<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 6)(1)
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
83083P100
(CUSIP Number)
IRA WHITE, ESQ. MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE, NEW YORK, NEW YORK 10178
(212) 309-6000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
MAY 6, 1997
(Date of Event which Requires Filing of this Statement on Schedule 13D)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement / /. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement on Schedule 13D, including all exhibits,
should be filed with the Securities and Exchange Commission. See Rule 13d-1(a)
for other parties to whom copies are to be sent.
- --------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET NYC DISCOVERY FUND, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,237,250 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)(2)
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 1,237,250 SHARES OF COMMON STOCK(1)
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 0 SHARES OF COMMON STOCK(1)(3)
------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,237,250 SHARES OF COMMON STOCK(1)(2)(3)(4)
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.17(1)(2)(3)(4)
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Connecticut
Financial Developments, L.P. or Prospect Street NYC Co-Investment Fund,
L.P., with which Prospect Street NYC Discovery Fund, L.P. and Prospect
Street Discovery Fund, Inc. may be deemed to be acting as a group.
(2) Does not include any shares of Common Stock, par value $.001 per share
(the "Common Stock"), or Class A Common, par value $.001 per share (the
"Class A Common"), owned by Zalman Silber, President of the Issuer, with
respect to which shares Prospect Street NYC Discovery Fund, L.P. was
granted a proxy with respect to certain matters and the holder (including
certain successors) is required to vote for certain matters. As reported
to Prospect Street NYC Discovery Fund, L.P. by the Issuer, as of May 6,
1997, there were 960,000 shares of Class A Common owned by Zalman Silber
and Mr. Silber had options or warrants to purchase 1,680,000 shares of
Common Stock.
(3) Does not include any shares of Common Stock or Class A Common owned by
Zalman Silber (including certain successors) which shares Prospect Street
NYC Discovery Fund, L.P. can cause to be sold under certain conditions.
(4) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Discovery Fund, L.P. by the Issuer on May 6, 1997,
that all 1,090,909 shares of Common Stock issuable to Prospect Street NYC
Discovery Fund, L.P. upon conversion of the Series A Convertible
Participating Preferred Stock, par value $.001 per share (the "Series A
Preferred Stock") are outstanding, and that all 146,341 shares of Common
Stock issuable to Prospect Street NYC Discovery Fund, L.P. upon exercise
of the Warrants (as hereinafter defined) issued to it in connection with
the Credit Agreement (as hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET DISCOVERY FUND, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,237,250 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)(2)
OWNED BY 9 SOLE DISPOSITIVE POWER)
EACH 1,090,909 SHARES OF COMMON STOCK(1)
10 SHARED DISPOSITIVE POWER
REPORTING 0 SHARES OF COMMON STOCK(1)(3)
PERSON WITH -----------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,237,250 SHARES OF COMMON STOCK(1)(2)(3)(4)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
47.17(1)(2)(3)(4)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Connecticut
Financial Developments, L.P. or Prospect Street NYC Co-Investment Fund,
L.P., with which Prospect Street NYC Discovery Fund, L.P. and Prospect
Street Discovery Fund, Inc. may be deemed to be acting as a group.
(2) Does not include any shares of Common Stock or Class A Common owned by
Zalman Silber, President of the Issuer, with respect to which shares
Prospect Street NYC Discovery Fund, L.P. was granted a proxy with respect
to certain matters and the holder (including certain successors) is
required to vote for certain matters. As reported to Prospect Street NYC
Discovery Fund, L.P. by the Issuer, as of May 6, 1997, there were 960,000
shares of Class A Common owned by Zalman Silber and Mr. Silber had options
or warrants to purchase 1,680,000 shares of Common Stock.
(3) Does not include any shares of Common Stock or Class A Common owned by
Zalman Silber (including certain successors) which shares Prospect Street
NYC Discovery Fund, L.P. can cause to be sold under certain conditions.
(4) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Discovery Fund, L.P. by the Issuer on May 6, 1997,
that all 1,090,909 shares of Common Stock issuable to Prospect Street NYC
Discovery Fund, L.P. upon conversion of the Series A Preferred Stock are
outstanding and that all 146,341 shares of Common Stock issuable to
Prospect Street NYC Discovery Fund, L.P. upon exercise of the Warrants (as
hereinafter defined) issued to it in connection with the Credit Agreement
(as hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CONNECTICUT FINANCIAL DEVELOPMENTS, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 52,700 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 52,700 SHARES OF COMMON STOCK(1)
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 0 SHARES OF COMMON STOCK(1)
------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
52,700 SHARES OF COMMON STOCK(1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.80(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Prospect Street NYC Co-Investment Fund, L.P., with
which Connecticut Financial Developments, L.P. and Prospect Street
Connecticut Capital, Inc. may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Connecticut Financial Developments, L.P. by the Issuer on May 6, 1997.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET CONNECTICUT CAPITAL, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 52,700 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 52,700 SHARES OF COMMON STOCK(1)
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 0 SHARES OF COMMON STOCK(1)
------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
52,700 SHARES OF COMMON STOCK(1)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.80(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Prospect Street NYC Co-Investment Fund, L.P., with
which Prospect Street Connecticut Capital, Inc. and Connecticut Financial
Developments, L.P. may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Connecticut Financial Developments, L.P. by the Issuer on May 6, 1997.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET NYC CO-INVESTMENT FUND, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF 43,902 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 43,902 SHARES OF COMMON STOCK(1)
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 0 SHARES OF COMMON STOCK(1)
-------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
43,902 SHARES OF COMMON STOCK(1)(2)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.07(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Connecticut Financial Developments, L.P., with
which Prospect Street NYC Co-Investment Fund, L.P. and Prospect Street
Co-Investment Fund, LLC may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Co-Investment Fund, L.P. by the Issuer on May 6, 1997
and that all 43,902 shares of Common Stock issuable to Prospect Street NYC
Co-Investment Fund, L.P. upon exercise of the Warrants (as hereinafter
defined) issued to it in connection with the Credit Agreement (as
hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 83083P 100
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET CO-INVESTMENT FUND, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 43,902 SHARES OF COMMON STOCK(1)
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 0 SHARES OF COMMON STOCK(1)
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 43,902 SHARES OF COMMON STOCK(1)
REPORTING 10 SHARED DISPOSITIVE POWER
PERSON WITH 0 SHARES OF COMMON STOCK(1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
43,902 SHARES OF COMMON STOCK(1)(2)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.07(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- --------------------------------------------------------------------------------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Connecticut Financial Developments, L.P., with
which Prospect Street NYC Co-Investment Fund, L.P. and Prospect Street
Co-Investment Fund, LLC may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Co-Investment Fund, L.P. by the Issuer on May 6, 1997
and that all 43,902 shares of Common Stock issuable to Prospect Street NYC
Co-Investment Fund, L.P. upon exercise of the Warrants (as hereinafter
defined) issued to it in connection with the Credit Agreement (as
hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
This Amendment No. 6 (the "Sixth Amendment") to the Statement
on Schedule 13D originally filed on July 17, 1995, as amended by Amendment No. 1
thereto filed on November 8, 1996, Amendment No. 2 thereto filed on November 20,
1996, Amendment No. 3 thereto filed on December 4, 1996, Amendment No. 4 thereto
filed on December 24, 1996 and Amendment No. 5 thereto filed on March 6, 1997
(such Statement, as so amended, the "Original Statement" and the Original
Statement together with the Sixth Amendment, the "Statement") relates to the
Common Stock, par value $0.001 per share ("Common Stock"), of Skyline Multimedia
Entertainment, Inc., a New York corporation ("Skyline"), and amends and restates
Items 2, 5 and 6 and amends Item 4 of the Original Statement. Capitalized terms
used and not defined herein shall have the meaning ascribed to them in the
Original Statement.
Item 2. Identity and Background.
(a) This Second Amendment is being filed by each of the
following persons pursuant to Rule 13d-1(f) promulgated by the Securities and
Exchange Commission (the "Commission") pursuant to Section 13 of the Securities
Exchange Act of 1934 (the "Act"): (i) Prospect Street NYC Discovery Fund, L.P.,
a Delaware limited partnership (the "Investor"), (ii) Prospect Street Discovery
Fund, Inc., a Delaware corporation (the "General Partner"), and sole general
partner of the Investor, (iii) Connecticut Financial Developments, L.P., a
Delaware limited partnership ("CFD"), (iv) Prospect Street Connecticut Capital,
Inc., a Delaware corporation ("CFDGP") and sole general partner of CFD, (v)
Prospect Street NYC Co-Investment Fund, L.P., a Delaware limited partnership
("Prospect II"), and (vi) Prospect Street Co-Investment Fund, LLC, a Delaware
limited liability company ("Prospect II GP") and the sole general partner of
Prospect II (collectively, the "Reporting Persons").
Attached as Schedule A is information concerning each
executive officer and director of each of the Reporting Persons; each person
controlling each of the Reporting Persons; and each executive officer and
director of any corporation or other person ultimately in control of each of the
Reporting Persons. Schedule A is incorporated into and made a part of this
Statement on Schedule 13D.
(b) The address of the principal business and principal office
of each of the Reporting Persons and the business address of each person named
on Schedule A is 250 Park Avenue, New York, New York 10177.
(c) The Investor's principal business is operating a Small
Business Investment Company under the Small Business Investment Act of 1958, as
amended. The General Partner is the general partner of the Investor and the
General Partner's sole function is to act as the general partner of the
Investor. CFD's principal business is operating a private venture capital
partnership. CFDGP is the general partner of CFD and CFDGP's sole function is to
act as the general partner of CFD. Prospect II's principal business is operating
a private venture capital partnership. Prospect II GP is the general partner of
Prospect II and Prospect II GP's sole function is to act as the general partner
of Prospect II. The principal occupation or employment of each person named on
Schedule A and the name and address of any corporation or other organization in
which such business is conducted is set forth on Schedule A. The principal
business of any such corporation or other organization is set forth in this
paragraph (c).
