of business during business
during business hours, and, without hindrance or delay, to inspect,
audit, checks copy, and make extracts from Debtor's books and records;
(b) Financial Statements. Debtor shall deliver to Lease Companies
such financial and operating statements as Lease Companies may request
from time to time, and in such form as is reasonably acceptable to Lease
Companies;
(c) Insurance. Debtor shall keep the Collateral insured against loss
or damage by fire, theft, and such other risks, hazards, and contingencies,
with such companies, in such amounts and under policies in such form as are
customary in the industry and are acceptable to Lease Companies. Such
policies shall make all losses payable to Debtor and Lease Companies, as their
respective interests may appear and shall bear a standard non-contributory
first mortgage endorsement, as appropriate;
(d) Taxes. Debtor will file all tax returns and pay all taxes when
due., and will cause any liens for taxes to be promptly released apd, except
as to liens which the Debtor has previously notified Lease Companies in
writing, there are no other liens or encumbrances on the Collateral; and
(e) Location of Collateral. None of the Collateral located at
Debtor's chief executive office shall be moved to a location other than
one identified in Section 5.3 below nor will Debtor change the
location of its chief executive office without at least fifteen (15)
days prior written notice to Lease Companies and without Lease Companies
being granted an opportunity to file whatever financing statements or
other documents are necessary to maintain the perfection of its security
interests in the Collateral.
IV. DEFAULT; REMEDIES.
4.1 Default. A Default shall exist if any one or more of the
following occurs and is continuing:
(a) Debtor fails to make any payment of principal or interest on the
Obligation on or before the date such payment is due;
(b) Debtor or guarantor of the Obligations fails to perform or to
observe any covenant contained herein or in any one or more of the Financing
Agreements;
(c) Lease Companies reasonably believes that the prospect of payment
of any of the Obligations or of the performance of any covenants or,
agreements contained in this Agreement or in any of the Financing Agreements
is substantially impaired; or
(d) The sale, loss, theft, destruction, encumbrance, or transfer of
any Collateral in violation hereof or the occurrence of substantial damage to
any Collateral, unless such Collateral is promptly replaced with Collateral
of like quality or restored to its former condition, or unless insurance
proceeds payable with respect thereto are delivered to Lease Companies.
4.2 Remedies Upon Default. Lease Companies, upon the occurrence of a
Default shall have the following remedies, each cumulative of the other to the
extent permitted by law: Lease Companies may declare all Obligations secured
hereby immediately due and payable without presentment for payment,
demand for payment, notice of non-payment, protest, notice of protest or
of dishonor, notice of default, notice of intent to accelerate, notice of
acceleration, notice of intent to foreclose, or any other notice all
of which are hereby expressly waived, and Lease Companies may proceed
to enforce payment of the same and exercise any and all of the rights
and remedies provided under the UCC, by this
Security Agreement, by any one or more of the Financing Agreements,
at law or in equity, as well as any other additional rights and
remedies possessed by Lease Companies, including the right to sell the
Collateral, or any part thereof, at public or private sale, for cash,
upon credit, or for future delivery as Lease Companies shall deem
appropriate.
V. MISCELLANEOUS.
5.1 Applicable Law. This Agreement shall be construed in all
respects in accordance with, and be governed by, the laws and decisions of
the State of Minnesota.
5.2 Notices. Any notice, request, instruction, or other document
to be given hereunder by any party hereto to any other party shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, at the address of such other party appearing below such party's
signature to this Agreement, or at such other address for a party as shall be
specified by like notice, which change of address shall become effective
when actually received. Any notice which is delivered personally in the
manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party. Any
notice which is addressed and mailed in the manner herein
provided shall be conclusively presumed to have been duly given
to the party to which it is addressed upon being so placed in the mail.
5.3 Locations of Collateral and Debtor's Chief Executive Office.
The street address of each location where Collateral is located and the
street address of Debtor's chief executive officer are as follows:
SKYWAY ADVERTISING INC.
12 South 6th Street
Suite 1126
Minneapolis, MN 55402
IN WITNESS WHEREOF, this Agreement has been duly executed this 28th
day of November, 1995.
DEBTOR: SECURED PARTY:
SKYWAY ADVERTISING INC. LEASE COMPANIES
EXHIBIT 10.2
BRIDGE FINANCING AGREEMENT
This agreement is made this day of November, 1995, by and
between Norman Winer
("Lender" or "Holder"), and Skyway Advertising, Inc. ("Skyway" or
"Borrower").
Whereas, Lender wishes to provide and Borrower wishes to secure
certain short-term
financing in anticipation of a proposed Initial Public Offering of the
securities of Borrower, and
Whereas, both of the parties hereto have acknowledged the receipt of
good and valuable
consideration for the covenants, promises, performances and obligations
undertaken, or to be
undertaken in fulfillment of this Agreement,
NOW, THEREFORE, IT IS HEREBY AGREED:
1. Closing on the financing anticipated hereby shall take place at the
offices of
Tuschner & Company, 120 South 6th Street, Suite 800, Minneapolis,
Minnesota at a time to be
set by the parties on November , 1995.
2. Lender shall deliver to Borrower the sum of $150,000.
3. Borrower shall deliver to Lender the following documents:
a. An executed Promissory Note in the form attached hereto as
Exhibit "A";
b. A Security Agreement in a form satisfactory to Lender and
Lender's counsel;
c. A UCC-1 Financing Statement with respect to the security
interest granted
pursuant to said Security Agreement;
d. A Warrant as set forth in this Agreement;
e. A n opinion of counsel that th e transactions described in this
Agreement and related docume nts have been authorized by all
necessary corporate actio n on the part of the Borrower from
counsel that represents that it is knowledgeable and experienced in the
area of securities law, and in which said counsel also indicates that he has
examined the books and records of Skyway to the extent he has deemed
necessary, and is aware of no reason why the Lender would not be able to
register the sale of its shares under Minnesota and Federal Securities
Laws;
f. An agreement from Tuschner & Company, Inc. and any other
party that has a right to a commission as a result of the loan
described herein, waiving any right to receive such commission
until the loan has been repaid in full, in a form satisfactory to
Lender and his Counsel;
g. A Personal Guaranty executed by Robert Blank and his spouse
personally
guaranteeing repayment of the loan described herein;
h. Subordination/Standby Agreem ents executed by all related
party creditors of Borrower by which they subordinate their
indebtedness to the debt owed to Lender and agree that they will
accept no payments on such debt until Lender has been repaid in full,
together with Borrower's agreement to make no payments on any such
debt; and
i. Evidence satisfactory to Lender and Lender's counsel that all
holders of the preferred shares of Borrower have waived their right
to put such shares for redemption until the loan described herein
has been repaid in full to Lender.
4. This Bridge Financing Agreement is made in anticipation of an
Initial Public
Offering of the securities of Skyway. Part of the consideration herefor is a
promise by Skyway
to file with the Securities and Exchange Commission a Registration
Statement no later than
January 31, 1996.
5. Borrower shall issue and deliver to Lender Warrants for the
purchase of 50,000
shares of the Common Stock of Skyway, exercisable at a price of one-half
of the price at
which similar shares are offered to the public in the above-referenced
Initial Public Offering.
6. Lender shall be entitled to demand registration with the Securities
and Exchange
Commission of the securities acquired by Lender pursuant to the warrant
described in paragraph
5 hereof. Said right to demand registration shall be exercisable only once,
at a date to be
determined solely by Lender.
7. Borrower shall direct Tuschner & Company, the anticipated
underwriter of the
above-referenced Initial Public Offering; or any substitute underwriter
hereafter named; to pay
the Promissory Note described in paragraph 3, above, directly out of the
proceeds of said Initial
Public Offering, first, and before any other creditors of Borrower
(including all related party
creditors and entities or person owed commissions as a result of the loan
anticipated hereby) at
closing thereon.
Dated: November , 1995
Skyway Advertising, Inc.
By:
Norman Winer Robert H. Blank
Its:
EXHIBIT "A" BRIDGE FINANCING AGREEMENT
This agreement is made this 1st day of November, 1995, by and
between Norman Winer ("Lender" or "Holder"), and Skyway Advertising,
Inc. ("Skyway" or "Borrower").
Whereas, Lender wishes to provide and Borrower wishes to secure
certain short-term financing in anticipation of a proposed Initial Public
Offering of the securities of Borrower, and
Whereas, both of the parties hereto have acknowledged the receipt
of good and valuable consideration for the covenants, promises,
performances and obligations undertaken, or to be undertaken in
fulfillment of this Agreement,
NOW, THEREFORE, IT IS HEREBY AGREED:
1. Closing on the financing anticipated hereby shall take place
at the offices of Tuschner & Company, 120 South 6th Street, Suite 800,
Minneapolis, Minnesota at a time to be set by the parties on Friday,
November 3, 1995.
2. Lender shall deliver to Borrower the sum of $150,000.
3. Borrower shall deliver to Lender an executed Promissory
Note in the form attached hereto as Exhibit "A".
4. This Bridge Financing Agreement is made in anticipation
of an Initial Public Offering of the securities of Skyway. Part of the
consideration herefor is a promise by Skyway to file with the Securities
and Exchange Commission a Registration Statement no later than
December 31, 1995.
5. Borrower shall issue and deliver to Lender Warrants for the
purchase of 50,000 shares of the Common Stock of Skyway, exercisable at
a price of one-half of the price similar shares are offered to the public
in the above-referenced Initial Public Offering.
6. Lender shall be entitled to demand registration with the
Securities and Exchange Commission of the securities acquired by Lender
pursuant to the warrant described in paragraph 5 hereof. Said right to
demand registration shall be exercisable only once, at a date to be
determined solely by Lender.
7. Borrower shall authorize Tuschner & Company, the
anticipated underwriter of the above-referenced Initial Public Offering; or
any substitute underwriter hereafter named; to pay the Promissory Note
described in paragraph 3, above, directly out of the proceeds of said Initial
Public Offering, first, and before any other creditors of Borrower
(including all related party creditors and entities or person owed
commissions as a result of the loan anticipated hereby) at closing thereon.
8. Borrower shall provide to Lender at closing written waivers
of the right to "put" their shares to Skyway, until the entire indebtedness to
Lender is satisfied, executed by each of the holders of Series A and/or
Series B Convertible Preferred Stock of Skyway.
9. Borrower shall provide to Lender at closing a written
Guarantee for repayment of the entire indebtedness to Lender executed by
Robert H. Blank and Ann E. Tatlock.
10. Borrower shall provide to Lender at closing an Opinion of
counsel setting forth counsel's opinion of the validity of the transaction
anticipated hereby and the basis for that opinion.
Dated: November , 1995
Skyway Advertising, Inc.
By:
Norman Winer Robert H. Blank
Its:
PROMISSORY NOTE
FOR VALUABLE CONSIDERATION RECEIVED, Skyway
Advertising, Inc., ("Skyway", or "Maker"), in conjunction with that
certain Bridge Financing Agreement, (which shall be incorporated herein
by reference) hereby promises to pay to Norman Winer ("Holder"), his
successors and assigns, at Holder's office at 3050 Multifoods Tower, 33
South 6th Street, Minneapolis, Minnesota, or at any other place designated
by Holder, the principal sum of $150,000, together with interest
(calculated on the basis of actual days elapsed and a 360 day year) on the
unpaid principal hereof, from the date of this Note until this Note is fully
paid, in the following manner and upon the following terms and
conditions:
1. Payment. This Note shall be payable in full at such time as the
Initial Public Offering of securities of Skyway closes and proceeds thereof
are delivered to Skyway, but in no event later than one hundred twenty
(120) days from the date of this Note, or at such other or different time as
the parties hereto may hereafter agree in writing.
2. Security. The loan evidenced hereby shall be secured by a
lien against all of the assets of Skyway to the full extent of principal and
interest accrued at any time hereunder. Said lien and the Security
Agreementcreating it shall be given priority over all claims of related
creditors of Skyway
3. Prepayment. This Note may be prepaid in whole or in part at any
time.
4. Interest. Interest shall accrue on this note at the rate of ten
per cent (10%).
5. Governing Law. This Note shall be construed and interpreted
in accordance with the laws of the State of Minnesota.
6. Binding Effect. Except as herein otherwise provided to the
contrary, this Note shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
Maker waives presentment, dishonor, protest, demand, diligence,
notice of protest, notice of demand, notice of dishonor, notice of
nonpayment, and any other notice of any kind otherwise required by law
in connection with the delivery, acceptance, performance, default,
enforcement or collection of this Note and expressly agrees that this Note,
or any payment hereunder, may be extended or subordinated (by
forbearance of otherwise) at any time, without in any way affecting the
liability of Maker.
Maker agrees to pay on demand all costs of collecting or enforcing
payment under this Note, including attorneys' fees and legal expenses,
whether suit be brought or not, and whether through courts of original
jurisdiction, courts of appellate jurisdiction, or bankruptcy courts, or
through other legal proceedings.
This Note may not be amended or modified, nor shall waiver of
any provision hereof be effective, except only by an instrument in writing
signed by the party against whom enforcement of any amendment,
modification, or waiver is sought.
IN WITNESS WHEREOF, this Note has been executed as of the
date set forth below.
Date: November , 1995
Skyway Advertising, Inc.
By:
Robert H. Blank
SECURITY AGREEMENT
This Security Agreement ("Agreement") is made this date by and between
Skyway Advertising, Inc., a Minnesota corporation, ("Debtor") and
Norman Winer ("Secured Party").
Section 1. Grant of Security Interest. Debtor, in consideration of the
indebtedness described in this Agreement, hereby grants, conveys, and
assigns to Secured Party for security all of Debtor's existing and future
right, title and interest in, to and under the property listed in Section 2 of
this Agreement. This security interest is granted to the Secured Party to
(a) secure the payment of the indebtedness evidenced by Debtor's note
payable to Secured Party dated November , 1995 ("Note") in the
principal sum of $150,000 with interest thereon, and all renewals,
extensions, and modifications of the Note; (b) the payment, performance
and observance of all obligations, covenants and agreements to be paid,
performed or observed by Debtor under that certain Bridge Financing
Agreement of even date, herewith, between Secured Party and the Debtor
("Financing Agreement"); (c) the payment of all other sums, with interest
thereon, advanced under the terms of this Agreement; and (d) the
performance of the agreements and warranties of Debtor contained in the
Note, this Agreement, the Financing Agreement, or incorporated in either
Agreement by reference .
