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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
Quarterly report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended: December 31, 1996
Commission File no. 0-23396
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
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(Exact name of small business issuer as specified in its charter)
New York 11-3182335
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(State of Incorporation) (IRS Employer Identification No.)
350 Fifth Avenue
New York, New York
10118
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(Address of principal executive office)
(Zip code)
Issuer's telephone number, including area code (212) 564-2224
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Common stock $.001 par value -- 2,455,000 shares outstanding as of
February 13, 1997. Additionally, there were 1,090,909 shares of Series A
Convertible Participating Preferred Stock, $.001 par value, outstanding as of
February 13, 1997.
Transitional Small Business Disclosure Format
Yes No X
----- -----
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Condensed consolidated financial statements
(unaudited)
Balance sheet as of December 31, 1996 3
Statements of operations for the three and six months
ended December 31, 1996 and 1995 4
Statements of cash flows for the six months
ended December 31, 1996 and 1995 5
Notes to financial statements 6
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 16
SIGNATURES 18
INDEX TO EXHIBITS 19
2
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
December 31, 1996
ASSETS
Current Assets
Cash $ 2,194,000
Inventory 199,000
Prepaid expenses and
other current assets 502,000
Due from Officer (Note 10) 188,000
------------
Total Current Assets 3,083,000
Property, Equipment and Leasehold
improvements - net (Note 4) 11,080,000
Security Deposits 410,000
Net Deferred Tax Asset (Note 3) 1,035,000
Deferred Project and Leasing
Costs (Note 4) 252,000
Certificate of Deposit 203,000
Deferred financing costs 157,000
Other Assets 18,000
------------
Total Assets $ 16,238,000
============
LIABILITIES
Current Liabilities
Note payable - current portion (Note 6) $ 305,000
Accounts payable 2,631,000
Accrued Expenses and other current
liabilities 301,000
Deferred Sponsorship Income (Note 9) 28,000
------------
Total Current Liabilities 3,265,000
Notes payable - long term portion 4,653,000
(Notes 6 and 7)
Deferred rent payable (Note 8) 796,000
------------
Total Liabilities 8,714,000
------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share 1,000
Common stock, par value $.001 per share 2,000
Class A common stock, par value $.001 per share 1,000
Additional paid in capital 9,295,000
Accumulated (Deficit) (1,775,000)
------------
Total Stockholders' Equity 7,524,000
------------
Total Liabilities and Stockholders' Equity $ 16,238,000
============
The accompanying notes are an integral part of these financial statements
3
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Ticket Sales $ 1,392,000 $ 1,113,000 $ 2,966,000 $ 2,466,000
Concession Sales 270,000 257,000 647,000 557,000
Sponsorship Income 87,000 78,000 143,000 153,000
----------- ----------- ----------- -----------
TOTAL REVENUES 1,749,000 1,448,000 3,786,000 3,176,000
----------- ----------- ----------- -----------
Operating Expenses:
Costs of Merchandise Sold 97,000 95,000 230,000 197,000
Selling, General and Administrative 2,144,000 1,037,000 3,462,000 2,148,000
Depreciation and Amortization 157,000 125,000 293,000 243,000
----------- ----------- ----------- -----------
Total Operating Expenses 2,398,000 1,257,000 3,985,000 2,588,000
Income/(loss) from Operations (649,000) 191,000 (199,000) 588,000
Net interest (expense)/income (72,000) 1,000 (74,000) (1,000)
----------- ----------- ----------- -----------
Income/(loss) before provision
for income taxes (721,000) 192,000 (273,000) 587,000
Income tax expense (Note 12) 20,000 15,000 164,000 30,000
Net Deferred Tax Benefit (Note 3) (229,000) -0- (824,000) -0-
----------- ----------- ----------- -----------
Net income/(loss) $ (512,000) $ 177,000 $ 387,000 $ 557,000
=========== =========== =========== ===========
Net income/(loss) per share
of common stock $ (.18) $ .06 $ .14 $ .20
=========== =========== =========== ===========
Weighted average number of shares
(excludes 670,000 escrow shares) 2,876,000 2,876,000 2,876,000 2,840,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Cash flow from operating activities:
Net Income $ 387,000 $ 557,000
Adjustments to reconcile Net Income
to net cash provided by/(used in) operating activities:
Depreciation and amortization expense 293,000 243,000
Deferred Income Taxes (695,000) -0-
Issuance of Warrants 53,000 -0-
Changes in operating assets and liabilities:
(Increase)in inventory (69,000) (27,000)
(Increase)in prepaid and other assets (352,000) (59,000)
Increase/(Decrease) in deferred sponsorship income (33,000) 15,000