(d) During the last five years none of the Reporting Persons
nor any of their respective executive officers or controlling persons or the
persons identified on Schedule A have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or state securities laws or finding any violation
with respect to such laws, except that, on August 25, 1995, the Commission
entered an order in Administrative Proceeding File No. 3-8557 finding, among
other things, that Mr. Joseph Cote caused violations of Section 17(a) of the Act
and Rule 17a-3 thereunder and ordering that Mr. Cote cease and desist from
causing any violation and any future violation of Section 17(a) of the Act and
Rule 17a-3 thereunder.
(e) All persons named in Schedule A to this statement are
citizens of the United States.
<PAGE> 9
Item 4. Purposes of Transactions
Item 4 as set forth in the Original Statement is hereby
amended by adding the following to the end of such item:
Prospect II became a party to the Credit Agreement as a New
Additional Lender under Section 9.03 thereof with a commitment to lend up to
$450,000. Prospect II also made a loan to the Borrowers of $450,000 and was
issued a Senior Note in the principal amount of $450,000 and a Warrant to
purchase up to 43,902 shares of Common Stock, at an initial price per share of
$4.25, subject to antidilution adjustment provisions.
The Investor, Bug, Prospect II and Bank of New York, as
Trustee for Brooklyn Union Gas Company Non-Bargaining Health VEBA ("VEBA")
entered into that certain Second Amendment to Senior Credit Agreement (the
"Second Amendment to Credit Agreement") pursuant to which, among other things,
the Credit Agreement was amended to allow other entities to become lenders
thereunder upon the consent of (i) lenders whose principal amount of and accrued
and unpaid interest on outstanding loans represent in excess of 50% of all
outstanding loans at such times and (ii) the Investor.
VEBA became a party to the Credit Agreement as a New
Additional Lender under Section 9.03 thereof, as amended, with a commitment to
lend up to $400,000. VEBA also made a loan to the Borrowers of $400,000 and was
issued a Senior Note in the principal amount of $400,000 and a Warrant to
purchase 39,024 shares of Common Stock, at an initial price of $4.25, subject to
antidilution adjustment provisions. As provided in the Second Amendment to
Credit Agreement, such Warrant is immediately exercisable.
Item 5. Interest in Securities of the Issuer
(a) The aggregate number of shares of Common Stock
beneficially owned by the Investor and the General Partner as of May 6, 1997 is
1,237,250 shares (1,090,909 of which shares the Investor has a right to acquire
upon conversion of the Series A Preferred Stock and 146,341 of which the
Investor has a right to acquire upon exercise of the Warrants held by it), or
approximately 47.17 percent of the Common Stock, in each case, not including the
shares of Common Stock or Class A Common, or other securities owned by Zalman
Silber, President of Skyline, with respect to which shares the Investor was
granted a proxy with respect to certain matters and the holder (including
certain successors) is required to vote for certain matters and not including
any securities owned by Connecticut Financial Developments, L.P. or Prospect
Street NYC Co-Investment Fund, L.P., with which the Investor may be deemed to be
acting as a group. As reported to the Reporting Persons by Skyline, as of May 6,
1997, there were 960,000 shares of Class A Common owned by Zalman Silber and Mr.
Silber had options or warrants to purchase 1,680,000 shares of Common Stock. The
aggregate number of shares of Common Stock beneficially owned by CFD and CFDGP
as of May 6, 1997 is 52,700, or approximately 3.80 percent of the Common Stock,
in each case, not including any securities owned by Prospect Street NYC
Discovery Fund, L.P. or Prospect Street NYC Co-Investment Fund, L.P., with which
CFD may be deemed to be acting as a group. The aggregate number of shares of
Common Stock beneficially owned by Prospect II and Prospect II GP as of May 6,
1997 is 43,902, or approximately 3.07 percent of the Common Stock, in each case,
not including any securities owned by Prospect Street NYC Discovery Fund, L.P.
or Connecticut Financial Developments, L.P., with which Prospect II may be
deemed to be acting as a group. As disclosed in Skyline's proxy statement for
its annual meeting of shareholders held on November 26, 1996, non-employee
directors automatically receive stock options to purchase 5,000 shares of Common
Stock on their election or reelection to the board of directors of Skyline. To
date, Messrs. Barry and Celmer, each a director of Skyline, were each granted
options to purchase 10,000 shares of Common Stock (which shares are not included
in the beneficial ownership reported by the Investor, the General Partner, CFD,
CFDGP, Prospect II or Prospect II GP). The Reporting Persons may be deemed to be
acting as a group with respect to securities of Skyline.
(b) The responses of the Reporting Persons to Items (7)
through (11) of the portions of pages 2 through 7 hereto which relate to shares
of Common Stock beneficially owned are herein incorporated by reference.
(c) Other than as reported in this Statement, none of the
Reporting Persons nor, to the best of their knowledge, any of the persons named
in Schedule A hereto has effected a transaction in shares of Common Stock during
the past 60 days.
<PAGE> 10
(d) No person other than the Reporting Persons has the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of the securities to which this Statement relates.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
the Securities of the Issuer.
Except as set forth in this Statement, to the best knowledge
of the Reporting Persons, no contracts, arrangements, understandings or
relationships (legal or otherwise) exist among the Reporting Persons and the
persons listed on Schedule A hereto or between such persons and any other person
with respect to any securities of Skyline, including but not limited to transfer
or voting of any such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of profits or
loss, or the giving or withholding of proxies.
<PAGE> 11
SIGNATURE
After reasonable inquiry and to the best of the knowledge and
belief of each of the undersigned, each of the undersigned certifies that the
information set forth in this Sixth Amendment with respect to the undersigned is
true, complete and correct and each of the undersigned agrees that this Sixth
Amendment may be filed jointly.
Dated: May 6, 1997
Prospect Street NYC Discovery Fund, L.P.
By: Prospect Street Discovery Fund, Inc.,
Its General Partner
By: /s/ Ronald D. Celmer
---------------------------
Name: Ronald D. Celmer
Title: Vice President
Prospect Street Discovery Fund, Inc.
By: /s/ Ronald D. Celmer
---------------------------
Name: Ronald D. Celmer
Title: Vice President
Connecticut Financial Developments, L.P.
By: Prospect Street Connecticut Capital, Inc.,
Its General Partner
By: /s/ Ronald D. Celmer
---------------------------
Name: Ronald D. Celmer
Title: Vice President
Prospect Street Connecticut Capital, Inc.
By: /s/ Ronald D. Celmer
---------------------------
Name: Ronald D. Celmer
Title: Vice President
<PAGE> 12
Prospect Street NYC Co-Investment Fund, L.P.
By: Prospect Street Co-Investment Fund, LLC
Its General Partner
By: /s/ Ronald D. Celmer
------------------------
Name: Ronald D. Celmer
Title: Vice President
Prospect Street Co-Investment Fund, LLC
By: /s/ Ronald D. Celmer
------------------------
Name: Ronald D. Celmer
Title: Vice President
<PAGE> 13
Schedule A
PROSPECT STREET DISCOVERY FUND, INC.
250 Park Avenue
New York, New York 10177
DIRECTORS
Richard E. Umohundro, Jr., C.P.A.
John F. Barry III, Esq.
Ronald D. Celmer, C.T.P.
OFFICERS TITLE
John F. Barry III, Esq. Executive Vice President
Preston I. Carnes Vice President
Ronald D. Celmer, C.T.P. Treasurer, Vice President
John A. Frobotta Vice President
Kevin F. Littlejohn, C.P.A., M.S.T. Vice President
Richard E. Umohundro, Jr., C.P.A. Chief Executive Officer
All of the above officers are appointed to their respective offices subject to
any necessary approval by the Small Business Administration.
PROSPECT STREET CONNECTICUT CAPITAL, INC.
250 Park Avenue
New York, New York 10177
DIRECTORS
Richard E. Umohundro, Jr., C.P.A.
John F. Barry III, Esq.
Ronald D. Celmer, C.T.P.
OFFICERS TITLE
John F. Barry III, Esq. Executive Vice President
Preston I. Carnes Vice President
Ronald D. Celmer, C.T.P. Treasurer, Vice President
John A. Frobotta Vice President
Kevin F. Littlejohn, C.P.A., M.S.T. Vice President
Richard E. Umohundro, Jr., C.P.A. Co-President
Joseph Cote Co-President
<PAGE> 14
PROSPECT STREET CO-INVESTMENT FUND, LLC
250 Park Avenue
New York, New York 10177
MANAGERS
Richard E. Umohundro, Jr., C.P.A.
John F. Barry III, Esq.
Ronald D. Celmer, C.T.P.