Section 2. Property. The property subject to the security interest (the
Collateral) is as follows:
2.1 Equipment. All equipment of the Debtor, including office
equipment, signage and other equipment used in the business of Debtor.
2.2 Accounts Receivable and Other Intangibles. All of the Debtor's
accounts, chattel paper, contract rights, commissions, warehouse receipts,
bills of lading, delivery orders, drafts, acceptances, notes, securities and
other instruments; documents; general intangibles and all other forms of
receivables, and all guaranties and securities therefor.
2.3 Inventory and Other Tangible Personal Property. All of the
Debtor's inventory, including all goods, merchandise, materials, raw
materials, work in progress, finished goods, now owned or hereinafter
acquired and held for sale or lease or furnished or to be furnished under
contracts or service agreements or to be used or consumed in the Debtor's
business and all other tangible personal property of Debtor.
2.4 After-Acquired Property. All property of the types described in
Sections 2.1 and 2.2, or similar thereto, that at any time hereafter may be
acquired by Debtor, including but not limited to all accessions, parts,
additions, and replacements.
2.5 Proceeds. All proceeds of the sale or other disposition of any of
the Collateral described or referred to in Sections 2.1-2.3. Sale or
disposition of Collateral is prohibited.
Section 3. Covenants of Debtor. The Debtor agrees and covenants as
follows:
3.1 Payment of Principal and Interest. The Debtor shall promptly pay
when due the principal of and interest on the indebtedness evidenced by
the Note, any other charges provided in the Note, and all other sums
secured by this Agreement and/or the Financing Agreement.
3.2 Corporate Existence. The Debtor is a corporation duly organized
and existing under the laws of the state of Minnesota and is duly qualified
in every other state in which it is doing business.
3.3 Corporate Authority. The execution, delivery, and performance of
this Agreement, the Financing Agreement, and the execution, delivery,
and payment of the Note are within Debtor's corporate powers, have been
duly authorized, and are not in contravention of law or the terms of the
Debtor's articles of incorporation and bylaws, or of any indenture,
agreement, or undertaking to which the Debtor is a party or by which it is
bound.
Section 4. Removal of Collateral Prohibited. The Debtor shall not
remove the Collateral from its premises without the written consent of the
Secured Party, except as necessary for the normal operation of Debtor's
business.
Section 5. Perfection of Security Interest. The Debtor agrees to
execute and file financing statements, and do whatever may be necessary
under the applicable Uniform Commercial Code in the state where the
Collateral is located, to perfect and continue the Secured Party's interest in
the Collateral, all at the Debtor's expense.
Section 6. Taxes and Assessments. The Debtor will pay or cause to
be paid promptly when due all taxes and assessments on the Collateral,
this Agreement, the Sales/Loan Agreement, and the Note. The Debtor
may, however, withhold payment of any tax assessment or claim if a good
faith dispute exists as to the obligation to pay.
Section 7. Insurance. The Debtor shall have and maintain, or cause to
be maintained, insurance at all times with respect to all Collateral except
accounts receivable, against such risks as the Secured Party may
reasonably require, in such form, for such periods, and written by such
companies as may be satisfactory to the Secured Party. All policies of
insurance shall have endorsed a loss payable clause acceptable to the
Secured Party and/or such other endorsements as the Secured Party may
from time to time request, and the Debtor will promptly provide the
Secured Party with the original policies or certificates of such insurance.
The Debtor shall promptly notify the Secured Party of any loss or damage
that may occur to the Collateral. The Secured Party is hereby authorized
to make proof of loss if it is not made promptly by the Debtor. All
proceeds of any insurance on the Collateral shall be held by the Secured
Party as a part of the Collateral. Such proceeds shall be paid out from
time to time upon order of the Debtor for the purpose of paying the
reasonable cost of repairing or restoring the property damaged. Any
proceeds that have not been so paid out within 120 days following their
receipt by the Secured Party shall be applied to the prepayment of
principal on the Note. In the event of failure to provide insurance as
herein provided, the Secured Party may, at the Secured Party's option,
provide such insurance at the Debtor's expense.
Section 8. Application of Payments. Unless applicable law provides
otherwise, all payments received by the Secured Party from the Debtor
under the Note, this Agreement, and/or the Financing Agreement shall be
applied by the Secured Party in the following order of priority: (i) interest
payable on the Note in the manner provided therein; (ii) principal of the
Note in the manner provided therein; and (iii) any other sums secured by
this Agreement and/or the Financing Agreement in such order as the
Secured Party, at the Secured Party's option, may determine.
Section 9. Protection of Secured Party's Security. If the Debtor fails
to perform the covenants and agreements contained or incorporated in this
Agreement and/or the Financing Agreement, or if any action or proceeding
is commenced which affects the Collateral or title thereto or the interest of
the Secured Party therein, including, but not limited to eminent domain,
insolvency, code enforcement, or arrangements or proceedings involving a
bankrupt or decedent, then the Secured Party, at the Secured Party's
option, may make such appearance, disburse such sums, and take such
action as the Secured Party deems necessary, in its sole discretion, to
protect the Secured Party's interest, including but not limited to (i)
disbursement of attorneys' fees, (ii) entry upon the Debtor's property to
make repairs to the Collateral, and (iii) procurement of satisfactory
insurance. Any amounts disbursed by Secured Party pursuant to this
Section, with interest thereon, shall become additional indebtedness of the
Debtor secured by this Agreement. Unless the Debtor and the Secured
Party agree to other terms of payment, such amounts shall be immediately
due and payable and shall bear interest from the date of disbursement at
the default rate stated in the Note unless collection from the Debtor of
interest at such rate would be contrary to applicable law, in which event
such amounts shall bear interest at the highest rate which may be collected
from the Debtor under applicable law. Nothing contained in this Section
shall require the Secured Party to incur any expense or take any action.
Section 10. Inspection. The Secured Party may make or cause to be
made reasonable entries upon and inspections of the Debtor's premises to
inspect the Collateral.
Section 11. Debtor and Lien Not Released. From time to time, the
Secured Party may, at the Secured Party's option, without giving notice to
or obtaining the consent of the Debtor, the Debtor's successors or assigns
or of any other lienholder or guarantors, without liability on the Secured
Party's part, and notwithstanding the Debtor's breach of any covenant or
agreement of the Debtor in this Agreement and/or the Financing
Agreement, extend the time for payment of said indebtedness or any part
thereof, reduce the payments thereon, release anyone liable on any of said
indebtedness, accept a renewal note or notes therefor, modify the terms
and the time of payment of said indebtedness, release from the lien of this
Agreement any part of the Collateral, take or release other or additional
security, reconvey any part of the Collateral, consent to any map or plan of
the Collateral, consent to the granting of any easement, join in any
extension or subordination agreement, and agree in writing with the
Debtor to modify the rate of interest or period of amortization of the Note
or change the amount of any installments payable thereunder. Any actions
taken by the Secured Party pursuant to the terms of this Section shall not
affect the obligation of the Debtor or the Debtor's successors or assigns to
pay the sums secured by this Agreement and/or the Financing Agreement
and to observe the covenants of the Debtor contained herein, shall not
affect the guaranty of any person, corporation, partnership, or other entity
for payment of the indebtedness secured hereby, and shall not affect the
lien or priority of lien hereof on the Collateral. The Debtor shall pay the
Secured Party a reasonable service charge, together with such title
insurance premiums and attorneys' fees as may be incurred at the Secured
Party's option for any such action if taken at the Debtor's request.
Section 12. Forbearance by Secured Party Not a Waiver. Any
forbearance by the Secured Party in exercising any right or remedy
hereunder, or otherwise afforded by applicable law, shall not be a waiver
of or preclude the exercise of any right or remedy. The acceptance by the
Secured Party of payment of any sum secured by this Agreement and/or
the Financing Agreement after the due date of such payment shall not be a
waiver of the Secured Party's right to either require prompt payment when
due of all other sums so secured or to declare a default for failure to make
prompt payment. The procurement of insurance or the payment of taxes,
rents or other liens or charges by the Secured Party shall not be a waiver of
the Secured Party's right to accelerate the maturity of the indebtedness
secured by this Agreement, nor shall the Secured Party's receipt of any
awards, proceeds or damages as provided in this Agreement operate to
cure or waive the Debtor's default in payment of sums secured by this
Agreement.
Section 13. Uniform Commercial Code Security Agreement. This
Agreement is intended to be a security agreement pursuant to the Uniform
Commercial Code for any of the items specified above as part of the
Collateral which, under applicable law, may be subject to a security
interest pursuant to the Uniform Commercial Code, and the Debtor hereby
grants the Secured Party a security interest in said items. The Debtor
agrees that the Secured Party may file any appropriate document in the
appropriate index as a financing statement for any of the items specified
above as part of the Collateral. In addition, the Debtor agrees to execute
and deliver to the Secured Party, upon the Secured Party's request, any
financing statements, as well as extensions, renewals and amendments
thereof, and reproductions of this Agreement and/or the Financing
Agreement in such form as the Secured Party may require to perfect a
security interest with respect to said items. The Debtor shall pay all costs
of filing such financing statements and any extensions, renewals,
amendments, and releases thereof, and shall pay all reasonable costs and
expenses of any record searches for financing statements the Secured Party
may reasonably require. Without the prior written consent of the Secured
Party, the Debtor shall not create or suffer to be created pursuant to the
Uniform Commercial Code any other security interest in the Collateral,
including replacements and additions thereto. Upon the occurrence of an
event of default, the Secured Party shall have the remedies of a secured
party under the Uniform Commercial Code and, at the Secured Party's
option, may also invoke the other remedies provided in this Agreement
and/or the Financing Agreement as to such items. In exercising any of
said remedies, the Secured Party may proceed against the items of real
property and any items of personal property specified above as part of the
Collateral separately or together and in any order whatsoever, without in
any way affecting the availability of the Secured Party's remedies under
the Uniform Commercial Code or of the other remedies provided in this
Agreement and/or the Financing Agreement.
Section 14. Events of Default. The Debtor shall be in default under this
Agreement when any of the following events or conditions occurs:
14.1 The Debtor shall be in default under the Note.
14.2 The Debtor fails to comply with any term, obligation, covenant, or
condition contained in this Agreement and/or in the Financing Agreement,
within 10 days after receipt of written notice from the Secured Party
demanding such compliance.
14.3 Any warranty, covenant, or representation made to the Secured
Party by the Debtor under this Agreement, and/or under the Financing
Agreement, proves to have been false in any material respect when made
or furnished.
14.4 Any levy, seizure, attachment, lien, or encumbrance of or on the
Collateral which is not discharged by the Debtor within 10 days or, any
sale, transfer, or disposition of any interest in the Collateral, other than in
the ordinary course of business, without the written consent of the Secured
Party.
Section 15. Acceleration in Case of Borrower's Insolvency. If the
Debtor shall voluntarily file a petition under the federal Bankruptcy Act,
as such Act may from time to time be amended, or under any similar or
successor federal statute relating to bankruptcy, insolvency, arrangements
or reorganizations, or under any state bankruptcy or insolvency act, or file
an answer in an involuntary proceeding admitting insolvency or inability
to pay debts, or if the Debtor shall be adjudged a bankrupt, or if a trustee
or receiver shall be appointed for the Debtor's property, or if the Collateral
shall become subject to the jurisdiction of a federal bankruptcy court or
similar state court, or if the Debtor shall make an assignment for the
benefit of its creditors, or if there is an attachment, receivership, execution
or other judicial seizure, then the Secured Party may, at the Secured
Party's option, declare all of the sums secured by this Agreement to be
immediately due and payable without prior notice to the Debtor, and the
Secured Party may invoke any remedies permitted by this Agreement.
Any attorneys' fees and other expenses incurred by the Secured Party in
connection with the Debtor's bankruptcy or any of the other events
described in this Section shall be additional indebtedness of the Debtor
secured by this Agreement.
Section 16. Rights of Secured Party.
16.1 Upon default or at any time before default when the Secured Party
reasonably feels insecure, the Secured Party may require the Debtor to
assemble the Collateral and make it available to the Secured Party at the
place to be designated by the Secured Party which is reasonably
convenient to both parties. The Secured Party may sell all or any part of
the Collateral as a whole or in parcels either by public auction, private
sale, or other method of disposition. The Secured Party may bid at any
public sale on all or any portion of the Collateral. Unless the Collateral is
perishable or threatens to decline speedily in value or is of the type
customarily sold on a recognized market, the Secured Party shall give the
Debtor reasonable notice of the time and place of any public sale or of the
time after which any private sale or other disposition of the Collateral is to
be made, and notice given at least 10 days before the time of the sale or
other disposition shall be conclusively presumed to be reasonable. A
public sale in the following fashion shall be conclusively presumed to be
reasonable:
16.1.1 Notice shall be given at least 10 days before the date of sale
by publication once in a newspaper of general circulation published in the
county in which the sale is to be held;
16.1.2 The sale shall be held in a county in which the Collateral or
any part is located or in a county in which the Debtor has a place of
business;
16.1.3 Payment shall be in cash or by certified check immediately
following the close of the sale;
16.1.4 The sale shall be by auction, but it need not be by a
professional auctioneer;
16.1.5 The Collateral may be sold as is and without any
preparation for sale.
16.2 Notwithstanding any provision of this Agreement, the Secured
Party shall be under no obligation to offer to sell the Collateral. In the
event the Secured Party offers to sell the Collateral, the Secured Party will
be under no obligation to consummate a sale of the Collateral if, in its
reasonable business judgment, none of the offers received by it reasonably
approximates the fair value of the Collateral.
16.3 In the event the Secured Party elects not to sell the Collateral, the
Secured Party may elect to follow the procedures set forth in the Uniform
Commercial Code for retaining the Collateral in satisfaction of the
Debtor's obligation, subject to the Debtor's rights under such procedures.
16.4 In addition to the rights under this Agreement and/or the Financing
Agreement, in the event of a default by the Debtor, the Secured Party shall
be entitled to the appointment of a receiver for the Collateral as a matter of
right whether or not the apparent value of the Collateral exceeds the
outstanding principal amount of the Note and any receiver appointed may
serve without bond. Employment by the Secured Party shall not
disqualify a person from serving as receiver.
Section 17. Waiver of Statute of Limitations. Debtor hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Agreement or to any action brought to enforce the Note or any
other obligation secured by this Agreement and/or the Financing
Agreement.
Section 18. Waiver of Marshaling. Notwithstanding the existence of
any other security interest in the Collateral held by the Secured Party or by
any other party, the Secured Party shall have the right to determine the
order in which any or all of the Collateral shall be subjected to the
remedies provided by this Agreement and/or the Financing Agreement.
The Secured Party shall have the right to determine the order in which any
or all portions of the indebtedness secured by this Agreement are satisfied
from the proceeds realized upon the exercise of the remedies provided in
this Agreement and/or the Financing Agreement. The Debtor, any party
who consents to this Agreement, and any party who now or hereafter
acquires a security interest in the Collateral and who has actual or
constructive notice of this Agreement, hereby waives any and all right to
require the marshaling of assets in connection with the exercise of any of
the remedies permitted by applicable law or by this Agreement and/or the
Financing Agreement.
Section 19. Provisions of Agreement. The Debtor agrees to comply
with the covenants and conditions of the Financing Agreement which is
hereby incorporated by reference in and made a part of this Agreement.
All advances made by the Secured Party pursuant to the Financing
Agreement shall be indebtedness of the Debtor secured by this Agreement,
and such advances may be obligatory as provided in the Agreement. All
sums disbursed by the Secured Party to protect the security of this
Agreement and/or the Financing Agreement up to the principal amount of
the Note shall be treated as disbursements pursuant to such Agreements.
All such sums shall bear interest from the date of disbursement at the rate
stated in the Note, unless collection from the Debtor of interest at such rate
would be contrary to applicable law in which event such amount shall bear
interest at the highest rate which may be collected from the Debtor under
applicable law. In case of a breach by the Debtor of the covenants and
conditions of the Agreement, the Secured Party at the Secured Party's
option (i) may invoke any of the rights or remedies provided in the
Agreement, (ii) may accelerate the sums secured by this Agreement and
invoke the remedies provided in this Agreement or, (iii) may do both.
Section 20. Remedies Cumulative. Each remedy provided in this
Agreement and/or the Financing Agreement is distinct and cumulative to
all other rights or remedies under this Agreement and/or the Financing
Agreement or afforded by law or equity, and may be exercised
concurrently, independently, or successively, in any order whatsoever.
Section 21. Notices. Any notices permitted or required under this
Agreement shall be deemed given upon the date of personal delivery or 48
hours after deposit in the United States mail, postage fully prepaid, return
receipt requested, addressed to Secured Party at:
Norman H. Winer
3050 Multifoods Tower
33 south 6th Street
Minneapolis, Minnesota 55402
with a copy to:
William D. Klein
3400 City Center
33 South 6th Street
Minneapolis, Minnesota 55402
addressed to the Debtor at:
Robert H. Blank
Skyway Advertising, Inc.
12 South 6th Street, Suite 1126
Minneapolis, Minnesota 55402
or at any other address as any party may, from time to time, designate by
notice given in compliance with this Section.
Section 22. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota.
Section 23. Titles and Captions. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part
of the context nor effect the interpretation of this Agreement.
Section 24. Entire Agreement. This Agreement and the Note and other
agreements executed contemporaneously hereto contain the entire under-
standing between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter
of this Agreement.
Section 25. Agreement Binding. This Agreement shall be binding
upon the heirs, executors, administrators, successors and assigns of the
parties hereto.
Section 26. Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which
the designated period of time begins to run shall be included, unless it is a
Saturday, Sunday or a legal holiday, in which event the period shall begin
to run on the next day which is not a Saturday, Sunday or legal holiday, in
which event the period shall run until the end of the next day thereafter
which is not a Saturday, Sunday or legal holiday.
Section 27. Pronouns and Plurals. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may require.
Section 28. Presumption. This Agreement or any section thereof shall
not be construed against any party due to the fact that said Agreement or
any section thereof was drafted by said party.
Section 29. Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such
action as may be necessary or appropriate to achieve the purposes of this
Agreement and the Financing Agreement.
Section 30. Parties in Interest. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
Section 31. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is
held invalid, shall not be affected thereby.
Dated:
SKYWAY ADVERTISING, INC.
Norman Winer
By:
Robert H. Blank
Its: Executive Vice-President
GUARANTEE OF REPAYMENT
The undersigned, Robert H. Blank and Ann E. Tatlock do hereby
personally guarantee repayment to Norman Winer of all indebtedness of
Skyway Advertising, Inc. growing out of that certain Bridge Financing
Agreement and Promissory Note executed this Day of November,
1995.
Robert H. Blank
Ann E. Tatlock
TEMPORARY WAIVER OF RIGHT TO PUT
WHEREAS, the undersigned is a record owner of
shares of Series Convertible Preferred Stock of Skyway Advertising,
Inc. (the "Company"); and
WHEREAS, the Company proposes to enter into a Bridge
Financing Agreement (the "Agreement") with an unrelated lender
("Lender") in the form attached hereto as Exhibit "A", as revised; and
WHEREAS, the undersigned agrees that the proposed financing is
in the best interests of the Company; and
WHEREAS, as a condition of the financing proposed by said
Agreement, the Company has been asked to request that its holders of
Series A and/or Series B Convertible Preferred Stock waive their right to
"put" their shares to the Company until after the proposed indebtedness is
repaid in full;
NOW, IN CONSIDERATION OF THE FOREGOING,
I, , a record owner of
shares of the Series Convertible Preferred Stock of the Company, do
hereby waive my right to put my preferred shares to the Company at any
time until after the above-described indebtedness of the Company to
Lender is repaid in full. I understand that the lender is relying upon this
waiver in entering into and performing the Bridge Financing Agreement.
Dated: November , 1995
SUBORDINATION AGREEMENT
WHEREAS, Skyway Advertising, Inc. (the "Company") proposes
to enter into a Bridge Financing Agreement (the "Agreement") with
Norman Winer ("Winer" or "Lender") in the form attached hereto as
Exhibit "A"; and
WHEREAS, the undersigned agree that the financing proposed
by said Agreement is in the best interests of the Company; and
WHEREAS, the proceeds of said financing are designated by the
Company as partial payment of the agreed upon redemption of the
common stock of the Company heretofore owned by the undersigned; and
WHEREAS, the said financing is to be repaid not later than 120
days after closing scheduled to take place on or about November 17, 1995;
and
WHEREAS, as a condition of the financing proposed by said
Agreement, the related creditors of the Company must subordinate their
interest, including security interests, and forgo repayment of all debts
owing until after the proposed indebtedness to Winer is repaid in full;
NOW, IN CONSIDERATION OF THE FOREGOING,
We, Mark W. Lease and Michael W. Lease, do hereby agree to
subordinate our rights to repayment of all debts from the Company,
whether now owing or hereafter created; owed to us jointly, severally or in
the name of our partnership, Lease Companies, Inc.; until the above-described
indebtedness of the Company to Norman Winer is repaid in full.
Dated: November , 1995
Mark W. Lease
Michael W. Lease
EXHIBIT 10.3
ILLUMINATED MEDIA INC.
15 S. Fifth Street, Suite 715
Minneapolis, MN 55402
(612) 338-3554 FAX 370-0381
TOLL-FREE: 800-776-0732
SKYWAY ADS DISCOVERSCREEN IM3-D
The undersigned advertiser, hereinafter called the Lessee, hereby authorizes
SKYWAY ADVERTISING, hereinafter called the Lessor, to lease__________________
___________ locations and to construct, erect and /or maintain ______________
___________________ indoor advertising display(s) on the following
locations;
In consideration of the foregoing and mutual promises herein contained. It is
agreed as follows:
l.) Lessee agrees lo pay $ __________________________________________ Dollars
in a lump sum as production cost) and/or $_______________ Dollars (for the
first and last month of this agreement) and $______________________________
_______________________ Dollars per month thereafter to the Lessor for the
full term of this, Lease. The first such monthly payment will become due and
payable on the first day of each month. Succeeding monthly payments will
become due and payable on the first day of each and every succeeding
calendar month, until the expiration of the within Lease. This Agreement
shall remain in force and effect for a period of (3) (6) (12) (18) (24) (36)
_____________________ calendar months from the first month's billing date and
shall continue thereafter from year to year on the terms herein agreed
upon, unless either party shall have first given the other written notice of
cancellation thirty (3O) days prior to the expiration date of the current
term. A finance charge not to exceed 11/2 percent per month will be charged
on any past-due balances.
2.) It is understood and agreed that the display, and or space leased hereunder
are especially constructed and erected for Lessee; that it is of no value
unless so used; that Lessor's major expenses of performance hereaher are
fully incurred at the beginning of the term of this Lease and that it is
a material consideration to Lessor in entering into this Lease; that
Lessee shall pay the full rental as herein provided and that Lessee
shall pay all the rental installments promptly when due. If the Lessee is
a corporation or partnership, the Lessor may demand that an individual(s)
provide a personal guarantee that the corporation or partnership will make
the payments required by this Agreement. Further, it the corporation or
partnership fails to make such payments, the personal guarantor will be
individuly liable for the Lessee's obligations pursuant to the terms of
this Agreement. Further, the personal guarantor will execute documents
indicating that he/she will be individually liable for the Lessee's debts
pursuant to the terms of this Agreement.
3.) Should any default occur in payment of rentals as herein provided;
a.) the Lessor may, upon notice of the Lessee, which notice shall
conclusively be deemed sufficient if mailed or delivered to Lessee at the
address herein stated, declaring any balance owing for the unexpired term
to be immediately due and payable, or b.) In lieu of continuing the
Lease and accelerating said rentals as aforesaid, Lessor may, upon like
notice, declare the Lease terminated for said default, and immediately
upon mailing or delivery of said notice, remove and repossess said display
bulletin and recover from Lessee eighty percent (80%) of any balance owing
for the unexpired term as liquidated damage, the same to be Immediately due
and payable within thirty (30) days. The Lessee specifically agrees that
this eighty percent (80%) payment for any balance owing for the unexpired
term is not a penalty but represents a reasonable forecast of general
and special damages the Lessor is likely to incur as a result of a breach
by the Lessee based on knowledge available to the parties at the time this
contract is executed. The Lessee specfically acknowledges that this figure
represents a reasonable forecast of general damages and further acknowledges
that this liquidated damage provision is valid and enforceable.
4.) If for any cause or contingency whatsoever beyond Lessor's control,
induding, without limiting the generallty of the inclusion, acts of God,
war, riots, insurrection, strikes, shortages of labor or materials,
present or future laws, ordinances, rules, orders or regulations. Lessor
shall be unable to maintain any of the spaces covered hereby, this
Agreement shall not terminate in whole or in part, but Lessor
shall allow Lessee credit at the rate specified for the period
during which such service shall not be furnished, such credit to be
rendered by extending the advertising service to be of at least equal value
with the amount of such credit.
5.) If, for any reason whatsoever the Lessor is unable to secure one or all of
the spaces described above, the Lessee will not have specific performance of
this contract as an available remedy. As an alternative to specific
performance, the Lessor may satisfy its obligation under this Agreement
by providing an equivalent location.
6.) The Lessee may only assign its rights pursuant to the terms of this Lease
with the express written approval of the Lessor. Further, the Lessor will
have a right of approval over any advertisement or display on any structure
owned by the Lessor.
7.) The Lessee agrees that if at any time during the term of this lease any
display furnished hereunder is not, in the Lessee's opinion, properly
maintained, he will promptly report same to Lessor in writing.
8.) The written and printed provisions of this agreement embody all of the
parties' agreements, conditions and representations and no prior or
contemporaneous oral or written agreements between parties not contained
herein shall be of any effect.
9.) Lessor agrees to build and erect the structures, and maintain said
structure in good order during the life of this agreement.
10.) The above-referenced display(s) is and will remain the property of the
Lessor and as such cannot be removed or assigned to another advertiser.
11.) Other terms of thls agreement;
_____________________________________________________________________
Dated; _______________________________________________
Received by;
(Subject to acceptance by Lessor) Lessee
________________________________________________________
(Salesman) By:
_______________________________________________________________
Address;
__________________________________________________________
Accepted by;
city; _________________________________ Zip
_____________________
(Lessor) Phone; ___________________________________________________________
1 :\13658\al032990.252
EXHIBIT 10.4
SKYWAY ADVERTISING AGREEMENT
This Agreement by and between Skyway Advertising Inc., of Minneapolis,
Minnesota ("Skyway Ads"), and JEA Plymouth Corporation, of Minneapolis
Minnesota ("Owner") describes the conditions concerning the installation,
operation and eventual removal of advertising wall panel units in that
enclosed pedestrian walkway running through the Plymouth Building:
Ad Panel Units:
Skyway Advertising Inc., will provide high-quality, three-panel units
of advertising which will be attached to the wall space of the "Skyway"
corridor, at the back of the building, and in the street-level entrance
to the parking garage, within the Plymouth Building. The units will be
back-lighted, and contain advertising transparencies for products and
services.
Ad Panel Unit Specifications:
The ads will be a standard size vertically oriented, measuring 2 ft
X 3 ft, resulting in a unit frame of approximately 3 1/2 ft deep by 6 1/2 ft
long, and protruding from the wall by less than 4 inches.
The units will be single-frame, flat black, plexiglass covered. The
unit panel will have a hinged front panel for easy replacement of
advertising transparencies. The units and their installation shall
comply with any and all Governmental codes and ordinances, incli.dlng
those of the Americans With Disabilities Act (ADA).
Community Service Panel:
Skyway Ads will reserve the center panel for civic, arts and other
non-profit/community events, or skyway maps, in order to enhance community
interests and public awareness of events.