OFFICERS TITLE
- -------- -----
John F. Barry III, Esq. Executive Vice President
Preston I. Carnes Vice President
Ronald D. Celmer, C.T.P. Treasurer, Vice President
John A. Frobotta Vice President
Kevin F. Littlejohn, C.P.A., M.S.T. Vice President
Richard E. Umohundro, Jr., C.P.A. Co-President
Joseph Cote Co-President
<PAGE> 15
EXHIBIT INDEX
Exhibit A - Stock Purchase Agreement, dated as of June 30, 1995 by and
between Skyline Multimedia Entertainment, Inc. and Prospect
Street NYC Discovery Fund, LP.*
Exhibit B - Stockholders Agreement, dated as of June 30, 1995 by and
between Zalman Silber and Prospect Street NYC Discovery
Fund, L.P.*
Exhibit C - Registration Rights Agreement, dated as of June 30, 1995 by
and between Skyline Multimedia Entertainment, Inc. and
Prospect Street NYC Discovery Fund L.P.*
Exhibit D - Certificate of Amendment of the Certificate of
Incorporation of Skyline Multimedia Entertainment, Inc.*
Exhibit E - Guarantee of Zalman Silber, dated as of June 30, 1995.*
Exhibit F - Note Purchase Agreement, dated as of November 6, 1996 by
and between Skyline Multimedia Entertainment, Inc. and
Prospect Street NYC Discovery Fund, L.P.*
Exhibit G - Demand Promissory Note issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P. on November 6, 1996 in the principal amount of
$1,500,000.*
Exhibit H - Letter Agreement, dated as of October 23, 1996 between
Skyline Multimedia Entertainment, Inc, and Prospect Street
NYC Discovery Fund, L.P.*
Exhibit I - Guarantee of Zalman Silber, dated November 6, 1996.*
Exhibit J - Senior Credit Agreement, dated as of December 20, 1996 by
and among Skyline Multimedia Entertainment, Inc., New York
Skyline, Inc., Skyline Virtual Reality, Inc., Skyline
Chicago, Inc., Skyline Magic, Inc., Skyline Las Vegas,
Inc., Prospect Street NYC Discovery Fund, L.P. and Bank of
New York, as Trustee for the Employees Retirement Plan of
the Brooklyn Union Gas Company.*
Exhibit K - Amended and Restated Registration Rights Agreement, dated
as of December 20, 1996 by and among Skyline Multimedia
Entertainment, Inc., Prospect Street NYC Discovery Fund,
L.P. and Bank of New York, as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company.*
Exhibit L - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P. on December 20, 1996 to purchase 133,333 shares of
Common Stock.*
Exhibit M - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P. on December 20, 1996 to purchase 13,008 shares of
Common Stock.*
Exhibit N - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company
on December 20, 1996 to purchase 66,667 shares of Common
Stock.*
Exhibit O - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company
on December 20, 1996 to purchase 30,893 shares of Common
Stock.*
Exhibit P - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Prospect Street NYC
Discovery Fund, L.P. on December 20, 1996 in the principal
amount of $1,500,000.*
<PAGE> 16
Exhibit Q - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Bank of New York, as
Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company on December 20, 1996 in the principal
amount of $1,000,000.*
Exhibit R - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company
on December 31, 1996 to purchase 48,780 shares of Common
Stock.*
Exhibit S - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Bank of New York, as
Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company on December 31, 1996 in the principal
amount of $500,000.*
Exhibit T - First Amendment to Senior Credit Agreement, dated as of
February 18, 1997, by and among Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality, Inc., Skyline Chicago, Inc., Skyline
Magic, Inc., Skyline Las Vegas, Inc., Prospect Street NYC
Discovery Fund, L.P., and Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas
Company.*
Exhibit U - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company
on February 18, 1997 to purchase 48,780 shares of Common
Stock.*
Exhibit V - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Bank of New York, as
Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company on February 18, 1997 in the principal
amount of $500,000.*
Exhibit W - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Co-Investment
Fund, L.P. on March 14, 1997 to purchase 43,902 shares of
Common Stock.
Exhibit X - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Prospect Street NYC
Co-Investment Fund, L.P. on March 14, 1997 in the principal
amount of $450,000.
Exhibit Y - Second Amendment to Senior Credit Agreement, dated as of
March 21, 1997, by and among Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc., Skyline Las Vegas, Inc., to Prospect Street NYC
Discovery Fund, L.P., Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas
Company, Prospect Street NYC Co-Investment Fund, L.P. and
Bank of New York, as Trustee for Brooklyn Union Gas Company
Non-Bargaining Health VEBA.
Exhibit Z - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for
Brooklyn Union Gas Company Non-Bargaining Health VEBA on
March 21, 1997 to purchase 39,024 shares of Common Stock.
Exhibit AA - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline
Virtual Reality Inc., Skyline Chicago, Inc., Skyline Magic,
Inc. and Skyline Las Vegas, Inc. to Brooklyn Union Gas
Company Non-Bargaining Health VEBA on March 21, 1997 in the
principal amount of $400,000.
* Previously filed
<PAGE> 1
Exhibit W
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND MAY BE
OFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
STOCK PURCHASE WARRANT
Date of Issuance: March 14, 1997 Certificate No. 7
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Prospect Street NYC Co-Investment
Fund, L.P., a Delaware limited partnership, or its registered assigns (the
"Registered Holder"), the right to purchase from the Company 43,902 shares of
Warrant Shares at a price per share of $4.25 (as adjusted from time to time, the
"Exercise Price"). This Warrant is one of several warrants (collectively, the
"Warrants") issued pursuant to the Senior Credit Agreement dated as of December
20, 1996, as amended, by and among the Company, the other Borrowers named
therein and the Lenders named therein (as such agreement may be amended,
modified or restated from time to time, the "Credit Agreement"). The Exercise
Price and number of Warrant Shares (and the amount and kind of other securities)
for which this Warrant is exercisable shall be subject to adjustment as provided
herein. Certain capitalized terms used herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant may
be exercised, in whole or in part, at any time and from time to time after
December 20, 1997 to and including 5:00 p.m., New York time, on December 20,
2006 or, if such day is not a business day, on the next preceding business day
(the "Exercise Period"); provided, however, that if the Company shall not have
given the Registered Holder written notice of the expiration of the Exercise
Period at least 60 days but not more than 90 days prior to the expiration of the
Exercise Period, the Exercise Period shall be extended until the 60th day
following the receipt by the Registered Holder of such a notice.
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<PAGE> 2
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all of
the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in Section 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check payable to the Company in an amount
equal to the Exercise Price multiplied by the number of Warrant Shares
being purchased upon such exercise (the "Aggregate Exercise Price"), (ii)
the surrender to the Company of debt or equity securities of the Company
or any of its direct or indirect subsidiaries having a value equal to the
Aggregate Exercise Price of the Warrant Shares being purchased upon such
exercise (which value in the case of debt securities or any preferred
stock shall be deemed to equal the aggregate outstanding principal amount
or liquidation value thereof plus all accrued and unpaid interest thereon
or accrued or declared and unpaid dividends thereon and in the case of
shares of Common Stock shall be the Fair Market Value thereof), or (iii)
the delivery of a notice to the Company that the Purchaser is exercising
the Warrant (or portion thereof) by authorizing the Company to reduce the
number of Warrant Shares subject to such exercise of the Warrant or
portion thereof by the number of shares having an aggregate Fair Market
Value determined as of the date immediately prior to the date of the
Exercise Time equal to the Aggregate Exercise Price.
(ii) Certificates for Warrant Shares purchased upon exercise of this
Warrant shall be delivered by the Company to the Purchaser within five days
after the date of the Exercise Time together with any cash payable in lieu of a
fraction of a share pursuant to Section 14 hereof. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such five-day period, deliver such
new Warrant to the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time, and
the Purchaser shall be deemed for all purposes to have become the Registered
Holder of such Warrant Shares at the Exercise Time.
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<PAGE> 3
(iv) The issuance of certificates for Warrant Shares upon exercise
of this Warrant shall be made without charge to the Registered Holder or the
Purchaser for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Warrant
Shares; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrants or any certificates representing Warrant Shares in a
name other than that of a Registered Holder, and the Company shall not be
required to issue or deliver such Warrant or certificate for Warrant Shares
unless and until the Person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
(v) The Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to or less than
the Exercise Price then in effect. In the event that the Company fails to comply
with its obligations set forth in the foregoing sentence, in addition to all
other rights which the Registered Holder or Purchaser may have at law or in
equity, the Purchaser may (but shall not be obligated to) purchase Warrant
Shares hereunder at par value, and the Company shall be obligated to reimburse
the Purchaser for the aggregate amount of consideration paid in connection with
such exercise in excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of
any portion of this Warrant is to be made in connection with a public offering
or a sale of the Company (pursuant to a merger, sale of stock or otherwise),
such exercise may at the election of the Registered Holder be conditioned upon
the consummation of such transaction, in which case such exercise shall not be
deemed to be effective until immediately prior to the consummation of such
transaction.
(viii) The Company shall at all times reserve and keep available out
of its authorized but unissued Warrant Shares solely for the purpose of issuance
upon the exercise of this Warrant, the maximum number of Warrant Shares issuable
upon the exercise of this Warrant. All Warrant Shares which are so issuable
shall, when issued and upon the payment of the applicable Exercise Price, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as may be necessary
to ensure that all such Warrant Shares may be so issued without violation by the
Company of any
3
<PAGE> 4
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock or other securities
constituting Warrant Shares may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on any domestic securities exchange upon which shares of
Common Stock or other securities constituting Warrant Shares are listed at the
time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of this
Warrant are convertible into or exchangeable for any other stock or securities
of the Company, the Company shall, at the Purchaser's option and upon surrender
of this Warrant by such Purchaser as provided above together with any notice,
statement or payment required to effect such conversion or exchange of Warrant
Shares, deliver to such Purchaser (or as otherwise specified by such Purchaser)
a certificate or certificates representing the stock or securities into which
the Warrant Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares are not to be
issued in the name of the Registered Holder, the Exercise Agreement shall also
state the name of the Person to whom the certificates for the Warrant Shares are
to be issued, and if the number of Warrant Shares to be issued does not include
all of the Warrant Shares purchasable hereunder, it shall also state the name of
the Person to whom a new Warrant for the unexercised portion of the rights
hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the date hereof, the Company issues
or sells, or in accordance with Section 2B is deemed to have issued or sold,
other than pursuant to a Permitted Issuance, as described in Section 2C, any
shares of Common Stock for a consideration per share less than the Fair Market
Value per share of the Common Stock determined as of the date of such issuance
or sale, then immediately upon such issuance or sale the Exercise Price shall be
reduced to equal the amount determined by multiplying the Exercise Price in
effect immediately prior to such issuance or sale by a fraction, the numerator
of which will be the sum of (1) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issuance or sale multiplied by the Fair
Market Value per share of the Common Stock determined as of the date of such
issuance or sale, plus (2) the consideration, if any, received by the Company
upon such issuance or sale, and the denominator of which will be the product
derived by multiplying such
4
<PAGE> 5
Fair Market Value per share of the Common Stock by the number of shares of
Common Stock Deemed Outstanding immediately after such issuance or sale. Upon
each such adjustment of the Exercise Price hereunder, the number of Warrant
Shares acquirable upon exercise of this Warrant shall be adjusted to equal the
number of shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Section 2, the calculation of the number of shares of Common
Stock Deemed Outstanding shall exclude the shares of Common Stock issued upon
exercise of this Warrant.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner
grants any rights or options (other than pursuant to a Permitted Issuance) to
subscribe for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (including without limitation
convertible common stock) (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein called
"Convertible Securities") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Fair Market Value per share of the
Common Stock in effect immediately prior to the time of the granting or sale of
such Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of this paragraph, the "price
per share for which Common Stock is issuable upon exercise of such Options or
upon conversion or exchange of such Convertible Securities" is determined by
dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus in the case of such Options which are exercisable for
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon exercise of such Options
or upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities (other than pursuant to a
Permitted Issuance) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the
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<PAGE> 6
Fair Market Value per share of the Common Stock in effect immediately prior to
the issuance or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of this paragraph, the "price per share for which Common
Stock is issuable upon such conversion or exchange" is determined by dividing
(A) the total amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Exercise Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Exercise Price have been or are to be made pursuant to other provisions of this
Section 2B, no further adjustment of the Exercise Price shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time, the Exercise Price in
effect at the time of such change shall be adjusted to the Exercise Price which
would have been in effect at such time had such options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold and the number of Warrant Shares shall be
correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder shall be adjusted to the Exercise
Price and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with
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<PAGE> 7
any merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an appraiser
jointly selected by the Company and the Required Holders, whose determination
shall be final and binding on the Company and all Registered Holders of
Warrants. The fees and expenses of such appraiser shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
2C. Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend recapitalization or otherwise)
the Common Stock into a greater number of shares or pays a dividend or makes a
distribution to holders of the Common Stock in the form of shares of Common
Stock, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of Warrant Shares obtainable upon
exercise of this Warrant shall be proportionately increased. If the Company at
any time combines (by reverse stock split or otherwise) the Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant shall be proportionately decreased.