Installation, Maintenance, Electrical:
Skyway Ads will be responsible for all installation and maintenance of
the units, and any electrical conduit and fixtures necessary to operate the
units. Electric power for the lighting will be drawn from the nearest
Plymouth Building source to the unit site. All electrical conduit shall
be recessed and Owner shall have final authorization authority
concerning all issues related to installation and aesthetic appearances.
While the power for the lighting will not be significant, Skyway Ads will
pay to Owner an amount calculated by Owner using current NSP assumptions
for the kilowatt hours that the lighting will consume. No electrical
connections for the unit will be visible.
Restoration to Original Condition:
In the event of default, cancellation or expiration of this agreement the
advertising units will be removed from their locations, and Skyway Ads will
restore the wall on which the units were installed to their original condition
within five business days.
Concession Fee to Owner: Right to Review Ads:
Owner will receive a monthly fee amounting to the greate
r of 20% of the advertising revenues due to Skyway Advertising Inc. from
its clients; or the sum of $100 monthly, for each SKYWAY ADS unit location,
except for the garage-level locations, which shall be $50 monthly minimum;
such payments in either event payable to Owner on the 10th day of each month.
Owner will review and approve all potential advertising, and has the right
to refuse any type of advertising for any reason at its sole discretion.
Skyway Ads will not solicit or accept advertising for alcohol or tobacco
products, or certain personal care products deemed to be offensive. Any
ads deemed by Owner to be of an offensive nature shall be immediately
removed by Skyway Ads following written notice by Owner; costs for removal
under such circumstances will be borne solely by Skyway Ads. Failure by
Skyway Ads to respond to such notice shall provide Owner with the right to
terminate this agreement immediately.
Owner will retain the right to audit the books of Skyway
Advertising Inc. in order to ensure proper credit from advertising contracts.
Copies of all ad contracts between Skyway Advertising Inc. and Owner will be
provided to Owner.
Location of Ad Panel Units:
A total of TWO units will be initially installed in the
Plymouth Building. Under no conditions will the ad units be placed on the
skyway bridge. bocations to be specified by Owner.
Term:
This agreement shall be for a term of three (3) years
commencing from the date of signature below), and expiring on the third
anniversary of such date, unless sooner terminated. This agreement may
be terminated prior to the expiration date by either party upon 30 days
advance written notice of either party's intent to so terminate. Should
termination in advance of contract term be initiated by Owner
within the first three months of the term, Owner shall pay all costs of
removal and restoration of the wall space to original condition.
However, if Owner terminates this agreement due to Skyway Ads failure to
maintain their obligations under this agreement, or after the first three
months of the term, then Skyway Ads shall be responsible for all costs of
removal and restoration.
Exclusivity Provisions:
Owner will grant to Skyway Advertising Inc. the exclusive
right to lease wall space from Owner for advertising purposes in the above
referenced skyway corridor, and parking entry, for a period of three (3)
years, commencing upon the execution of this Agreement. Such rights do not
preclude Owner from exercising its ordinary business of remodeling and
improvements, which may alter such available wall space from time to time.
Such exclusive rights of Skyway Advertising Inc. will cease if Owner or
Skyway Advertising Inc., terminates or cancels this agreement.
Owner will retain the right to close off the Skyway area
for any reason, without incurring liability to Skyway Advertising Inc., for
lost advertising revenues.
Subordination:
All items in this Agreement will be subject to Minnesota
law.
By their signature below, both parties acknowledge and agree to terms of the
Agreement as stated above.
/s/ Robert H. Blank /s/ Kenneth
Skyway Advertising Inc. JEA Plymouth Corporation
Exec. Vice President Vice President
Title Title
Date 6-15-94 Date 6-15-94
EXHIBIT 10.5
FIFTEEN BUILDING COMPANY, LLC
March 1,1996
Mr. Bob Blank
Skyway Advertising, Inc.
15 South5thStreet, Suite 715,
Minneapolis, MN 55402
Bob:
Here is the swings space lease as discussed:
REVISED SWING SPACE LEASE
Space: 15 South 5th Street, Suite 715 & its annex across the hall
(suite # to be designated).
Term: 2year
Gross Rent: $500/month
Late Fee: Rent is due on the 1st of each month. To avoid a $25 late
fee, rent must be received by the landlord no later than the 3rd of
each month.
Condition: As is
Landlord rights: Landlord reserves the right to move tenant
at its sole discretion. Additionally, landlord reserves the right to
cancel this agreement with 30 days notice.
Storage: Storage win be made available to tenant and is subject to
availability.
Bob, we are glad to accommodate your swing space needs and hope to eventually
land your firm on a permanent basis.
Accepted and/Agreed on this 1 day of March, 1996, by
/s/ Robert H. Blank (Bob Blank), President of Skyway Advertising, Inc.
105 SOUTH 5TH STREET, SUITE 714 MINNEAPOLIS, MN 55402
PHONE 612 341-3111 FAX 612-337-5308
EXHIBIT 10.6
ILLUMINATED MEDIA INC.
CORPORATE STOCK OPTION PLAN
PURPOSE; EFFECTIVENESS OF THE PLAN
The purpose of the ILLUMINATED MEDIA INC. CORPORATE
STOCK OPTION PLAN (the "Plan") is to advance the interests of
Illuminated Media Inc. (the "Company") and its stockholders by helping
the Company obtain and retain the services of directors, officers and key
employees upon whose judgment, initiative and efforts the Company is
substantially dependent, and to provide those persons with further
incentives to advance the interests of the Company.
This Plan will become effective as of 1996, the date of its
adoption by the Board.
This Plan will remain in effect until it is terminated by the Board or the
Committee (as defined hereafter) under Section VIII hereof, or December
31, 2005.
I. Certain Definitions
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan) will
govern the construction of this Plan, and of any stock option agreements
entered into pursuant to this Plan:
A. "1933 Act" means the Securities Act of 1933, as amended;
B. "1934 Act" means the Securities Exchange Act of 1934, as
amended;
C. "Board" means the Board of Directors of the Company;
D. "Called for under an Option," or words to similar effect, means
issuable pursuant to the exercise of an Option;
E. "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to refer to Sections
of the Code as enacted at the time of this Plan's adoption by the Board and
as subsequently amended, or to any substantially similar successor
provisions of the Code resulting from recodification, renumbering or
otherwise);
F. "Committee" means a committee of two or more individuals,
appointed by the Board, to administer and interpret this Plan; provided that
the term "Committee" will refer to the Board during such times as no
Committee is appointed by the Board;
G. "Company" means Illuminated Media Inc., a Minnesota
corporation, and/or any successor thereto;
H. "Disability" has the same meaning as "permanent and total
disability," as defined in Section 22(e)(3) of the Code;
I. "Eligible Participants" means persons who, at a particular time, are
directors, officers or key employees of the Company or its subsidiaries;
J. "Fair Market Value" means, with respect to the Common Stock, the
following:
1. If the Common Stock is listed or admitted to unlisted trading
privileges on any national securities exchange or is not so listed or
admitted but transactions in the Common Stock are reported on the
NASDAQ National Market System (NMS) or NASDAQ Small
Capitalization Market System (Small-Cap), the last sale price of the
Common Stock on such exchange or reported by the NASDAQ NMS or
Small Cap as of such date (or, if no shares were traded on such day, as of
the next preceding day on which there was such a trade); or
2. If the Common Stock is not so listed or admitted to unlisted
trading privileges, or reported on the NASDAQ NMS or Small-Cap, and
such bid and asked prices are not so reported, such price as the Committee
determines in good faith in the exercise of its reasonable discretion.
K. "NSO" means any option granted under this Plan whether
designated by the Committee as a "non-qualified stock option," a
"non-statutory stock option" or otherwise;
L. "Option" means an option granted pursuant to this Plan entitling
the option holder to acquire shares of Stock issued by the Company
pursuant to the valid exercise of the option;
M. "Option Agreement" means an agreement between the Company
and an Optionee, in form and substance satisfactory to the Committee in
its sole discretion, consistent with this Plan;
N. "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of the Option
Stock called for under such Option;
O. "Option Stock" means Common Stock issued or issuable by the
Company pursuant to the valid exercise of an Option;
P. "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a Transfer
authorized under this Plan;
Q. "Plan" means this Corporate Stock Option Plan of the Company;
R. "Previously Acquired Shares" means shares of Company Common
Stock that are already owned by the Eligible Participant;
S. "Stock" means shares of the Company's Common Stock, $.01 par
value;
T. "Subsidiary" has the same meaning as "Subsidiary Corporation" as
defined in Section 424(f) of the Code;
U. "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift,
attachment or levy of such Option Stock, including without limitation an
assignment for the benefit of creditors of the Optionee, a transfer by
operation of law, such as a transfer by will or under the laws of descent
and distribution, an execution of judgment against the Option Stock or the
acquisition of record or beneficial ownership thereof by a lender or
creditor, a transfer pursuant to a QDRO, or to any decree of divorce,
dissolution or separate maintenance, any property settlement, any
separation agreement or any other agreement with a spouse (except for
estate planning purposes) under which a part or all of the shares of Option
Stock are transferred or awarded to the spouse of the Optionee or are
required to be sold; or a transfer resulting from the filing by the
Optionee of a petition for relief, or the filing of an involuntary petition
against such Optionee, under the bankruptcy laws of the United States or
of any other nation.
II. Eligibility
Participants in the Plan shall be those Eligible Participants who, in the
judgment of the Committee, are performing, or during the term of an
option will perform, services as a director, officer, or key employee with
respect to the management, operation and development of the Company or
any Subsidiary, and significantly contributed, are significantly
contributing or are expected to significantly contribute to the achievement
of corporate objectives. Eligible Participants may be granted from time to
time one or more Options, as may be determined by the Committee in its
sole discretion. The number, type, terms and conditions of the Options
granted to various Eligible Participants need not be uniform, consistent or
in accordance with any plan, regardless of whether such Eligible
Participants are similarly situated. Upon determination by the Committee
that an Option is to be granted to an Eligible Participant, written notice
shall be given such person, specifying the terms, conditions, rights and
duties related thereto. Each Eligible Participant to whom an Option is to
be granted shall enter into an agreement with the Company, in such form
as the Committee shall determine and which is consistent with the
provisions of the Plan, specifying such terms, conditions, rights and duties.
Options shall be deemed to be granted as of the date specified in the grant
resolution of the Committee, and the related option agreements shall be
dated as of such date.
III. Administration
A. Committee. The Committee, if appointed by the Board, will
administer this Plan. If the Board, in its discretion, does not appoint such a
Committee, the Board itself will administer this Plan and take such other
actions as the Committee is authorized to take hereunder; provided that the
Board may take such actions hereunder in the same manner as the Board
may take other actions under the Company's articles of incorporation and
by-laws generally.
A majority of the Committee shall constitute a quorum. Action of
such Committee may be taken without a meeting if unanimous written
consent is given. Such Committee shall act by majority approval of the
members, shall keep minutes of its meetings and written action, and shall
provide copies of such minutes to the Board. Copies of the minutes and
written action shall be kept with the written records of the Company.
From and after the date on which the Company first registers a class
of its equity securities under Section 12 of the 1934 Act, the Plan shall be
administered by the Board, all of whom shall be "disinterested persons"
within the meaning of Rule 16b-3 under the 1934 Act, or a committee
consisting solely of not fewer than two members of the Board who are
such "disinterested persons."
B. Authority and Discretion of Committee. The Committee will have
full and final authority in its discretion, at any time and from time to time,
subject only to the express terms, conditions and other provisions of the
Company's articles of incorporation, by-laws and this Plan, and the
specific limitations on such discretion set forth herein:
1. to select and approve the persons who will be granted Options
under this Plan from among the Eligible Participants, and to grant to any
person so selected one or more Options to purchase such number of shares
of Option Stock as the Committee may determine;
2. to determine the period or periods of time during which Options
may be exercised, the Option Price and the duration of such Options, and
other matters to be determined by the Committee in connection with
specific Option grants and Option Agreements as specified under this
Plan;
3. to interpret this Plan, to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for the operation and administration of this Plan;
and
4. to delegate all or a portion of its authority under subsections
1, 2 and 3 of this Section III to one or more directors of the Company who are
executive officers of the Company, but only in connection with Options
granted to Eligible Participants who are not subject to the reporting and
liability provisions of Section 16 of the 1934 Act, and the rules and
regulations thereunder, and subject to such restrictions and limitations
(such as the aggregate number of shares of Option Stock called for by
such Options that may be granted) as the Committee may decide to impose
on such delegate directors.
C. Limitation on Authority. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no authority:
1. to grant Options to any of its members, whether or not approved
by the Board; and
2. to determine any matters, or exercise any discretion, in
connection with the Options, to the extent that the power to make such
determinations or to exercise such discretion would cause one or more
members of the Committee no longer to be "disinterested persons" within
the meaning of Section III. A. above.
D. Designation of Options. Except as otherwise provided herein, the
Committee will designate any Option granted hereunder as an NSO.
E. Option Agreements. Options will be deemed granted hereunder
only upon the execution and delivery of an Option Agreement by the
Optionee and a duly authorized executive officer of the Company.
Options will not be deemed granted hereunder merely upon the
authorization of such grant by the Committee.
IV. Shares Reserved for Options
A. Option Pool. The aggregate number of shares of Option Stock that
may be issued pursuant to the exercise of Options granted under this Plan
shall be Two HundredThousand (200,000) (the "Option Pool"), provided
that such number will be increased by the number of shares of Option
Stock that the Company subsequently may reacquire through repurchase
or otherwise. Shares of Option Stock that would have been issuable
pursuant to Options, but that are no longer issuable because all or part of
those Options have terminated or expired, will be deemed not to have been
issued for purposes of computing the number of shares of Option Stock
remaining in the Option Pool and available for issuance.
The maximum number of shares authorized may also be increased
from time to time by approval of the Board and, if required pursuant to
Rule 16b-3 under the 1934 Act, Section 422 of the Code, or the applicable
rules of any securities exchange or NASDAQ and/or NASD, the
shareholders of the Company.
B. Adjustments Upon Changes in Stock. In the event of any change
in the outstanding Stock of the Company as a result of a stock split,
reverse stock split, stock dividend, recapitalization, combination or
reclassification, reorganization, merger, consolidation, liquidation, rights
offering, extraordinary dividend or divesture (including a spin-off) or any
other change in the corporate structure or shares of the Company,
appropriate proportionate adjustments will be made (in order to prevent
dilution or enlargement of Eligible Participants) in: (1) the aggregate
number of shares of Option Stock in the Option Pool that may be issued
pursuant to the exercise of Options granted hereunder; (2) the Option Price
and the number of shares of Option Stock called for in each outstanding
Option granted hereunder; and (3) other rights and matters determined on
a per share basis under this Plan or any Option Agreement hereunder. Any
such adjustments will be made only by the Board (or, if the Company is
not the surviving corporation in any such transaction, the board of
directors of the surviving corporation), and when so made will be
effective, conclusive and binding for all purposes with respect to this Plan
and all Options then outstanding. No such adjustments will be required by
reason of the issuance or sale by the Company for cash or other
consideration of additional shares of its Stock or securities convertible into
or exchangeable for shares of its Stock.
V. Terms of Stock Option Agreements
Each Option granted pursuant to this Plan will be evidenced by an
agreement (an "Option Agreement") between the Company and the person
to whom such Option is granted, in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Plan. Without
limiting the foregoing, each Option Agreement (unless otherwise stated
therein) will be deemed to include the following terms and conditions:
A. Covenants of Optionee. At the discretion of the Committee, the
person to whom an Option is granted hereunder, as a condition to the
granting of the Option, must execute and deliver to the Company a
confidential information agreement approved by the Committee. Nothing
contained in this Plan, any Option Agreement or in any other agreement
executed in connection with the granting of an Option under this Plan will
confer upon any Optionee any right with respect to the continuation of his
or her status as an employee of, officer of, or director of, the Company or
its subsidiaries.
B. Vesting. An Option shall become exercisable at such times and in
such installments (which may be cumulative) as shall be determined by the
Committee in its sole discretion at the time the Option is granted. Upon
the completion of its exercise period, an Option, to the extent not then
exercised, shall expire.
C. Exercise of the Option.
1. Mechanics and Notice. An Option may be exercised to the
extent exercisable (a) by giving written notice of exercise to the
Company, specifying the number of full shares of Option Stock to be
purchased and accompanied byfull payment of the Option Price thereof
and the amount of withholding taxes pursuant to subsection V.C.2 below;
and (b) by giving assurances satisfactory to the Company that the shares of
Option Stock to be purchased upon such exercise are being purchased for
investment and not with a view to resale in connection with any
distribution of such shares in violation of the 1933 Act; provided,
however, that in the event the Option Stock called for under the
Option is registered under the 1933 Act, or in the event resale of such
Option Stock without such registration would otherwise be permissible,
this second condition will be inoperative if, in the opinion of counsel for
the Company, such condition is not required under the 1933 Act, or any
other applicable law, regulation or rule of any governmental agency.
2. Withholding Taxes. As a condition to the issuance of the shares
of Option Stock upon full or partial exercise of an Option granted under
this Plan, the Optionee will pay to the Company in cash, or in such other
form as the Committee may determine in its discretion, the amount of the
Company's tax withholding liability, if any, required in connection with
such exercise. For purposes of this subsection V.C.2, "tax withholding
liability" will mean all federal and state income taxes, social security tax,
and any other taxes applicable to the compensation income arising from
the transaction required by applicable law to be withheld by the Company.
3. Payment of Option Price. Each Option Agreement will specify
the Option Price with respect to the exercise of Option Stock thereunder,
to be fixed by the Committee in its discretion, but in no event will the
Option Price for an NSO granted hereunder be less than Fair Market
Value. The Option Price will be payable to the Company in United States
dollars in cash or by check or, such other form of consideration as may be
approved by the Committee, in its discretion.
In determining whether or upon what terms and conditions an
Eligible Participant will be permitted to pay the purchase price of an
Option in a form other than cash, the Committee may consider all relevant
facts and circumstances, including, without limitation, the tax and
securities law consequences to the Company. In the event the Eligible
Participant is permitted to pay the purchase price of an Option in whole or
in part with Previously Acquired Shares and/or the surrender of Options,
the value of such Previously Acquired Shares and/or the shares covered by
such Options shall be equal to their Fair Market Value on the date of
exercise of the Option.
D. Termination of the Option. Except as otherwise provided herein,
each Option Agreement will specify the period of time, to be fixed by the
Committee in its discretion, during which the Option granted therein will
be exercisable, not to exceed ten years from the date of grant in the case of
an NSO (the "Option Period"). To the extent not previously exercised,
each Option will terminate upon the expiration of the Option Period
specified in the Option Agreement; provided, however, that each such
Option will terminate, if earlier: (i) twelve months after the date that the
Optionee ceases to be an Eligible Participant by reason of such person
termination of service as an officer, director or employee; or (ii) six
months after the date that the Optionee ceases to be an Eligible Participant
by reason of such person's death or disability. In the event of a sale of all
or substantially all of the assets of the Company, or a merger or
consolidation or other reorganization in which the Company is not the
surviving corporation, or in which the Company becomes a subsidiary of
another corporation (any of the foregoing events, a "Corporate
Transaction"), then notwithstanding anything else herein, the successor
corporation must agree to assume the outstanding Options or substitute
therefor comparable options of such successor corporation or a parent or
subsidiary of such successor corporation.
Unless the committee shall otherwise determine in its sole
discretion, an Eligible Participant's service shall, for purposes of the Plan,
be deemed to have terminated on the date such Eligible Participant ceases
to perform services for the Company and all Subsidiaries, as determined in
good faith by the Committee.
E. Limited Transferability. Unless otherwise directed by the Board,
no Option will be transferable by the Optionee otherwise than by (i) will
or the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order (as defined by the Code), or (iii) if the Optionee is
a corporation, limited liability company, or partnership, distribution to the
shareholders or partners thereof. During the lifetime of the Optionee, the
Option will be exercisable only by him/her/it, or the transferee if it was
transferred pursuant to this subpart.
F. Qualification of Stock. The right to exercise an Option will be
further subject to the requirement that if at any time the Board determines,
in its discretion, that the listing, registration or qualification of the shares
of Option Stock called for thereunder upon any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory authority, is necessary or desirable as a condition
of or in connection with the granting of such Option or the purchase of
shares of Option Stock thereunder, the Option may not be exercised, in
whole or in part, unless and until such listing, registration, qualification,
consent or approval is effected or obtained free of any conditions not
acceptable to the Board, in its discretion.
G. Additional Restrictions on Transfer. By accepting Options and/or
Option Stock under this Plan, the Optionee will be deemed to represent,
warrant and agree as follows:
1. Securities Act of 1933. The Optionee understands that the
shares of Option Stock have not been registered under the 1933 Act, and
that such shares are not freely tradeable and must be held indefinitely
unless such shares are either registered under the 1933 Act or an
exemption from such registration is available. The Optionee understands
that the Company is under no obligation to register the shares of Option
Stock.
2. Other Applicable Laws. The Optionee further understands that
Transfer of the Option Stock requires full compliance with the provisions
of all applicable laws.
3. Investment Intent. Unless a registration statement is in effect
with respect to the sale of Option Stock obtained through exercise of
Options granted hereunder: (a) upon exercise of any Option, the Optionee
will purchase the Option Stock for his/her/its own account and not with a
view to distribution within the meaning of the 1933 Act, other than as may
be effected in compliance with the 1933 Act and the rules and regulations
promulgated thereunder; (b) no one else will have any beneficial interest
in the Option Stock; and (c) he/ she/it has no present intention of disposing
of the Option Stock at any particular time.
H. Compliance with Law. Notwithstanding any other provision of
this Plan, Options may be granted pursuant to this Plan, and Option Stock
may be issued pursuant to the exercise thereof by an Optionee, only after
there has been compliance with all applicable federal and state securities
laws, and all of the same will be subject to this overriding condition. The
Company will not be required to register or qualify Option Stock with the
Securities and Exchange Commission ("SEC") or any State agency, except
that the Company will register with, or as required by local law, file for
and secure an exemption from such registration requirements from, the
applicable securities administrator and other officials of each jurisdiction
in which an Eligible Participant would be granted an Option hereunder
prior to such grant.
I. Stock Certificates. Certificates representing the Option Stock
issued pursuant to the exercise of Options will bear all legends required by
law and necessary to effectuate this Plan's provisions. The Company may
place a "stop transfer" order against shares of the Option Stock until all
restrictions and conditions set forth in this Plan have been complied with.
Unless a registration statement under the 1933 Act and applicable
state securities laws is in effect with respect to the issuance or transfer of
the shares of Stock under the Plan, each certificate representing any such
shares shall be endorsed with a legend in substantially the following form,
unless counsel for the Company is of the opinion as to any such certificate
that such legend is unnecessary:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR UNDER APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT AND SUCH STATE LAWS OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH IS
TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
J. Notices. Any notice to be given to the Company under the terms of
an Option Agreement will be addressed to the Company at its principal
executive office, Attention: Corporate Secretary, or at such other address
as the Company may designate in writing. Any notice to be given to an
Optionee will be addressed to the Optionee at the address provided to the
Company by the Optionee. Any such notice will be deemed to have been
duly given if and when enclosed in a properly sealed envelope, addressed
as aforesaid, registered and deposited, postage and registry fee prepaid, in
a post office or branch post office regularly maintained by the United
States Government.
K. Other Provisions. The Option Agreement may contain such other
terms, provisions and conditions, including such special forfeiture
conditions, rights of repurchase, rights of first refusal and other
restrictions on Transfer of Option Stock issued upon exercise of any
Options granted hereunder, not inconsistent with this Plan, as may
be determined by the Committee in its sole discretion.
L. Rights as a Shareholder. The Eligible Participant shall have no
rights as a shareholder with respect to any shares of Company Common
Stock covered by an Option until the Optionee shall have become the
holder of record of such shares.
M. Employment of Service. Nothing in this Plan shall interfere with
or limit in any way the right of the Company or any Subsidiary to
terminate the service of any Eligible Participant at any time, nor confer
upon any Eligible Participant any right to continue in the service of the
Company or any Subsidiary.
N. Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved
compensation plans or programs entered into by the Company. The Plan
will be construed to be in addition to any and all other plans or programs.
Neither the adoption of the plan nor the submission of the Plan to the
shareholders of the Company for approval will be construed as creating
any limitations on the power or authority of the Board to adopt such
additional or other compensation arrangements as the Board may deem
necessary or desirable.
VI. Proceeds from Sale of Stock
Cash proceeds from the sale of shares of Option Stock issued from time
to time upon the exercise of Options granted pursuant to this Plan will be
added to the general funds of the Company and as such will be used from
time to time for general corporate purposes.
VII. Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations of this
Plan, the Committee may modify, extend or renew outstanding Options
granted under this Plan, or accept the surrender of outstanding Options (to
the extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, however, no modification of any Option
will, without the consent of the holder of the Option, alter or impair any
rights or obligations under any Option theretofore granted under this Plan.
VIII. Amendment and Discontinuance
The Board may amend, suspend or discontinue this Plan at any time or
from time to time; provided further that no such action may, without the
approval of the stockholders of the Company, materially increase (other
than by reason of an adjustment pursuant to Section IV.B hereof) the
maximum aggregate number of shares of Option Stock in the Option Pool
that may be issued under Options granted pursuant to this Plan or
materially increase the benefits accruing to Plan participants or materially
modify eligibility requirements for the participants. Moreover, no such
action may alter or impair any Option previously granted under this Plan
without the consent of the holder of such Option.
IX. Plan Compliance with Rule 16b-3
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the Plan or action by the Plan administrators fails
so to comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Plan administrators.
X. Miscellaneous
A. Construction and Headings. The use of the masculine gender shall
also include within its meaning the feminine, and the singular may include
the plural and the plural may include the singular, unless the context
clearly indicates to the contrary, The headings of the Sections and subparts
of the Plan are for convenience of reading only and are not meant to be of
substantive significance and shall not add or detract from the meaning of
such Section or subpart.
B. Governing Law. The place of administration of the Plan shall be
conclusively deemed to be within the State of Minnesota, and the rights
and obligations of any and all persons having or claiming to have had an
interest under the Plan or under any agreements evidencing Options shall
be governed by and construed exclusively and solely in accordance with
the laws of the State of Minnesota without regard to the conflict of laws
provisions of any jurisdiction. All parties agree to submit to the
jurisdiction of the state and federal courts of Minnesota with respect to
matters relating to the Plan and agree not to raise or assert the defense that
such forum is not convenient for such party.
C. Successors and Assigns. This Plan shall be binding upon and inure
to the benefit of the successors and permitted assigns of the Company,
including without limitation, whether by way of merger, consolidation,
operation of law, assignment, purchase or other acquisition of substantially
all of the assets or business of the Company, and any and all such
successors and assigns shall absolutely and unconditionally assume all of
the Company's obligations under the Plan.
D. Survival of Provisions. The rights, remedies, agreements,
obligations and covenants contained in or made pursuant to the plan, any
agreement evidencing an Option and any other notices or agreements in
connection therewith, including, without limitation, any notice of exercise
of an Option, shall survive the execution and delivery of such notices and
agreements and the delivery and receipt of shares of Common stock and
shall remain in full force and effect.
XI. Copies of Plan
A copy of this Plan will be delivered to each Optionee at or before the
time he or she executes an Option Agreement.
________________
[SPECIMEN FORM]
ILLUMINATED MEDIA INC.
1996 CORPORATE STOCK OPTION PLAN
Stock Option Agreement
Form CASH
THIS AGREEMENT is made as of __________, 199_, between
ILLUMINATED MEDIA INC., a Minnesota corporation (the
"Company"), and ___________________________ (the "Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. Option Grant. The Company hereby grants to the Optionee an
option (the "Option") to purchase the number of shares of the Company's
Common Stock (the "Shares"), for an exercise price per share (the "Option
Price") and based upon a Grant Date, all as set forth below:
Shares under option: ___________
Option Price per Share: $ ______
Grant Date: ___________, 199_
The Option will be subject to all of the terms and conditions set forth
herein and in the Company's 1996 Corporate Stock Option Plan (the
"Option Plan"), a copy of which is attached hereto and incorporated by
reference. The Option granted hereunder will be a nonstatutory or
nonqualified option for tax purposes.