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange
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<PAGE> 8
for Common Stock is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Company shall make appropriate provision
(in form and substance satisfactory to the Required Holders) to ensure that each
Registered Holder of Warrants shall thereafter have the right to acquire and
receive upon exercise thereof, in lieu of or addition to (as the case may be)
the Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrants, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrants had such Organic Change not taken
place. In any such case, the Company shall make appropriate provision (in form
and substance satisfactory to the Required Holders) with respect to such
Registered Holder's rights and interests to insure that the provisions hereof
(including, without limitation, Sections 2, 3 and 4) shall thereafter be
applicable to the Warrants (including, without limitation, in the case of any
such Organic Change in which the successor entity or purchasing entity is other
than the Company, an immediate adjustment of the Exercise Price to the value for
the Common Stock reflected by the terms of such Organic Change and a
corresponding immediate adjustment in the number of Warrant Shares acquirable
and receivable upon exercise of the Warrants, if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
each Registered Holder of Warrants such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Registered Holder may be
entitled to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
obtainable upon exercise of this Warrant so as to protect the rights of the
Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
8
<PAGE> 9
(ii) The Company shall give written notice to the Registered Holder
at least 30 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of Common
Stock, or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holder at least 30 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
SECTION 3. Certain Rights of Registered Holders Regarding Dividends. If
the Company pays a dividend or distribution upon the Common Stock, other than
dividends or distributions described in Section 2C, then the Company shall pay
to the Registered Holder of this Warrant, at the time of payment thereof, such
dividend or distribution which would have been paid to such Registered Holder
had this Warrant been fully exercised immediately prior to the date on which a
record is taken for such dividend or distribution or, if no record is taken, the
date as of which the record holders of Common Stock entitled to said dividends
or distributions are to be determined.
SECTION 4. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of the Common Stock
or any other shares of capital stock of the Company (the "Purchase Rights") ,
then the Registered Holder shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
Registered Holder would have acquired if such Registered Holder had held the
maximum number of Warrant Shares acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
SECTION 5. Definitions. The following terms have the meanings set forth
below:
"Change of Control" has the meaning ascribed thereto in clause (i) of the
definition thereof in the Credit Agreement.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
9
<PAGE> 10
"Common Stock Deemed Outstanding" means, at any given time, the number of
shares of all classes of the Company's common stock actually outstanding at such
time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
"Fair Market Value" means (i) the average of the closing sales prices of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day or, (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq Stock Market or, (iv) if the Common Stock is not reported on the
Nasdaq Stock Market, the average of the representative bid and asked quotations
for the Common Stock as of 4:00 P.M., New York time, as reported on the Nasdaq
interdealer quotation system, or any similar successor organization, in each
such case averaged over a period of 21 trading days consisting of the day as of
which "Fair Market Value" is being determined and the immediately prior 20
trading days prior to such day during which the Common Stock was traded;
provided, however, that with respect to the exercise procedure described in
Section 1B(i)(d)(iii), in the event that a Change of Control has occurred or
there has been a public announcement concerning a possible Change of Control or
other event which would result in a Change of Control, in each case, during the
period in which "Fair Market Value" is being measured as provided herein, such
prices shall be averaged over a period of 21 trading days consisting of the day
before the earlier of the occurrence or announcement (if different) of any such
event and the immediately prior 20 trading days prior to such day during which
the Common Stock has traded. Notwithstanding the foregoing, if at any time of
determination either (x) the Common Stock is not registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, and either listed on a
national securities exchange or authorized for quotation in the Nasdaq system,
or (y) less than 25% of the outstanding Common Stock is held by the public free
of transfer restrictions under the Securities Act of 1933, as amended, then Fair
Market Value shall mean the price that would be paid per share for the entire
common equity interest in the Company in an orderly sale transaction between a
willing buyer and a willing seller, using valuation techniques then prevailing
in the securities industry and assuming full disclosure of all relevant
information and a reasonable period of time for effectuating such sale, without
discount for lack of liquidity, or minority position. Fair Market Value shall be
determined jointly by the Company's Board of Directors in its good faith
judgment and the Required Holders; provided that, if such parties are unable to
so agree within 15 days, such value shall be determined by an independent
investment banking or appraisal firm mutually acceptable to the Company and the
Required Holders, which firm shall submit to the Company and the Warrant holders
a written report setting forth such determination. The fees and expenses of such
firm will be borne by the Company, and the determination of such firm will be
final and binding upon all parties.
"Permitted Issuance" means any issuance by the Company of shares of Common
Stock (a) upon exercise of the Warrants or pursuant to the exercise or
conversion of any Options or
10
<PAGE> 11
Convertible Securities issued prior to the date hereof in accordance with the
terms thereof as in existence on the date of execution of the Credit Agreement;
(b) in connection with any dividend or distribution to the holders of the Common
Stock not prohibited by any provision of the Credit Agreement; or (c) without
duplication of any Options referenced in clause (a) above, of up to 3,000,000
shares (subject to appropriate adjustment for stock splits, reverse stock
splits, stock dividends, recapitalizations, reorganizations and similar events
recapitalizations and similar events) of Common Stock or rights or options to
purchase any such shares issued to employees, directors, or consultants of the
Company or any direct or indirect subsidiary or pursuant to one or more stock
bonus or similar plans adopted by the Board of Directors of the Company.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, limited liability company, limited
liability partnership, other business organization, trust, union, association or
governmental or regulatory authority.
"Required Holders" means the holders representing a majority of the
Warrants Shares issuable upon exercise of the Warrants.
"Warrant Shares" means shares of the Company's Common Stock; provided,
that if the securities issuable upon exercise of the Warrants are issued by an
entity other than the Company or there is a change in the class of securities so
issuable, then the term "Warrant Shares" shall mean shares of the security
issuable upon exercise of the Warrants if such security is issuable in shares,
or shall mean the equivalent units in which such security is issuable if such
security is not issuable in shares.
SECTION 6. No Voting Rights; Limitations of Liability. This Warrant shall
not entitle the Registered Holder hereof to any voting rights or other rights as
a stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such Registered Holder for the Exercise Price of Warrant Shares
acquirable by exercise hereof or as a stockholder of the Company.
SECTION 7. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
SECTION 8. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. All Warrants representing portions of the rights
hereunder are referred to herein as the "Warrants."
11
<PAGE> 12
SECTION 9. Exchange. In the event that it becomes unlawful or, in the
reasonable judgment of any Registered Holder of this Warrant, unduly burdensome
by reason of a change in legal or regulatory considerations or the
interpretation thereof affecting such Registered Holder, or any material change
(including a reduction in the number of shares of Common Stock outstanding) in
the capital structure of the Company, to hold any or all of the Warrants or
Warrant Shares, the Registered Holder of this Warrant shall have the right to
require the Company to use its best efforts to permit all or part of such
Registered Holder's Warrants or Warrant Shares to be exchanged for nonvoting
stock or similar interests that convey equivalent economic benefits to such
Warrants or Warrant Shares and include equivalent anti-dilution protection. To
the extent that the Company may lawfully do so after the exercise of its best
efforts, any such exchange shall occur as soon as practicable but in any event
within 60 days after written notice by the Registered Holder of this Warrant to
the Company (or such earlier date if required to comply with applicable law).
SECTION 10. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 11. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 12. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the prior written consent of the Required
Holders.
SECTION 13. Warrant Register. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer of
Warrants. The Company may deem and treat the Registered Holder as the absolute
owner hereof (notwithstanding any notation
12
<PAGE> 13
of ownership or other writing thereon made by anyone) for all purposes and shall
not be affected by any notice to the contrary.
SECTION 14. Fractions of Shares. The Company may, but shall not be
required to, issue a fraction of a Warrant Share upon the exercise of this
Warrant in whole or in part. As to any fraction of a share which the Company
elects not to issue, the Company shall make a cash payment in respect of such
fraction in an amount equal to the same fraction of the Fair Market Value of a
Warrant Share on the date of such exercise.
SECTION 15. Descriptive Headings; Governing Law. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. THE CORPORATION
LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE
RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
* * * * *
13
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:_________________________________________
Name:
Title:
Attest:
__________________________
Name:
Title:
<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ____), hereby agrees to subscribe for the
purchase of Warrant Shares covered by such Warrant and makes payment herewith in
full therefor at the price per share provided by such Warrant.
Signature______________________________
Address________________________________
<PAGE> 16
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED,________________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. ___) with respect to the number of the Warrant Shares
covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Dated: Signature ________________________________
________________________________
Witness ________________________________
<PAGE> 1
Exhibit X
THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON MARCH 14, 1997,
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
UNDER ANY STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE RESOLD OR TRANSFERRED
UNLESS REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THAT CERTAIN
CREDIT AGREEMENT, DATED AS OF DECEMBER 20, 1996, AS AMENDED, MODIFIED OR
RESTATED FROM TIME TO TIME, AMONG THE BORROWERS NAMED THEREIN AND THE LENDERS
NAMED THEREIN.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT, AND AS REQUIRED BY
TREASURY REGULATION Section 1.1275-3(B)(1), INFORMATION REGARDING THE ISSUE
PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO
MATURITY MAY BE OBTAINED FROM THE BORROWERS.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
NEW YORK SKYLINE, INC.
SKYLINE VIRTUAL REALITY, INC.
SKYLINE CHICAGO, INC.
SKYLINE MAGIC, INC.
SKYLINE LAS VEGAS, INC.
SENIOR PROMISSORY NOTE
March 14, 1997 $450,000
New York, New York No. 5
FOR VALUE RECEIVED, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a
New York corporation ("SMEI"), NEW YORK SKYLINE, INC., a New York corporation
("NYSI"), SKYLINE VIRTUAL REALITY, INC., a Delaware corporation ("SVRI"),
SKYLINE CHICAGO, INC., a Delaware corporation ("SCI"), SKYLINE MAGIC, INC., a
Delaware corporation ("SMI"), SKYLINE LAS VEGAS, INC., a Delaware corporation
("SLVI") (SMEI, NYSI, SVRI, SCI, SMI and SLVI, each a "Borrower" and, jointly
and severally, the "Borrowers"), each hereby jointly and severally promises to
pay Prospect Street NYC Co-Investment Fund, L.P., a Delaware limited
partnership, and its registered assigns (the "Registered Holder") the unpaid
principal amount of each Loan made by the Registered Holder to each such
Borrower (as indicated on the schedule attached hereto) together with interest
and premiums thereon calculated from the date hereof in accordance with the
provisions of this Note.
<PAGE> 2
This Note was issued pursuant to a Senior Credit Agreement,
dated as of December 20, 1996 (as amended, modified or restated from time to
time, the "Credit Agreement"), among the Borrowers and the Lenders, and this
Note is one of the "Senior Notes" referred to in the Credit Agreement. The
Credit Agreement contains terms governing the rights of the holder of this Note,
and all provisions of the Credit Agreement are hereby incorporated herein in
full by reference. Unless otherwise indicated herein, capitalized terms used in
this Note have the same meanings as set forth in the Credit Agreement.
1. Interest. Interest will accrue on the unpaid principal
amount of this Note from the date hereof at a rate of 14% per annum. Interest
accrued on this Note shall be payable on December 20, 2001 (the "Final Maturity
Date"). Upon the occurrence and during the continuance of an Event of Default,
interest will accrue on the unpaid principal amount of this Note, all unpaid
interest on this Note and all other amounts payable hereunder, to the extent
permitted by applicable law, at 21% per annum.
2. Method of Payment. Each Borrower shall pay principal,
interest and all other amounts payable on this Note with respect to any Loan
made by the Registered Holder to such Borrower in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. Each Borrower shall pay principal and interest on this Note with respect
to any Loan made by the Registered Holder to each Borrower by wire transfer of
immediately available funds. All payments shall be applied first, to all accrued
and unpaid interest hereon, second, to unpaid premiums, if any, and third, to
principal.
3. Prepayment. The Borrowers may, at any time and from time to
time, prepay all or any portion of the principal amount of this Note in cash.
Written notice of prepayment under this Section 3 shall be given at least 30
days but not more than 60 days before the prepayment date set forth in such
notice to the Registered Holder at the address provided in or pursuant to
Section 9. Any such prepayment shall be in an amount of at least $250,000 and in
integrals of $50,000, or such lesser amount as equals the then outstanding
principal amount of this Note being prepaid, and shall be accompanied by the
cash payment of all accrued and unpaid interest on the portion of the principal
then being prepaid plus a premium equal to the applicable percentage of the
principal amount being prepaid, determined as follows:
During the 12-Month Period
Beginning December 20 Applicable Percentage
- -------------------------- ---------------------
1996 5%
1997 4%
1998 3%
1999 2%
2000 1%
-2-
<PAGE> 3
Once due notice of prepayment is given, the principal amount of this Note (or
applicable portion thereof) shall become due and payable on the optional
prepayment date set forth in the written notice to the Registered Holder.
4. Repayment. Each Borrower will repay this Note (with respect
to any Loan made by the Registered Holder to such Borrower) in full, in cash on
the Final Maturity Date at 100% of the outstanding principal amount of this Note
plus accrued but unpaid interest thereon to such date.
5. Events of Default; Remedies. Events of Default and the
consequences of Events of Default are set forth in Article VIII of the Credit
Agreement. All provisions of Article VIII of the Credit Agreement are
specifically hereby incorporated herein in full by this reference.
6. Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of SMEI, without expense to the Registered Holder, for a Note
or Notes, dated as of the date to which interest has been paid on the unpaid
principal amount of the Note or Notes so exchanged, or, if no interest has been
paid thereon, then dated as of the date of the Note or Notes so exchanged, each
in the principal amount $1,000 or any multiple thereof, for the same aggregate
unpaid principal amount as the Note or Notes so surrendered for exchange and
each payable to such Person or Persons, or order, as may be designated by such
Registered Holder; provided, however, that upon any such exchange there shall be
filed with the Borrowers the name and address for all purposes hereof of the
payee of each Note delivered in exchange for this Note and such exchanged Note
shall in all other respects be in the same form and have the same terms as this
Note.
7. Replacement. Upon receipt of evidence reasonable
satisfactory to the Borrowers (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
this Note, and in the case of any such loss, theft or destruction, upon receipt
of indemnity reasonably satisfactory to the Borrowers (provided that if the
Registered Holder is a financial institution or other institutional investor its
own agreement shall be satisfactory) or, in the case of any such mutilation upon
surrender of this Note, the Borrowers shall (at their expense) execute and
deliver in lieu of such Note, a Note of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated Note and dated as of
the date to which interest has been paid on the unpaid principal amount of the
Note so lost, stolen, destroyed or mutilated, or, if no interest has been paid
thereon, then dated as of the date of the Note so lost, stolen, destroyed or
mutilated.
8. Place of Payment. Payments of principal and cash interest
and other amounts payable hereunder are to be delivered at the following
address:
-3-
<PAGE> 4
Prospect Street NYC Co-Investment Fund, L.P.
250 Park Avenue, 17th Floor
New York, New York 10177
or to such other address or to the attention of such other Person as specified
by prior written notice to the Borrowers.
9. Headings; Governing Law. The headings used in this Note
are for convenience of reference only and do not define or limit the provisions
hereof. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
10. Note Register. Each Borrower shall maintain at its
principal executive offices books for the registration and the registration of
transfer of this Note. Each Borrower may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
11. Usury Laws. It is the intention of the Borrowers and the
holder(s) of this Note to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Note shall be subject to
reduction to the amount not in excess of the maximum legal amount allowed under
the applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Borrowers or otherwise, then earned interest may
never include more than the maximum amount permitted by law, computed from the
date hereof until payment, and any interest in excess of the maximum amount
permitted by law shall be canceled automatically and, if theretofore paid, shall
at the option of the holders hereof either be rebated to the Borrowers or
credited on the principal amount of this Note, or if this Note has been paid,
then the excess shall be rebated to the Borrowers. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal balance of
this Note remaining unpaid from time to time. If such interest does exceed the
maximum legal rate, it shall be deemed a mistake and such excess shall be
canceled automatically and, if theretofore paid, rebated to the Borrowers or
credited on the principal amount of this Note, or if this Note has been repaid,
then such excess shall be rebated to the Borrowers.
12. Certain Waivers. Each of the Borrowers hereby waives
diligence, presentment, protest and demand and notice of protest and demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from
-4-
<PAGE> 5
time to time and that the holder hereof may accept security for this Note or
release security for this Note, all without in any way affecting the liability
of the Borrowers hereunder.
-5-
<PAGE> 6
IN WITNESS WHEREOF, each Borrower has executed and delivered
this Note as of the date first above written.
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By:____________________________
Name:
Title:
NEW YORK SKYLINE, INC.
By:____________________________
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:____________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:____________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:____________________________
Name:
Title:
SKYLINE LAS VEGAS, INC.
By:____________________________
Name:
Title:
<PAGE> 7
- --------------------------------------------------------------------------------
BORROWER PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------
Skyline Multimedia Entertainment, Inc.
New York Skyline, Inc.
Skyline Virtual Reality Inc.
Skyline Chicago, Inc.
Skyline Magic, Inc.
Skyline Las Vegas, Inc.
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit Y
SECOND
AMENDMENT
TO
SENIOR CREDIT AGREEMENT
SECOND AMENDMENT, dated as of March 21, 1997 (this "Amendment") to the
Senior Credit Agreement dated as of December 20, 1996 (as amended by the First
Amendment to the Senior Credit Agreement dated as of February 18, 1997, the
"Credit Agreement"), by and among Skyline Multimedia Entertainment, Inc., a New
York corporation (the "Company"), New York Skyline, Inc., a New York corporation
("NYSI"), Skyline Virtual Reality, Inc., a Delaware corporation ("SVRI"),
Skyline Chicago, Inc., a Delaware corporation ("SCI"), Skyline Magic, Inc., a
Delaware corporation ("SMI"), Skyline Las Vegas, Inc., a Delaware corporation
("SLVI") (the Company, NYSI, SVRI, SCI, SMI and SLVI, together, the
"Borrowers"), Prospect Street NYC Discovery Fund, L.P., a Delaware limited
partnership ("Prospect"), Bank of New York, as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company ("Bug") and Prospect Street
NYC Co-Investment Fund, L.P., a Delaware limited partnership ("Prospect II").