2. Stockholder Rights. No rights or privileges of a stockholder in the
Company are conferred by reason of the granting of the Option. Optionee
will not become a stockholder in the Company with respect to the Shares
unless and until the Option has been properly exercised and the Option
Price fully paid as to the portion of the Option exercised.
3. Termination. Subject to earlier termination as provided in the
Option Plan, this Option will expire, unless previously exercised in full, on
December __, 199_.
4. Terms of the Option Plan. The Optionee understands that the Option
Plan includes important terms and conditions that apply to this Option.
Those terms include (without limitation): important conditions to the right
of the Optionee to exercise the Option; important restrictions on the ability
of the Optionee to transfer the Option or to transfer Shares received upon
exercise of the Option; and early termination of the Option following the
occurrence of certain events, including the Optionee no longer being an
advisor or consultant to or of the Company or its subsidiaries. The
Optionee acknowledges that he/she/it has read the Option Plan, agrees to
be bound by its terms, and makes each of the representations required to
be made by the Optionee under it.
5. Miscellaneous. This Agreement (together with the Option Plan) sets
forth the complete agreement of the parties concerning the subject matter
hereof, superseding all prior agreements, negotiations and understandings.
This Agreement will be governed by the substantive law of the State of
Minnesota, and may be executed in counterparts.
The parties hereby have entered into this Agreement as of the date set
forth above.
ILLUMINATED MEDIA INC.
By ______________________
An Authorized Officer
OPTIONEE
_________________________
Address:
_________________________
_________________________
_________________________
Attachments: (1) Spousal Consent
(2) 1996 Corporate Stock Option Plan
SPOUSAL CONSENT
The undersigned is the spouse of the Optionee referred to in the
attached Illuminated Media Inc.1996 Corporate Stock Option Plan
Agreement (the "Agreement"). The undersigned acknowledges that he or
she:
1. has received, reviewed and understands the terms of the Agreement
(including its attachments);
2. consents to the Agreement, and agrees to be bound by its terms to the
extent that he or she now has or may obtain any interest in the Option or
Shares covered by the Agreement; and
3. understands that the Company is relying upon this consent in
entering into the Agreement and in not taking further steps to protect its
interests.
Date: ________, 199_
________________________
________________________
Print Name
[SPECIMEN FORM]
ILLUMINATED MEDIA INC.
1996 CORPORATE STOCK OPTION PLAN
Stock Option Agreement
Form NOCASH
THIS AGREEMENT is made as of ________, 199_, between
Illuminated Media Inc., a Minnesota corporation (the "Company"), and
__________________________ (the "Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. Option Grant. The Company hereby grants to the Optionee an
option (the "Option") to purchase the number of shares of the Company's
Common Stock (the "Shares"), for an exercise price per share (the "Option
Price") and based upon a Grant Date, all as set forth below:
Shares under option: ___________
Option Price per Share: $ ______
Grant Date: ___________, 199_
The Option will be subject to all of the terms and conditions set forth
herein and in the Company's 1996 Corporate Stock Option Plan (the
"Option Plan"), a copy of which is attached hereto and incorporated by
reference. The Option granted hereunder will be a nonstatutory or
nonqualified option for tax purposes.
2. Exercise Price. The Optionee may pay the Option Price for Shares, in
his or her sole discretion, by either:
(a) paying the Option Price in cash; or
(b) paying with Previously Acquired Shares; or
(c) paying the Option Price through surrendering that number of
Options covering the number of underlying shares of Common Stock the
fair market value of which shares equal the Option Price.
3. Stockholder Rights. No rights or privileges of a stockholder in the
Company are conferred by reason of the granting of the Option. Optionee
will not become a stockholder in the Company with respect to the Shares
unless and until the Option has been properly exercised and the Option
Price fully paid as to the portion of the Option exercised.
4. Termination. Subject to earlier termination as provided in the
Option Plan, this Option will expire, unless previously exercised in full, on
December __, 199_.
5. Terms of the Option Plan. The Optionee understands that the Option
Plan includes important terms and conditions that apply to this Option.
Those terms include (without limitation): important conditions to the right
of the Optionee to exercise the Option; important restrictions on the ability
of the Optionee to transfer the Option or to transfer Shares received upon
exercise of the Option; and early termination of the Option following the
occurrence of certain events, including the Optionee no longer being an
advisor or consultant to or of the Company or its subsidiaries. The
Optionee acknowledges that he/she/it has read the Option Plan, agrees to
be bound by its terms, and makes each of the representations required to
be made by the Optionee under it.
6. Miscellaneous. This Agreement (together with the Option Plan) sets
forth the complete agreement of the parties concerning the subject matter
hereof, superseding all prior agreements, negotiations and understandings.
This Agreement will be governed by the substantive law of the State of
Minnesota, and may be executed in counterparts.
The parties hereby have entered into this Agreement as of the date set
forth above.
ILLUMINATED MEDIA INC.
By ______________________
An Authorized Officer
OPTIONEE
_________________________
Address:
_________________________
_________________________
_________________________
Attachments: (1) Spousal Consent
(2) 1996 Corporate Stock Option Plan
SPOUSAL CONSENT
The undersigned is the spouse of the Optionee referred to in the
attached Illuminated Media Inc. 1996 Corporate Stock Option Plan
Agreement (the "Agreement"). The undersigned acknowledges that he or
she:
1. has received, reviewed and understands the terms of the Agreement
(including its attachments);
2. consents to the Agreement, and agrees to be bound by its terms to the
extent that he or she now has or may obtain any interest in the Option or
Shares covered by the Agreement; and
3. understands that the Company is relying upon this consent in
entering into the Agreement and in not taking further steps to protect its
interests.
Date: ________, 199_
________________________
________________________
Print Name
[Sample Form of Notice to Optionee]
MEMORANDUM
Date:___________
To: ________________
From: Robert H. Blank
Chief Executive Officer
Illuminated Media Inc.
Subject: 1996 CORPORATE STOCK OPTION PLAN
I am pleased to inform you that the Board of Directors recently
awarded you a non-statutory stock option to purchase ___________ shares
of the Company's Common Stock at an exercise price of $_____ per share.
This option was granted on _________, 199_ under the 1996 Corporate
Stock Option Plan and vests as of the grant date.
Please enter your address on the enclosed Stock Option Agreement,
sign the original copy of the Agreement and return it to me as soon as
practicable. Attached to the Agreement is a Spousal Consent which your
spouse should sign and date. A duplicate copy of the Agreement is
included for your files. Attached to your copy of the agreement as Exhibit
A is a copy of the 1996 Corporate Stock Option Plan.
If you desire to exercise a vested portion of your option, I will assist
you in arranging for the execution of the necessary papers. If you have
any questions regarding your option, please contact me.
CONGRATULATIONS!
Enclosure
NOTICE OF EXERCISE OF OPTION
To: Illuminated Media Inc.
Office of the Corporate Secretary
From: ______________________
(Optionee)
Address:
___________________
___________________
___________________
Social Security Number: _____________
1. Exercise of Option. I am the holder of an option or options granted
under the 1996 Corporate Stock Option Plan (the "Plan") and that certain
Stock Option Agreement dated _______, 199_. I hereby irrevocably elect
to exercise the purchase rights represented by such option, and to purchase
thereunder __________________ (_______) shares of Common Stock of
Illuminated Media Inc. (the "Company") at $_____ per share, for an
aggregate exercise price of $________, to be paid by me in one or more of
the following forms (indicate the amount for each form that applies):
[ ] $_________ by delivering herewith cash or a check made payable
to Illuminated Media Inc.; or
[ ] $_________ by the delivery herewith of
certificate(s) numbered _______ representing shares of Common
Stock of the Company with a fair market value on the date hereof equal to
$_____ per share (and, if such certificate represents shares in excess
of the number required to achieve the amount indicated in the left margin,
requesting that the Company or its transfer agent deliver to me a certificate
or certificates for the balance of the shares represented thereby), together
with a stock power executed in blank; or
[ ] $_________ by delivering to __________________________
("Broker") an irrevocable direction (two copies of which I have completed,
executed and attached hereto), to sell that number of shares of the stock to
be acquired hereby and to deliver the proceeds thereof to the Company in
the amount indicated in the left margin; or
[ ] $_________ by the delivery herewith of the Stock Option
Agreement dated _______, 199_, representing Options to purchase ____
shares of Common Stock of the Company with the shares having a fair
market value on the date hereof equal to $_____ per share
(and, if such Stock Option Agreement represents shares in excess of the
number required to achieve the amount indicated in the left margin,
requesting that the Company or its transfer agent deliver to me a Stock
Option Agreement for the balance of the Options represented
thereby).
I request that certificate(s) for such shares be registered and issued in the
name set forth above. The certificate(s) issued upon exercise of the
aforesaid option should be mailed to my address indicated above via first
class mail. I acknowledge that the Option Exercise Date is the date upon
which this notice and the required payment are received in the Office of
the Secretary of the Company.
2. Other Acknowledgements.
(a) I acknowledge receipt of copies of the Company's most
recent 10K and/or Annual Report to Shareholders, and 10Q.
(b) I am aware that the Securities Act of 1933, as amended, and the
regulations and requirements of the Securities and Exchange Commission
thereunder, may impose limitations on the resale of Company stock
acquired pursuant to this option exercise. I hereby certify that any resale
of such stock will be made incompliance with the Act and those
regulations and requirements
(c) I hereby appoint ________________ as my agent to accept delivery
of the shares of Company stock being purchased on my behalf pursuant to
this option exercise, and request ________________ to forward the
certificates representing those shares to me at the address shown above.
Dated:_________, 199_
_______________________
Optionee
EXHIBIT 10.7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of , 1996 is
by and between Illuminated Media Inc., a Minnesota corporation (the
"Company"), and , a Minnesota resident (the "Executive").
Whereas, the Company desires to employ the Executive in the
capacity of ; and
Whereas, the Executive possesses certain unique skills, talents,
contacts, judgment and knowledge of the Company's businesses, strategies,
ethics and objectives; and
Whereas, in order to provide for continuity in the executive
management of the Company, which continuity is deemed to be vital to the
continued growth and success of the Company, and in order that the
Company may continue to avail itself of the unique skills, talents, contacts,
judgment and knowledge of Executive, the Company desires to ensure the
retention of Executive in the employ of the Company; and
Whereas, the Executive desires to be assured of a secure tenure with
the Company, duties and responsibilities commensurate with Executive's
education, experience and background, and salary, bonus, incentive
compensation and other benefits and perquisites at levels that reflect
Executive's anticipated future contributions to the Company;
In consideration of the foregoing premises and the parties' mutual
covenants and undertakings contained in this Agreement, the Company and
Executive agree as follows:
ARTICLE I. DEFINITIONS
Capitalized terms used in this Agreement shall have their defined
meaning throughout the Agreement. The following terms shall have the
meanings set forth below, unless the context clearly requires otherwise.
1.1 "Agreement" means this Executive Employment Agreement,
as from time to time amended.
1.2 "Base Salary" means the total annual cash compensation
payable on a regular periodic basis, without regard to voluntary or mandatory
deferrals, as set forth at paragraph 3.1 of this Agreement.
1.3 "Beneficiary" means the person or persons designated in
writing to the Company by Executive to receive benefits payable after
Executive's death pursuant to paragraph 3.5 of this Agreement. In the absence
of such designation or in the event that all of the persons so designated
predecease Executive, Beneficiary means the executor, administrator or
personal representative of Executive's estate.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Cause" has the meaning set forth at paragraph 4.2 of this
Agreement.
1.6 "Company" means all of the following, jointly and
severally:
(a) Illuminated MediaInc.; (b) any Subsidiary; and (c) any Successor.
1.7 "Confidential Information" means information that is
proprietary to the Company or proprietary to others and entrusted to the
Company, whether or not trade secrets. Confidential Information includes,
but is not limited to, information relating to business plans and to business
as conducted or anticipated to be conducted, and to past or current or
anticipated products. Confidential Information also includes, without
limitation, information concerning research, development, purchasing,
accounting, marketing, selling and services. All information that Executive
has a reasonable basis to consider confidential is Confidential Information,
whether or not originated by Executive and without regard to the manner in
which Executive obtains access to this and any other proprietary information.
1.8 "Date of Termination" has the meaning set forth at paragraph
4.6(b) of this Agreement.
1.9 "Disability" means the unwillingness or inability of Executive
to perform Executive's duties under this Agreement because of incapacity due
to physical or mental illness, bodily injury or disease for a period of twelve
(12) months.
1.10 "Good Reason" has the meaning set forth at paragraph 4.3 of
this Agreement.
1.11 "Notice of Termination" has the meaning set forth at paragraph
4.6(a) of this Agreement.
1.12 "Plan" means any bonus or incentive compensation
agreement, plan, program, policy or arrangement sponsored, maintained or
contributed to by the Company, to which the Company is a party or under
which employees of the Company are covered, including,without limitation,
any stock option, restricted stock or any other equity-based compensation
plan, annual or long-term incentive (bonus) plan, and any employee benefit
plan, such as a thrift, pension, profit sharing, deferred compensation, medical,
dental, disability, accident, life insurance, automobile allowance, perquisite,
fringe benefit, vacation, sick or parental leave, severance or relocation plan
or policy or any other agreement, plan, program, policy or arrangement
intended to benefit employees or executive officers of the Company.
1.13 "Subsidiary" means any corporation at least a majority of
whose securities having ordinary voting power for the election of directors
(other than securities having such power only by reason of the occurrence of
a contingency) is at the time owned by the Company and/or one (1) or more
Subsidiaries.
1.14 "Successor" has the meaning set forth at paragraph 7.2 of this
Agreement.