WHEREAS, capitalized terms not otherwise defined herein have the
respective meanings set forth in the Credit Agreement;
WHEREAS, each of the Borrowers, Prospect, Bug, Prospect II and Bank of
New York, as Trustee for Brooklyn Union Gas Company Non-Bargaining Health VEBA
("VEBA") desire (i) that Section 9.3 of the Credit Agreement be amended to
provide for more than one New Additional Lender; (ii) that Section 9.7 of the
Credit Agreement be amended to provide that the parties agree that the fair
market value of the Warrants to be issued under the Credit Agreement is $1.00
for each Warrant Share issuable thereunder; (iii) that Section 9.9 of the Credit
Agreement be amended to provide that an opinion of counsel to the Borrowers in
connection with amendments, modifications, terminations or waivers under the
Credit Agreement is only necessary if requested by the Required Lenders; and
(iv) that Footnote 5 to the Form of Warrant attached as Exhibit F to the Credit
Agreement be amended to provide that the Warrant issuable to VEBA on the date
hereof shall be immediately exercisable;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Amendment to Section 9.3 of the Credit Agreement. Section 9.3 of the
Credit Agreement is hereby deleted in its entirety and the following is inserted
in lieu thereof:
<PAGE> 2
"9.3 New Additional Lenders. Upon the consent of the
Required Lenders and Prospect, one or more additional Persons
(each a "New Additional Lender") shall be made a party to this
Agreement by executing a counterpart of this Agreement. Each
New Additional Lender shall have the respective Additional
Loan Commitment as shall be set forth on the counterpart of
this Agreement executed by such New Additional Lender. In the
event that any New Additional Lender is made a party to this
Agreement, the terms "Additional Lender" and "Lender" herein
shall be deemed to refer to such New Additional Lender."
2. Amendment to Section 9.7 of the Credit Agreement. Section 9.7 of the
Credit Agreement is hereby deleted in its entirety and the following is inserted
in lieu thereof:
"9.7 Consideration for Warrants. The Lenders and the
Borrowers acknowledge and agree that, for all purposes
(including tax and accounting), the consideration paid for the
Warrants to be issued hereunder is $1.00 for each Warrant
Share (as defined in the Warrants) issuable thereunder
(subject to adjustment for stock splits, stock dividends,
recapitalization, reorganizations and similar events which
occur on or after the Closing Date). Each Lender and each
Borrower shall file their respective Tax Returns in a manner
which is consistent with such valuation and shall not take any
contrary position with any taxing authority."
3. Amendment to Section 9.9 of the Credit Agreement. Section 9.9 of the
Credit Agreement is hereby amended by inserting the phrase ", if the Required
Lenders so Request," immediately after the phrase "Required Lenders and each
Borrower and" and immediately before the phrase "an opinion of counsel of the
Borrowers to the effect" in the fourth line of Section 9.9 of the Credit
Agreement.
4. Amendment to Footnote 5 of the Form of Warrant. Footnote 5 of the
Form of Warrant attached as Exhibit F to the Credit Agreement is hereby amended
by deleting the text of Footnote 5 in its entirety and inserting the following
in lieu thereof:
"The Warrant to be issued to Bug (the "February Bug Warrant")
on February 18, 1997 with respect to 48,780 Warrant Shares
(subject to adjustment as provided in such Warrant) and the
Warrant to be issued to VEBA (the "March VEBA Warrant") on
March 21, 1997 with respect to 48,780 Warrant Shares (subject
to adjustment as provided in such Warrant) will each be
exercisable immediately upon issuance. All Warrants other than
the February Bug Warrant and the March VEBA Warrant shall be
exercisable as follows: (i) the first 200,000 Warrant
-2-
<PAGE> 3
Shares will be exercisable immediately upon issuance; (ii) the
next 100,000 Warrant Shares will be exercisable beginning one
year from the Closing Date; and (iii) all remaining Warrant
Shares will be exercisable beginning two years from the
Closing Date, in each case pro rata among the Lenders
participating in each Borrowing pursuant to which such
Warrants are issued and subject to appropriate adjustment for
stock splits, stock dividends, recapitalizations,
reorganizations and similar events which occur on or after
execution of the Credit Agreement."
5. Effectiveness of Amendment. Pursuant to Section 9.9 of the Credit
Agreement, this Amendment shall become effective upon the execution and delivery
of this Agreement by each Lender and each Borrower.
6. Effect on Credit Agreement. The Credit Agreement shall continue in
full force and effect as amended by this Amendment. From and after the date
hereof, all references to the Credit Agreement shall be deemed to mean the
Credit Agreement as amended by this Amendment.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:
--------------------------------------
Name:
Title:
NEW YORK SKYLINE, INC.
By:
--------------------------------------
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:
--------------------------------------
Name:
Title:
SKYLINE CHICAGO, INC.
By:
--------------------------------------
Name:
Title:
SKYLINE MAGIC, INC.
By:
--------------------------------------
Name:
Title:
[Signature Page to Second Amendment to Senior Credit Agreement]
-4-
<PAGE> 5
SKYLINE LAS VEGAS, INC.
By:
------------------------------------
Name:
Title:
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund, Inc., its General Partner
By:
------------------------------
Name: Ronald D. Celmer
Title: Vice President
BANK OF NEW YORK, as Trustee for the
Employees Retirement Plan of the Brooklyn
Union Gas Company
By:
------------------------------------
Name:
Title:
PROSPECT STREET NYC CO-INVESTMENT FUND, L.P.
By: Prospect Street Co-Investment Fund, LLC,
its General Partner
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
BANK OF NEW YORK, as Trustee for Brooklyn Union Gas Company Non-Bargaining
Health VEBA
By:
-------------------------------
Name:
Title:
[Signature Page to Second Amendment to Senior Credit Agreement]
-5-
<PAGE> 1
Exhibit Z
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND MAY
BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
STOCK PURCHASE WARRANT
Date of Issuance: March 21, 1997 Certificate No. 8
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Bank of New York, as Trustee for
Brooklyn Union Gas Company Non-Bargaining Health VEBA or its registered assigns
(the "Registered Holder"), the right to purchase from the Company 48,780 shares
of Warrant Shares at a price per share of $4.25 (as adjusted from time to time,
the "Exercise Price"). This Warrant is one of several warrants (collectively,
the "Warrants") issued pursuant to the Senior Credit Agreement dated as of
December 20, 1996, as amended, by and among the Company, the other Borrowers
named therein and the Lenders named therein (as such agreement may be amended,
modified or restated from time to time, the "Credit Agreement"). The Exercise
Price and number of Warrant Shares (and the amount and kind of other securities)
for which this Warrant is exercisable shall be subject to adjustment as provided
herein. Certain capitalized terms used herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant
may be exercised, in whole or in part, at any time and from time to time after
the Date of Issuance to and including 5:00 p.m., New York time, on December 20,
2006 or, if such day is not a business day, on the next preceding business day
(the "Exercise Period"); provided, however, that if the Company shall not have
given the Registered Holder written notice of the expiration of the Exercise
Period at least 60 days but not more than 90 days prior to the expiration of the
Exercise Period, the Exercise Period shall be extended until the 60th day
following the receipt by the Registered Holder of such a notice.
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<PAGE> 2
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when
all of the following items have been delivered to the Company (the "Exercise
Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) either (i) a check payable to the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant
Shares being purchased upon such exercise (the "Aggregate Exercise
Price"), (ii) the surrender to the Company of debt or equity securities
of the Company or any of its direct or indirect subsidiaries having a
value equal to the Aggregate Exercise Price of the Warrant Shares being
purchased upon such exercise (which value in the case of debt
securities or any preferred stock shall be deemed to equal the
aggregate outstanding principal amount or liquidation value thereof
plus all accrued and unpaid interest thereon or accrued or declared and
unpaid dividends thereon and in the case of shares of Common Stock
shall be the Fair Market Value thereof), or (iii) the delivery of a
notice to the Company that the Purchaser is exercising the Warrant (or
portion thereof) by authorizing the Company to reduce the number of
Warrant Shares subject to such exercise of the Warrant or portion
thereof by the number of shares having an aggregate Fair Market Value
determined as of the date immediately prior to the date of the Exercise
Time equal to the Aggregate Exercise Price.
(ii) Certificates for Warrant Shares purchased upon exercise
of this Warrant shall be delivered by the Company to the Purchaser within five
days after the date of the Exercise Time together with any cash payable in lieu
of a fraction of a share pursuant to Section 14 hereof. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such five-day period, deliver such
new Warrant to the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
Registered Holder of such Warrant Shares at the Exercise Time.
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<PAGE> 3
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrants or any certificates representing Warrant Shares in a
name other than that of a Registered Holder, and the Company shall not be
required to issue or deliver such Warrant or certificate for Warrant Shares
unless and until the Person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
(v) The Company shall not close its books against the transfer
of this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to or less than
the Exercise Price then in effect. In the event that the Company fails to comply
with its obligations set forth in the foregoing sentence, in addition to all
other rights which the Registered Holder or Purchaser may have at law or in
equity, the Purchaser may (but shall not be obligated to) purchase Warrant
Shares hereunder at par value, and the Company shall be obligated to reimburse
the Purchaser for the aggregate amount of consideration paid in connection with
such exercise in excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any
reasonable request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of stock or
otherwise), such exercise may at the election of the Registered Holder be
conditioned upon the consummation of such transaction, in which case such
exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued Warrant Shares solely for the
purpose of issuance upon the exercise of this Warrant, the maximum number of
Warrant Shares issuable upon the exercise of this Warrant. All Warrant Shares
which are so issuable shall, when issued and upon the payment of the applicable
Exercise Price, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to ensure that all such Warrant Shares may be so issued
without violation by the Company of any
3
<PAGE> 4
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock or other securities
constituting Warrant Shares may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on any domestic securities exchange upon which shares of
Common Stock or other securities constituting Warrant Shares are listed at the
time of such exercise.