ARTICLE II. EMPLOYMENT DUTIES AND TERM
2.1 Employment. Upon the terms and conditions set forth in this
Agreement, the Company hereby employs Executive, and Executive accepts
such employment as of the Company. Except as expressly
provided herein, termination of this Agreement by either party or by mutual
agreement of the parties shall also terminate Executive's employment by the
Company.
2.2 Duties. During the term of this Agreement, and excluding
any periods of vacation, sick, disability or other leave to which Executive
is entitled, Executive agrees to devote, reasonable attention and time
during normal business hours to the business and affairs of the Company
to the extent necessary to discharge the responsibilities assigned to
Executive hereunder and in the Company's bylaws, as amended from time
to time, to use Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities.
2.3 Certain Proprietary and/or Confidential Information. If
Executive possesses any proprietary and/or confidential information of
another person or entity as a result of prior employment or professional
relationship, Executive shall honor any legal obligation that Executive has
with that person or entity with respect to such proprietary and/or confidential
information.
2.4 Term. Subject to the provisions of Article IV, the term of
employment of Executive under this Agreement shall continue until
2.5 Return of Proprietary Property. Executive agrees that all
property in Executive's possession belonging to Company, including without
limitation, all documents, reports, manuals, memoranda, computer print-outs,
customer lists, credit cards, keys, identification, products, access cards,
automobiles and all other property relating in any way to the business of the
Company are the exclusive property of the Company, even if Executive
authored, created or assisted in authoring or creating, such property.
Executive shall return to the Company all such documents and property
immediately upon termination of employment or at such earlier time as the
Company may reasonably request.
ARTICLE III. COMPENSATION, BENEFITS AND EXPENSES
3.1 Base Salary. Subject to paragraph 4.7(a), during the term of
Executive's employment under this Agreement and for as long thereafter as
required pursuant to Article IV, the Company shall pay Executive a Base
Salary at an annual rate that is not less than Dollars or such
other annual rate as may from time to time be approved by the Board, such
Base Salary to be paid in substantially equal regular periodic payments in
accordance with the Company's regular payroll practices. If Executive's Base
Salary is increased from time to time during the term of Executive's
employment under this Agreement, the increased amount shall become the
Base Salary for the remainder of the term and any extensions of Executive's
term of employment under this Agreement and for as long thereafter as
required pursuant to Article IV, subject to any subsequent increases.
3.2 Other Compensation and Benefits. During the term of
Executive's employment under this Agreement and for as long thereafter as
required pursuant to Article IV, the Company shall continue in full force and
effect all Plans in which Executive becomes entitled to participate and
thereafter the Company shall take no action adversely affecting Executive's
continued participation in any such Plans on at least as favorable a basis to
Executive as on the date as of which Executive first becomes entitled to
participate in such Plan, or which would materially reduce Executive's
benefits in the future under any such Plans or deprive Executive of any
material benefit enjoyed by Executive as of the date of this Agreement or the
date as of which Executive first becomes entitled to participate in such Plan,
as the case may be. Executive shall be entitled to participate in or receive
benefits under any Plan made available by the Company in the future to its
executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such
Plans. Nothing paid to Executive under any Plan made available in the future
shall be deemed to be in lieu of the Base Salary, bonuses, incentives or
compensation of any other nature otherwise payable to Executive.
3.3 Vacation. For each 12-month period during the term of
Executive's employment under this Agreement, Executive shall be entitled
to twenty (20) vacation days. The time or times at which such vacation
days are to be taken shall be reasonably determined by Executive
consistent with Executive's duties and obligations under this Agreement.
3.4 Business Expenses. During the term of Executive's
employment under this Agreement and for as long thereafter as required
pursuant to Article IV, the Company shall, in accordance with, and to the
extent of, its uniform policies in effect from time to time, bear all ordinary
and necessary business expenses incurred by Executive in performing
Executive's duties as an executive officer of the Company, including, without
limitation, all travel and living expenses while away from home on business
in the service of the Company, social and civic club membership and
participation expenses and entertainment expenses, provided that Executive
accounts promptly for such expenses to the Company in the manner
reasonably prescribed from time to time by the Company.
3.5 Death Benefits. If Executive dies during the term of
Executive's employment under this Agreement, in addition to any death
benefits payable to Executive's Beneficiary pursuant to any Plan, the
Company shall pay to Executive's Beneficiary a monthly benefit in the
amount of for a period of twelve (12) consecutive months
commencing with the month first following the month during which
Executive dies.
3.6 Status of Interest. To the extent that Executive or any other
person acquires a right to receive payments pursuant to paragraph 3.5, such
right shall be no greater than the right of any unsecured general creditor of
the Company.
3.7 Future Grant of Options. Conditioned on Executive remaining
employed by the Company, the Company shall grant to Executive options to
acquire shares of the Company's common stock, par value $.01 per share.
Such options shall be granted pursuant to the Company's Corporate Stock
Option Plan under a stock option agreement to be entered into between
Executive and the Company simultaneously with the execution of this
Agreement.
ARTICLE IV. EARLY TERMINATION
4.1 Early Termination. Subject to the respective continuing
obligations of the parties pursuant to Article V, this Article IV sets forth the
terms for early termination of Executive's employment under this Agreement.
4.2 Termination by the Company for Cause. The Company may
terminate this Agreement for Cause. For purposes of this Agreement,
"Cause" means (a) an act or acts of personal dishonesty taken by Executive
and intended to result in substantial personal enrichment of Executive at the
expense of the Company, (b) repeated violations by Executive of his
obligation under paragraph 2.2 which are demonstrably willful and deliberate
on Executive's part and are not remedied within a reasonable period after
Executive's receipt of notice of such violation from the Company or (c) the
willful engaging by Executive in illegal conduct that is materially
demonstrably injurious to the Company. For purposes of this paragraph 4.2,
no act, or failure to act, on Executive's part shall be considered "dishonest,"
"willful" or "deliberate" unless done, or omitted to be done, by Executive in
bad faith and without reasonable belief that Executive's action or omission
was in, or not opposed to, the best interest of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of the Company.
Notwithstanding.the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than one-half of the entire membership of the Board at a meeting of the
Board called and held for the purpose (after reasonable notice to Executive
and an opportunity for Executive, together with Executive's counsel to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth above in this paragraph 4.2 and
specifying the particulars thereof in detail.
4.3 Termination by Executive for Good Reason. Executive may
terminate Executive's employment under this Agreement for Good Reason
in accordance with the ensuing provisions of this paragraph 4.3. Termination
by Executive for "Good Reason" shall mean termination of employment
based on any one or more of the following:
(a) An adverse change in Executive's status or position as an
executive officer of the Company, including, without
limitation, any adverse change in Executive's status or
position as a result of a material diminution in Executive's
duties, responsibilities or authority as of the date of this
Agreement (or any status or position to which Executive may
be promoted after the date hereof) or the assignment to
Executive of any duties or responsibilities which, in
Executive's reasonable judgment, are inconsistent with
Executive's status or position, or any removal of Executive
from or any failure to reappoint or reelect Executive to such
positions (except in connection with the termination of
Executive's employment for Cause in accordance with
paragraph 4.2 hereof or Disability or death in accordance with
paragraph 4.4 hereof); or
(b) A reduction by the Company in Executive's Base Salary as in
effect under this Agreement or as the same may be increased
from time to time or a change in the eligibility requirements
or performance criteria under any Plan under which Executive
is covered under this Agreement, which adversely affects
Executive; or
(c) Without replacement by a Plan providing benefits to
Executive equal to or greater than those discontinued, the
failure by the Company to continue in effect, within its
maximum stated term, any Plan in which Executive is
participating or the taking of any action by the Company that
would adversely affect Executive's participation or materially
reduce Executive's benefits under any Plan; or
(d) The taking of any action by the Company that would
materially adversely affect the physical conditions in or under
which Executive performs his employment duties; or
(e) The Company requiring Executive to be based anywhere
other than where Executive's office is located as of the date
of this Agreement, except for required travel on the
Company's business to an extent substantially consistent
with the business travel obligations of executives similarly
employed in the advertising industry; or
(f) The failure by the Company to obtain from any Successor the
assent to this Agreement contemplated by paragraph 7.2; or
(g) Any purported termination by the Company of this
Agreement or the employment of the Executive by the
Company which is not expressly authorized by this
Agreement or any breach of this Agreement by the Company
other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the
Company within a reasonable period after the Company's
receipt of notice thereof from the Executive; or
4.4 Termination in the Event of Death or Disability. The term of
Executive's employment under this Agreement shall terminate in the event
of Executive's death or Disability.
4.5 Termination by Mutual Agreement. The parties may
terminate Executive's employment under this Agreement at any time by
mutual written agreement.
4.6 Notice of Termination; Date of Termination; Offer of
Continued Employment. The provisions of this paragraph 4.6 shall apply in
connection with any early termination of Executive's employment under this
Agreement pursuant to this Article IV:
(a) For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provisions in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide the basis for such termination. Any
purported termination by the Company or by Executive
pursuant to this Article IV (other than a termination by mutual
agreement pursuant to paragraph 4.5 or death) shall be
communicated by written Notice of Termination to the other
party hereto.
(b) For purposes of this Agreement, "Date of Termination" shall
mean: (1) if Executive's employment is terminated due to
death, the last day of the month first following the month
during which Executive's death occurs; (2) if Executive's
employment is to be terminated for Disability, thirty (30)
calendar days after Notice of Termination is given; (3) if
Executive's employment is terminated by the Company for
Cause or by Executive for Good Reason, the date specified in
the Notice of Termination; (4) if Executive's employment is
terminated by mutual agreement of the parties, the date
specified in such agreement; or (5) if Executive's employment
is terminated for any other reason, the date specified in the
Notice of Termination, which in no event shall be a date
earlier than ninety (90) calendar days after the date on which
a Notice of Termination is given, unless an earlier date has
been expressly agreed to by Executive in writing either in
advance of, or after, receiving such Notice of Termination;
provided, however, if within thirty (30) calendar days after
giving of a Notice of Termination the recipient of the Notice
of Termination notifies the other party that a dispute exists
concerning the termination, then the Date of Termination
shall be the date on which the dispute is finally determined,
whether by mutual written agreement of the parties, by final
and binding arbitration or by final judgment, order or decree
of a court of competent jurisdiction (the time for appeal
therefrom having expired or no appeal having been
perfected). During the pendency of any such dispute and until
the dispute is resolved in the manner provided in the
immediately preceding sentence, the Company will continue
to pay Executive all compensation and benefits to which he
was entitled pursuant to Article III immediately prior to the
time the Notice of Termination was given.
(c) If this Agreement is terminated other than by reason of (1) the
expiration of the term hereof as described at paragraph 2.4,
(2) Executive's Disability or death, (3) Executive's
termination for Cause pursuant to paragraph 4.2 which
termination for Cause has been agreed to by Executive or has
been determined in a proceeding as provided in paragraph 7.3
to have been proper or (4) by mutual agreement of the parties
pursuant to paragraph 4.5, Executive may, but shall not be
required to, not later than ten (10) days after the Date of
Termination, provide a written offer of continued
employment with the Company in accordance with the terms
of this Agreement which terms shall, in the case of a
termination by Executive for Good Reason pursuant to
paragraph 4.3, include the Company taking any such steps as
may be necessary to eliminate in a manner reasonably
satisfactory to Executive any conditions which created such
good reason for such termination. Within ten (10) days of its
receipt of such offer, the Company shall provide Executive
with a written acceptance or rejection of such offer. Failure
of the Company to so accept or reject such offer within such
period shall be deemed to be a rejection of such offer. The
parties hereby acknowledge that Executive's failure to provide
such offer to the Company shall in no way impair, affect or
constitute a waiver of Executive's right to enforce the
Company's obligations under this Agreement and the
Company shall not assert such failure as a defense in any
action or proceeding by Executive to enforce the Company's
obligation under this Agreement.
4.7 Compensation upon Termination, Death or During Disability.
(a) During any period that Executive fails to perform Executive's
duties hereunder as a result of incapacity due to physical or
mental illness, Executive shall continue to receive all Base
Salary and other compensation and benefits to which
Executive is otherwise entitled under this Agreement and any
Plan until Executive's Date of Termination.
(b) If Executive's employment under this Agreement is
terminated on account of Disability or death, the Company
shall, within ten (10) calendar days following the Date of
Termination, pay any amounts due to Executive for Base
Salary through the Date of Termination, together with any
other unpaid and pro rata amounts to which Executive is
entitled as of the Date of Termination pursuant to Article IV
hereof, including, without limitation, amounts to which
Executive is entitled under any Plan in accordance with the
terms of such Plan, and further, including, without limitation,
a pro rata portion (prorated through the Date of Termination)
of any annual or long-term bonus or incentive payments (for
performance periods in effect at the Date of Termination) to
which Executive would have been entitled had Executive
remained continuously employed through the end of such
performance periods and continued to perform Executive's
duties in the same manner as performed immediately prior to
the Executive's death or Disability.
(c) If Executive's employment under this Agreement is
terminated by the Company for Cause or by Executive for
other than Good Reason, the Company shall pay Executive
the Base Salary through the Date of Termination and any
amounts to which the Executive is entitled under any Plan in
accordance with the terms of such Plan. The Company shall
also pay any retirement benefits to which Executive is or
becomes entitled pursuant to paragraph 3.5 of this Agreement.
(d) If Executive's employment under this Agreement is
terminated by the mutual agreement of the parties under
paragraph 4.5, the Company shall provide Executive with the
payments and benefits specified in the agreement.
(e) If, in breach of this Agreement, the Company terminates
Executive's employment hereunder (it being understood that
a purported termination for Disability or for Cause which is
disputed and may be determined not to have been proper shall
be a termination by the Company in breach of this
Agreement) or if Executive terminates his employment
hereunder for Good Reason for the unexpired term of this
Agreement as determined in accordance with paragraph 2.4,
unless earlier terminated pursuant to paragraph 4.4 or
paragraph 4.5, the Company shall, as damages for such
breach:
(1) continue to pay any amounts due to Executive for
Base Salary in accordance with paragraph 3.1. at the
annual rate in effect thereunder immediately prior to
the Date of Termination (but determined without
regard to any purported reduction in Base Salary
which gave rise to such termination of employment)
in the same manner as if Executive had remained
continuously employed throughout the period
described above;
(2) cause Executive's continued participation in all Plans
in accordance with paragraph 3.2 of this Agreement as
if Executive remained continuously employed with
the Company throughout the period described above
for all purposes, including without limitation grants,
awards, accruals and vesting thereunder; provided,
that, if such continued participation is not permissible
under applicable law, the Company shall provide
Executive with benefits substantially similar to those
to which Executive would have been entitled under
those Plans in which Executive's continued
participation is not permissible;
(3) continue to (i) provide Executive with paid vacation
in accordance with paragraph 3.3 of this Agreement,
and (ii) bear business expenses of Executive in
accordance with paragraph 3.4 with respect to matters
reasonably undertaken by Executive on behalf of the
Company, and in the same manner as if Executive had
remained continuously employed throughout the
period described above; and
(4) pay any retirement and death benefits to which
Executive is or became entitled pursuant to paragraph
3.5 of this Agreement.
(f) Executive shall not be required to mitigate the Company's
payment obligations pursuant to this paragraph 4.7 by making
any efforts to secure other employment for which Executive
is reasonably qualified by education, experience or
background, and Executive's commencement of employment
with another employer shall not reduce the obligations of the
Company pursuant to paragraph 4.7 hereof.
ARTICLE V. CONFIDENTIAL INFORMATION
5.1 Prohibitions Against Use. Executive will not during or
subsequent to the termination of Executive's employment under this
Agreement use or disclose, other than in connection with Executive's
employment with the Company, any Confidential Information to any person
not employed by the Company or not authorized by the Company to receive
such Confidential Information, without the prior written consent of the
Company. Executive will use reasonable and prudent care to safeguard and
protect and prevent the unauthorized use and disclosure of Confidential
Information. The obligations contained in this paragraph 5.1 will survive for
as long as the Company in its sole judgment considers the information to be
Confidential Information. The obligations under this paragraph 5.1 will not
apply to any Confidential Information that is now or becomes generally
available to the public through no fault of Executive or to Executive's
disclosure of any Confidential Information required by law or judicial or
administrative process.
ARTICLE VI. NON-COMPETITION
6.1 Non-Competition. Subject to paragraph 6.2 and 6.3,
Executive agrees that during the term of this Agreement and for a period of
two (2) years following termination of employment for any reason, Executive
will not directly or indirectly, alone or as a partner, officer, director,
shareholder or employee of any other firm or entity, engage in any
commercial activity in competition with any part of the Company's business
as conducted during the term of the Agreement or as of the date of such
termination of employment or with any part of the Company's contemplated
business with respect to which Executive has Confidential Information as
governed by Article V. For purposes of this clause (a), "shareholder" shall
not include beneficial ownership of less than five percent (5%) of the
combined voting power of all issued and outstanding voting securities of a
publicly held corporation whose stock is traded on a major stock exchange
or quoted on NASDAQ.
6.2 Early Termination. Notwithstanding paragraph 6.1, if
Executive's employment terminates under circumstances which entitle him
to receive damages for breach of this Agreement pursuant to paragraph 4.7(e)
and the Company fails to provide Executive with any compensation or
benefits due him pursuant to paragraph 4.7(e) and does not remedy such
failure within ten (10) days after receipt of notice of such failure from
Executive, the restrictions set forth in paragraph 6.1 shall cease to apply to
Executive for the remainder of the period to which such restrictions would
otherwise apply notwithstanding any subsequent remedy of such failure by
the Company.
6.3 Employer's Option to Revise. At its sole option, the Company
may, by written notice to Executive within thirty (30) days after the effective
date of the termination of Executive's employment, waive or limit the time
and/or geographic area in which Executive is prohibited from engaging in
competitive activity.
6.4 Agreement Not to Recruit. Executive recognizes that the
Company's workforce constitutes an important and vital aspect of its business
on a world-wide basis. Executive agrees that for a period of 1 year following
the termination of this Agreement for any reason whatsoever, he shall not
solicit, or assist anyone else in the solicitation of, any of the Company's
then-current employees to terminate their employment with the Company and
to become employed by any business enterprise with which the Executive
may then be associated, affiliated or connected.
ARTICLE VII. GENERAL PROVISIONS
7.1 No Adequate Remedy. Notwithstanding paragraph 4.7, the
parties declare that it is impossible to accurately measure in money the
damages which will accrue to either party by reason of a failure to perform
any of the obligations under this Agreement. Therefore, if either party shall
institute any action or proceeding to enforce the provisions hereof, other than
a claim by Executive for a payment pursuant to paragraph 4.7, the party
against whom such action or proceeding is brought hereby waives the claim
or defense that such party has an adequate remedy at law, and such party shall
not assert in any such action or proceeding the claim or defense that such
party has an adequate remedy at law.
7.2 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit
of any Successor of the Company and each Subsidiary, and
any such Successor shall absolutely and unconditionally
assume all of the Company's and any Subsidiary's obligations
hereunder. Upon Executive's written request, the Company
will seek to have any Successor, by agreement in form and
substance satisfactory to Executive, assent to the fulfillment
by the Company of their obligations under this Agreement.
Failure to obtain such assent at least three (3) business days
prior to the time a person or entity becomes a Successor (or
where the Company does not have at least three (3) business
days' advance notice that a person or entity may become a
Successor, within one (1) business day after having notice
that such person or entity may become or has become a
Successor) shall constitute Good Reason for termination by
Executive of employment pursuant to paragraph 4.3. For
purposes of this Agreement, "Successor" shall mean any
corporation, individual, group, association, partnership, firm,
venture or other entity or person that, subsequent to the date
hereof, succeeds to the actual or practical ability to control
(either immediately or with the passage of time), all or
substantially all of the Company's business and/or assets,
directly or indirectly, by merger, consolidation,
recapitalization, purchase, liquidation, redemption,
assignment, similar corporate transaction, operation of law or
otherwise.
(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts would still be
payable to Executive hereunder if Executive had continued to
live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee, or other designee or, if there be
no such designee, to Executive's estate. Executive may not
assign this Agreement, in whole or in any part, without the
prior written consent of the Company.
7.3 Disputes. Any dispute, controversy or claim for damages
arising under or in connection with this Agreement shall, in Executive's sole
discretion, be settled exclusively by such judicial remedies as Executive may
seek to pursue or by arbitration in Minneapolis, Minnesota by a panel of three
(3) arbitrators in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators' award
in any court having jurisdiction; provided, however, that Executive shall be
entitled to seek specific performance of Executive's right to be paid until the
Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. The Company shall bear
all costs and expenses, including attorney's fees, arising in connection with
any arbitration proceeding pursuant to this paragraph 7.3. The Company shall
be entitled to seek an injunction or restraining order in a court of competent
jurisdiction to enforce the provisions of Articles V and VI.
7.4 No Offsets. In no event shall any amount payable to
Executive pursuant to this Agreement be reduced for purposes of offsetting,
either directly or indirectly, any indebtedness or Liability of Executive to the
company.
7.5 Notice. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing and
be personally delivered or mailed postage prepaid, registered or certified U.S.
mail to any party at its address set forth on the last page of this Agreement.
Either party may, by notice hereunder, designate a changed address. Any
notice hereunder shall be deemed effectively given and received: (a) if
personally delivered, upon delivery; or (b) if mailed, on the registered date
or the date stamped on the certified mail receipt.
7.7 Withholding. To the extent required by any applicable law,
including, without limitation, any federal or state income tax or excise tax
law or laws, the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act or any comparable federal, state or local laws, the
Company retains the right to withhold such portion of any amount or
amounts payable to Executive under this Agreement as the Company (on the
written advice of counsel) deems necessary.
7.8 Captions. The various headings or captions in this Agreement
are for convenience only and shall not affect the meaning or interpretation of
this Agreement.
7.9 Governing Law. The validity, interpretation, construction,
performance, enforcement and remedies of or relating to this Agreement, and
the rights and obligations of the parties hereunder, shall be governed by the
substantive laws of the State of Minnesota (without regard to the conflict of
laws rules or statutes of any jurisdiction), and .any and every legal proceeding
arising out of or in connection with this Agreement shall be brought in the
appropriate courts of the State of Minnesota, each of the parties hereby
consenting to the exclusive jurisdiction of said courts for this purpose.
7.10 Construction. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining portions of this
Agreement.
7.11 Waivers. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or
partial exercise of any right or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right or remedy granted
hereby or by any related document or by law.
7.12 Modification. This Agreement may not be modified or
amended except by written instrument signed by the parties hereto.
7.13 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties hereto in reference to all of
the matters herein agreed upon. This Agreement replaces all prior
employment agreements or understandings of the parties hereto, and any and
all such prior agreements or understandings are hereby rescinded by mutual
agreement.
7.14 Counterparts. This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one (1) and the same instrument.
7.15 Survival. The parties expressly acknowledge and agree that
the provisions of this Agreement which by their express or implied terms
extend beyond the termination of Executive's employment hereunder
(including, without limitation, the provisions of paragraph 3.5 (relating to
death benefits) and 4.7 (relating to compensation) or beyond the termination
of this Agreement (including, without limitation, the provisions of paragraph
5.1 (relating to confidential information) and Article VI (relating to
non-competition)), shall continue in full force and effect notwithstanding
Executive's termination of employment hereunder or the termination of this
Agreement, respectively.
IN WITNESS WHEREOF, the parties hereto have caused this
Executive Employment Agreement to be duly executed and delivered as of
the day and year first above written.
EXECUTIVE: COMPANY
__________________ ILLUMINATED
MEDIA INC., a
Minnesota corporation
By:
_______________________
Chairman of the
Board
Address: Address:
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________
EXHIBIT 24.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in the Illuminated Media Inc. Registration
Statement on Form SB-2 of our report, which contains an explanatory paragraph
with respect to the substantial doubt about the Company's ability to
continue as a going concern, dated July 31,1996, except note 2 which is
dated February 14, 1997, on the financial statements of Illuminated Media
Inc., for the years ended February 29, 1996, and February 28, 1995, and to
the reference to our firm under the caption "Experts."
/s/Silverman Olson Thorvilson & Kaufmann LTD.
Minneapolis, Minnesota
February 26, 1997
EXHIBIT 25.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
___________________, a director of Illuminated Media Inc., a Minnesota
corporation, which intends to prepare and file with the Securities and Exchange
Commission("SEC"), and certain state securities commissions (the "State
Commission") a RegistrationStatement on Form SB-2 for the registration,
under the Securities Act of 1933, of 1,500,000Units, hereby constitutes
and appoints Robert H. Blank and Richard D. Kothe, and each of them, with
full power to act without the other, as his/her true and lawful attorney-in
- -fact and agent, with full and several power of substitution, for him/her
and in his/her name, place and stead, in any and all capacities, to take
any or all of the following actions:
A. To execute and deliver the following documents:
1. The Registration Statement.
2. Any and all amendments (including post-effective amendments) to
the Registration Statement.
3. All exhibits to the Registration Statement, including, without
limitation, the Underwriting Agreement, the Warrant Agreement, the
Impoundment Agreement and the Escrow Agreement.
4. All Transfer Agent documentation.
5. Such other documents as may be needed to cause the Registration
Statement to become effective.
B. To file any or all of the afore-mentioned documents with the SEC and
the State Commission.
C. To execute and deliver any and all documents, agreements, corporate
resolutions, receipts and other instruments as may reasonably be needed in
order to close the sale of up to 1,500,000 Units.
Granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents
and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
This power of attorney may be revoked by giving written or telegraphic
notice to either of the attorneys-in-fact, or to Richard P. Keller, special
legal counsel for the Company, and in any event, shall terminate and expire
in all respects at 12:00 p.m., on Monday, March 3, 1997.
IN WITNESS WHEREOF, the undersigned has hereunto set his/her hand
this _____ day of January, 1997.
__________________________________
The foregoing Power of Attorney was acknowledged before me this _________
day of January, 1997, by ______________________.
______________________________
Notary Public
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ILLUMINATED MEDIA INC., AS OF AND FOR
THE YEAR ENDED FEBRUARY 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 4,795
<SECURITIES> 0
<RECEIVABLES> 35,105
<ALLOWANCES> (24,818)
<INVENTORY> 0
<CURRENT-ASSETS> 26,672
<PP&E> 71,239
<DEPRECIATION> (28,564)
<TOTAL-ASSETS> 69,745
<CURRENT-LIABILITIES> 315,770
<BONDS> 0
0
61,500
<COMMON> 700
<OTHER-SE> (511,989)
<TOTAL-LIABILITY-AND-EQUITY> 69,745
<SALES> 236,932
<TOTAL-REVENUES> 239,374
<CGS> 0
<TOTAL-COSTS> (394,170)
<OTHER-EXPENSES> (2,808)
<LOSS-PROVISION> (24,818)
<INTEREST-EXPENSE> (17,239)
<INCOME-PRETAX> (174,843)
<INCOME-TAX> 0
<INCOME-CONTINUING> (174,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174,843)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> 0
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ILLUMINATED MEDIA INC., AS OF AND FOR
THE PERIOD ENDED NOVEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1996
[CASH] 15,767
[SECURITIES] 0
[RECEIVABLES] 97,442
[ALLOWANCES] (67,132)
[INVENTORY] 0
[CURRENT-ASSETS] 51,606
[PP&E] 75,408
[DEPRECIATION] (38,349)
[TOTAL-ASSETS] 88,914
[CURRENT-LIABILITIES] 478,638
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 61,500
[COMMON] 700
[OTHER-SE] (632,289)
[TOTAL-LIABILITY-AND-EQUITY] 88,914
[SALES] 181,012
[TOTAL-REVENUES] 187,337
[CGS] 0
[TOTAL-COSTS] (274,152)
[OTHER-EXPENSES] 0
[LOSS-PROVISION] (42,314)
[INTEREST-EXPENSE] (33,485)
[INCOME-PRETAX] (120,300)
[INCOME-TAX] 0
[INCOME-CONTINUING] (120,300)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (120,300)
[EPS-PRIMARY] (1.72)
[EPS-DILUTED] 0
</TABLE>