(ix) If the Warrant Shares issuable by reason of exercise of
this Warrant are convertible into or exchangeable for any other stock or
securities of the Company, the Company shall, at the Purchaser's option and upon
surrender of this Warrant by such Purchaser as provided above together with any
notice, statement or payment required to effect such conversion or exchange of
Warrant Shares, deliver to such Purchaser (or as otherwise specified by such
Purchaser) a certificate or certificates representing the stock or securities
into which the Warrant Shares issuable by reason of such conversion are
convertible or exchangeable, registered in such name or names and in such
denomination or denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the
Purchaser shall deliver to the Company an Exercise Agreement in substantially
the form set forth in Exhibit I hereto, except that if the Warrant Shares are
not to be issued in the name of the Registered Holder, the Exercise Agreement
shall also state the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be issued does
not include all of the Warrant Shares purchasable hereunder, it shall also state
the name of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the date hereof, the Company issues
or sells, or in accordance with Section 2B is deemed to have issued or sold,
other than pursuant to a Permitted Issuance, as described in Section 2C, any
shares of Common Stock for a consideration per share less than the Fair Market
Value per share of the Common Stock determined as of the date of such issuance
or sale, then immediately upon such issuance or sale the Exercise Price shall be
reduced to equal the amount determined by multiplying the Exercise Price in
effect immediately prior to such issuance or sale by a fraction, the numerator
of which will be the sum of (1) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issuance or sale multiplied by the Fair
Market Value per share of the Common Stock determined as of the date of such
issuance or sale, plus (2) the consideration, if any, received by the Company
upon such issuance or sale, and the denominator of which will be the product
derived by multiplying such
4
<PAGE> 5
Fair Market Value per share of the Common Stock by the number of shares of
Common Stock Deemed Outstanding immediately after such issuance or sale. Upon
each such adjustment of the Exercise Price hereunder, the number of Warrant
Shares acquirable upon exercise of this Warrant shall be adjusted to equal the
number of shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Section 2, the calculation of the number of shares of Common
Stock Deemed Outstanding shall exclude the shares of Common Stock issued upon
exercise of this Warrant.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any
manner grants any rights or options (other than pursuant to a Permitted
Issuance) to subscribe for or to purchase Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock (including without
limitation convertible common stock) (such rights or options being herein called
"Options" and such convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Fair Market Value per share of the
Common Stock in effect immediately prior to the time of the granting or sale of
such Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of this paragraph, the "price
per share for which Common Stock is issuable upon exercise of such Options or
upon conversion or exchange of such Convertible Securities" is determined by
dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus in the case of such Options which are exercisable for
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon exercise of such Options
or upon the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities (other than pursuant to a
Permitted Issuance) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the
5
<PAGE> 6
Fair Market Value per share of the Common Stock in effect immediately prior to
the issuance or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For the purposes of this paragraph, the "price per share for which Common
Stock is issuable upon such conversion or exchange" is determined by dividing
(A) the total amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Exercise Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Exercise Price have been or are to be made pursuant to other provisions of this
Section 2B, no further adjustment of the Exercise Price shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time, the Exercise Price in
effect at the time of such change shall be adjusted to the Exercise Price which
would have been in effect at such time had such options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold and the number of Warrant Shares shall be
correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder shall be adjusted to the Exercise
Price and the number of shares which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with
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<PAGE> 7
any merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an appraiser
jointly selected by the Company and the Required Holders, whose determination
shall be final and binding on the Company and all Registered Holders of
Warrants. The fees and expenses of such appraiser shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
2C. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of Warrant Shares obtainable
upon exercise of this Warrant shall be proportionately increased. If the Company
at any time combines (by reverse stock split or otherwise) the Common Stock into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares obtainable upon exercise of this Warrant shall be proportionately
decreased.
2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange
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<PAGE> 8
for Common Stock is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Company shall make appropriate provision
(in form and substance satisfactory to the Required Holders) to ensure that each
Registered Holder of Warrants shall thereafter have the right to acquire and
receive upon exercise thereof, in lieu of or addition to (as the case may be)
the Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrants, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrants had such Organic Change not taken
place. In any such case, the Company shall make appropriate provision (in form
and substance satisfactory to the Required Holders) with respect to such
Registered Holder's rights and interests to insure that the provisions hereof
(including, without limitation, Sections 2, 3 and 4) shall thereafter be
applicable to the Warrants (including, without limitation, in the case of any
such Organic Change in which the successor entity or purchasing entity is other
than the Company, an immediate adjustment of the Exercise Price to the value for
the Common Stock reflected by the terms of such Organic Change and a
corresponding immediate adjustment in the number of Warrant Shares acquirable
and receivable upon exercise of the Warrants, if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
each Registered Holder of Warrants such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Registered Holder may be
entitled to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
obtainable upon exercise of this Warrant so as to protect the rights of the
Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
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<PAGE> 9
(ii) The Company shall give written notice to the Registered
Holder at least 30 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Certain Rights of Registered Holders Regarding Dividends. If
the Company pays a dividend or distribution upon the Common Stock, other than
dividends or distributions described in Section 2C, then the Company shall pay
to the Registered Holder of this Warrant, at the time of payment thereof, such
dividend or distribution which would have been paid to such Registered Holder
had this Warrant been fully exercised immediately prior to the date on which a
record is taken for such dividend or distribution or, if no record is taken, the
date as of which the record holders of Common Stock entitled to said dividends
or distributions are to be determined.
SECTION 4. Purchase Rights. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of the
Common Stock or any other shares of capital stock of the Company (the "Purchase
Rights") , then the Registered Holder shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such Registered Holder would have acquired if such Registered Holder had held
the maximum number of Warrant Shares acquirable upon complete exercise of this
Warrant immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
SECTION 5. Definitions. The following terms have the meanings set forth
below:
"Change of Control" has the meaning ascribed thereto in clause (i) of
the definition thereof in the Credit Agreement.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company, any securities into which such Common Stock shall have been changed
or any securities resulting from any reclassification or recapitalization of
such Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
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"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of all classes of the Company's common stock actually outstanding at
such time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
"Date of Issuance" means the date the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"Fair Market Value" means (i) the average of the closing sales prices
of the Common Stock on all domestic securities exchanges on which the Common
Stock is listed, or (ii) if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, (iii) if on any day the Common Stock is not
so listed, the sales price for the Common Stock as of 4:00 P.M., New York time,
as reported on the Nasdaq Stock Market or, (iv) if the Common Stock is not
reported on the Nasdaq Stock Market, the average of the representative bid and
asked quotations for the Common Stock as of 4:00 P.M., New York time, as
reported on the Nasdaq interdealer quotation system, or any similar successor
organization, in each such case averaged over a period of 21 trading days
consisting of the day as of which "Fair Market Value" is being determined and
the immediately prior 20 trading days prior to such day during which the Common
Stock was traded; provided, however, that with respect to the exercise procedure
described in Section 1B(i)(d)(iii), in the event that a Change of Control has
occurred or there has been a public announcement concerning a possible Change of
Control or other event which would result in a Change of Control, in each case,
during the period in which "Fair Market Value" is being measured as provided
herein, such prices shall be averaged over a period of 21 trading days
consisting of the day before the earlier of the occurrence or announcement (if
different) of any such event and the immediately prior 20 trading days prior to
such day during which the Common Stock has traded. Notwithstanding the
foregoing, if at any time of determination either (x) the Common Stock is not
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, and either listed on a national securities exchange or authorized for
quotation in the Nasdaq system, or (y) less than 25% of the outstanding Common
Stock is held by the public free of transfer restrictions under the Securities
Act of 1933, as amended, then Fair Market Value shall mean the price that would
be paid per share for the entire common equity interest in the Company in an
orderly sale transaction between a willing buyer and a willing seller, using
valuation techniques then prevailing in the securities industry and assuming
full disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders; provided that,
if such parties are unable to so agree within 15 days, such value shall be
determined by an independent investment banking or appraisal firm mutually
acceptable to the Company and the Required Holders, which firm shall submit to
the Company and the Warrant holders a written report setting forth such
determination.
10
<PAGE> 11
The fees and expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
"Permitted Issuance" means any issuance by the Company of shares of
Common Stock (a) upon exercise of the Warrants or pursuant to the exercise or
conversion of any Options or Convertible Securities issued prior to the date
hereof in accordance with the terms thereof as in existence on the date of
execution of the Credit Agreement; (b) in connection with any dividend or
distribution to the holders of the Common Stock not prohibited by any provision
of the Credit Agreement; or (c) without duplication of any Options referenced in
clause (a) above, of up to 3,000,000 shares (subject to appropriate adjustment
for stock splits, reverse stock splits, stock dividends, recapitalizations,
reorganizations and similar events recapitalizations and similar events) of
Common Stock or rights or options to purchase any such shares issued to
employees, directors, or consultants of the Company or any direct or indirect
subsidiary or pursuant to one or more stock bonus or similar plans adopted by
the Board of Directors of the Company.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, limited liability company, limited
liability partnership, other business organization, trust, union, association or
governmental or regulatory authority.
"Required Holders" means the holders representing a majority of the
Warrants Shares issuable upon exercise of the Warrants.
"Warrant Shares" means shares of the Company's Common Stock; provided,
that if the securities issuable upon exercise of the Warrants are issued by an
entity other than the Company or there is a change in the class of securities so
issuable, then the term "Warrant Shares" shall mean shares of the security
issuable upon exercise of the Warrants if such security is issuable in shares,
or shall mean the equivalent units in which such security is issuable if such
security is not issuable in shares.
SECTION 6. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered Holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares acquirable by exercise hereof or as a stockholder of the Company.
SECTION 7. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company.
11
<PAGE> 12
SECTION 8. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are referred to herein as the "Warrants."
SECTION 9. Exchange. In the event that it becomes unlawful or, in the
reasonable judgment of any Registered Holder of this Warrant, unduly burdensome
by reason of a change in legal or regulatory considerations or the
interpretation thereof affecting such Registered Holder, or any material change
(including a reduction in the number of shares of Common Stock outstanding) in
the capital structure of the Company, to hold any or all of the Warrants or
Warrant Shares, the Registered Holder of this Warrant shall have the right to
require the Company to use its best efforts to permit all or part of such
Registered Holder's Warrants or Warrant Shares to be exchanged for nonvoting
stock or similar interests that convey equivalent economic benefits to such
Warrants or Warrant Shares and include equivalent anti-dilution protection. To
the extent that the Company may lawfully do so after the exercise of its best
efforts, any such exchange shall occur as soon as practicable but in any event
within 60 days after written notice by the Registered Holder of this Warrant to
the Company (or such earlier date if required to comply with applicable law).
SECTION 10. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the Company
(provided that if the Registered Holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Company shall (at
its expense) execute and deliver in lieu of such certificate a new certificate
of like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 11. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 12. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein
12
<PAGE> 13
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the prior written consent of the Required
Holders.
SECTION 13. Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 14. Fractions of Shares. The Company may, but shall not be
required to, issue a fraction of a Warrant Share upon the exercise of this
Warrant in whole or in part. As to any fraction of a share which the Company
elects not to issue, the Company shall make a cash payment in respect of such
fraction in an amount equal to the same fraction of the Fair Market Value of a
Warrant Share on the date of such exercise.
SECTION 15. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. THE CORPORATION
LAWS OF THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE
RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
* * * * *
13
<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:______________________________________
Name:
Title:
Attest:
______________________________
Name:
Title:
<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ____), hereby agrees to subscribe for the
purchase of Warrant Shares covered by such Warrant and makes payment herewith in
full therefor at the price per share provided by such Warrant.
Signature______________________________
Address________________________________
<PAGE> 16
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED,________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. ___) with respect to the number of the Warrant
Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Dated: Signature ________________________________
________________________________
Witness ________________________________
<PAGE> 1
Exhibit AA
THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON MARCH 21, 1997,
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
UNDER ANY STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE RESOLD OR TRANSFERRED
UNLESS REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN THAT CERTAIN
CREDIT AGREEMENT, DATED AS OF DECEMBER 20, 1996, AS AMENDED, MODIFIED OR
RESTATED FROM TIME TO TIME, AMONG THE BORROWERS NAMED THEREIN AND THE LENDERS
NAMED THEREIN.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT, AND AS REQUIRED BY
TREASURY REGULATION Section 1.1275-3(B)(1), INFORMATION REGARDING THE ISSUE
PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE AND THE YIELD TO
MATURITY MAY BE OBTAINED FROM THE BORROWERS.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
NEW YORK SKYLINE, INC.
SKYLINE VIRTUAL REALITY, INC.
SKYLINE CHICAGO, INC.
SKYLINE MAGIC, INC.
SKYLINE LAS VEGAS, INC.
SENIOR PROMISSORY NOTE
March 21, 1997 $500,000
New York, New York No. 6
FOR VALUE RECEIVED, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York
corporation ("SMEI"), NEW YORK SKYLINE, INC., a New York corporation ("NYSI"),
SKYLINE VIRTUAL REALITY, INC., a Delaware corporation ("SVRI"), SKYLINE CHICAGO,
INC., a Delaware corporation ("SCI"), SKYLINE MAGIC, INC., a Delaware
corporation ("SMI"), SKYLINE LAS VEGAS, INC., a Delaware corporation ("SLVI")
(SMEI, NYSI, SVRI, SCI, SMI and SLVI, each a "Borrower" and, jointly and
severally, the "Borrowers"), each hereby jointly and severally promises to pay
Bank of New York, as Trustee for Brooklyn Union Gas Company Non-Bargaining
Health VEBA, and its registered assigns (the "Registered Holder") the unpaid
principal amount of each Loan made by the Registered Holder to each such
Borrower (as indicated on the schedule attached hereto) together with interest
and premiums thereon calculated from the date hereof in accordance with the
provisions of this Note.
<PAGE> 2
This Note was issued pursuant to a Senior Credit Agreement, dated as of
December 20, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among the Borrowers and the Lenders, and this Note is one
of the "Senior Notes" referred to in the Credit Agreement. The Credit Agreement
contains terms governing the rights of the holder of this Note, and all
provisions of the Credit Agreement are hereby incorporated herein in full by
reference. Unless otherwise indicated herein, capitalized terms used in this
Note have the same meanings as set forth in the Credit Agreement.
1. Interest. Interest will accrue on the unpaid principal amount of
this Note from the date hereof at a rate of 14% per annum. Interest accrued on
this Note shall be payable on December 20, 2001 (the "Final Maturity Date").
Upon the occurrence and during the continuance of an Event of Default, interest
will accrue on the unpaid principal amount of this Note, all unpaid interest on
this Note and all other amounts payable hereunder, to the extent permitted by
applicable law, at 21% per annum.
2. Method of Payment. Each Borrower shall pay principal, interest and
all other amounts payable on this Note with respect to any Loan made by the
Registered Holder to such Borrower in money of the United States that at the
time of payment is legal tender for payment of public and private debts. Each
Borrower shall pay principal and interest on this Note with respect to any Loan
made by the Registered Holder to each Borrower by wire transfer of immediately
available funds. All payments shall be applied first, to all accrued and unpaid
interest hereon, second, to unpaid premiums, if any, and third, to principal.
3. Prepayment. The Borrowers may, at any time and from time to time,
prepay all or any portion of the principal amount of this Note in cash. Written
notice of prepayment under this Section 3 shall be given at least 30 days but
not more than 60 days before the prepayment date set forth in such notice to the
Registered Holder at the address provided in or pursuant to Section 9. Any such
prepayment shall be in an amount of at least $250,000 and in integrals of
$50,000, or such lesser amount as equals the then outstanding principal amount
of this Note being prepaid, and shall be accompanied by the cash payment of all
accrued and unpaid interest on the portion of the principal then being prepaid
plus a premium equal to the applicable percentage of the principal amount being
prepaid, determined as follows:
<TABLE>
<CAPTION>
During the 12-Month Period
Beginning December 20 Applicable Percentage
- --------------------- ---------------------
<S> <C>
1996 5%
1997 4%
1998 3%
1999 2%
2000 1%
</TABLE>
-2-
<PAGE> 3
Once due notice of prepayment is given, the principal amount of this Note (or
applicable portion thereof) shall become due and payable on the optional
prepayment date set forth in the written notice to the Registered Holder.
4. Repayment. Each Borrower will repay this Note (with respect to any
Loan made by the Registered Holder to such Borrower) in full, in cash on the
Final Maturity Date at 100% of the outstanding principal amount of this Note
plus accrued but unpaid interest thereon to such date.
5. Events of Default; Remedies. Events of Default and the
consequences of Events of Default are set forth in Article VIII of the Credit
Agreement. All provisions of Article VIII of the Credit Agreement are
specifically hereby incorporated herein in full by this reference.
6. Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of SMEI, without expense to the Registered Holder, for a Note
or Notes, dated as of the date to which interest has been paid on the unpaid
principal amount of the Note or Notes so exchanged, or, if no interest has been
paid thereon, then dated as of the date of the Note or Notes so exchanged, each
in the principal amount $1,000 or any multiple thereof, for the same aggregate
unpaid principal amount as the Note or Notes so surrendered for exchange and
each payable to such Person or Persons, or order, as may be designated by such
Registered Holder; provided, however, that upon any such exchange there shall be
filed with the Borrowers the name and address for all purposes hereof of the
payee of each Note delivered in exchange for this Note and such exchanged Note
shall in all other respects be in the same form and have the same terms as this
Note.
7. Replacement. Upon receipt of evidence reasonable satisfactory to
the Borrowers (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of this Note, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Borrowers (provided that if the Registered Holder
is a financial institution or other institutional investor its own agreement
shall be satisfactory) or, in the case of any such mutilation upon surrender of
this Note, the Borrowers shall (at their expense) execute and deliver in lieu of
such Note, a Note of like kind representing the same rights represented by such
lost, stolen, destroyed or mutilated Note and dated as of the date to which
interest has been paid on the unpaid principal amount of the Note so lost,
stolen, destroyed or mutilated, or, if no interest has been paid thereon, then
dated as of the date of the Note so lost, stolen, destroyed or mutilated.
8. Place of Payment. Payments of principal and cash interest and
other amounts payable hereunder are to be delivered at the following address:
-3-
<PAGE> 4
Bank of New York, as Trustee for Brooklyn Union
Gas Company Non-Bargaining Health VEBA
c/o The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, NY 11201-3850
or to such other address or to the attention of such other Person as specified
by prior written notice to the Borrowers.
9. Headings; Governing Law. The headings used in this Note are for
convenience of reference only and do not define or limit the provisions hereof.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
10. Note Register. Each Borrower shall maintain at its principal
executive offices books for the registration and the registration of transfer of
this Note. Each Borrower may deem and treat the Registered Holder as the
absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
11. Usury Laws. It is the intention of the Borrowers and the holder(s)
of this Note to conform strictly to all applicable usury laws now or hereafter
in force, and any interest payable under this Note shall be subject to reduction
to the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the holder hereof resulting from an Event of Default,
voluntary prepayment by the Borrowers or otherwise, then earned interest may
never include more than the maximum amount permitted by law, computed from the
date hereof until payment, and any interest in excess of the maximum amount
permitted by law shall be canceled automatically and, if theretofore paid, shall
at the option of the holders hereof either be rebated to the Borrowers or
credited on the principal amount of this Note, or if this Note has been paid,
then the excess shall be rebated to the Borrowers. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal balance of
this Note remaining unpaid from time to time. If such interest does exceed the
maximum legal rate, it shall be deemed a mistake and such excess shall be
canceled automatically and, if theretofore paid, rebated to the Borrowers or
credited on the principal amount of this Note, or if this Note has been repaid,
then such excess shall be rebated to the Borrowers.
-4-
<PAGE> 5
12. Certain Waivers. Each of the Borrowers hereby waives diligence,
presentment, protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Borrowers hereunder.
-5-
<PAGE> 6
IN WITNESS WHEREOF, each Borrower has executed and delivered this Note
as of the date first above written.
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By:____________________________
Name:
Title:
NEW YORK SKYLINE, INC.
By:____________________________
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:____________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:____________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:____________________________
Name:
Title:
SKYLINE LAS VEGAS, INC.
By:____________________________
Name:
Title:
<PAGE> 7
<TABLE>
<CAPTION>
BORROWER PRINCIPAL AMOUNT
-------- ----------------
<S> <C>
Skyline Multimedia Entertainment, Inc.
New York Skyline, Inc.
Skyline Virtual Reality Inc.
Skyline Chicago, Inc.
Skyline Magic, Inc.
Skyline Las Vegas, Inc.
</TABLE>