Increase/(decrease) in accounts payable,
accrued expenses and deferred rent payable 2,453,000 (762,000)
----------- -----------
Net cash provided by/(used in) operating activities 2,037,000 (33,000)
----------- -----------
Cash flows from investing activities:
(Increase) in security deposits (38,000) (2,000)
Acquisition of property, equipment and
leasehold improvements (5,758,000) (78,000)
Net advances to officer/stockholder (188,000) -0-
(Increase) in certificate of deposit (203,000) -0-
(Increase) in deferred project and leasing costs (22,000) -0-
----------- -----------
Net cash(used in)investing activities (6,209,000) (80,000)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of preferred stock - 0 - 2,833,000
Repayment of notes payable (732,000) (360,000)
Reduction of deferred private
placement costs - 0 - 62,000
Financing Costs (175,000) -0-
Proceeds from Notes Payable 5,075,000 -0-
----------- -----------
Net cash provided by Financing Activities 4,168,000 2,535,000
----------- -----------
Net increase/(decrease) in cash (4,000) 2,422,000
Cash at beginning of period 2,198,000 144,000
----------- -----------
Cash at end of period $ 2,194,000 $ 2,566,000
=========== ===========
</TABLE>
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest................$ 60,000 $ 54,000
Taxes...................$ 26,000 $ 43,000
The accompanying notes are an integral part of these financial statements.
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-QSB and rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six months
ended December 31, 1996 are not necessarily indicative of the results that may
be expected for the full fiscal year ended June 30, 1997. For further
information, refer to the financial statements and footnotes thereto included
in the Company's annual report on Form 10-KSB for the year ended June 30, 1996.
2. Per Share Data
Net income/loss per share for each period is calculated by dividing
net income for the period by the weighted average number of common shares
outstanding for each period, excluding shares held in escrow. The weighted
average number of common shares was calculated including the convertible
participating preferred stock as common stock equivalents.
3. Income Taxes
The principal components of Deferred Tax Assets, Liabilities, and the
Valuation Allowance are as follows:
December 31
1996 1995
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Deferred Tax Assets:
Capitalization of start-up costs 522,000 804,000
Net operating loss carryforwards 993,000 463,000
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1,515,000 1,267,000
Valuation allowance - 0 - (1,267,000)
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1,515,000 - 0 -
Deferred Tax Liabilities:
Depreciation differences 480,000 - 0 -
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Net Deferred Tax Asset $1,035,000 - 0 -
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6
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
4. Property, equipment and leasehold improvements
(A) Property and equipment, including assets under capital leases are
recorded at cost and are depreciated on the straight-line method over the
estimated useful lives of the assets from three to twelve years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful life of the asset. Property, equipment
and leasehold improvements at cost are summarized as follows:
Equipment and fixtures $ 1,494,000
Simulation equipment 2,419,000
Simulation film 1,059,000
Leasehold improvements 7,122,000
------------
12,049,000
Less: Accumulated depreciation
and amortization (1,014,000)
------------
Total $11,080,000
============
(B) The Company has incurred leasing costs in connection with its XS
New York site and the Company's XS Chicago site. Since the Company is in the
design phase of XS Chicago, it has not yet determined the estimated capital
expenditures that will be required to complete the project. The Company expects
to commence operations of the XS Chicago site by the fall of 1997.
5. Inventory
Inventory consists of clothing, souvenirs and food sold at the
Company's various sites and is valued at the lower of cost (first-in,
first-out) or market.
6. Notes Payable
A) On December 31, 1996, the Company refinanced its existing equipment
loan on the equipment located at its New York Skyride location for aggregate
proceeds of $1,500,000. The new note bears interest at 11 1/2% per annum
compounded monthly and is to be repaid in 48 monthly installments. Pursuant to
the loan agreement, the lender was granted a first security interest in all of
the equipment at the New York Skyride location. Additionally, up to $250,000 of
the loan is personally guaranteed by the Company's president.
B) During November 1996 the Company entered into a loan agreement with
an institutional lender to finance the acquisition of the equipment for its XS
New York site aggregating $1,295,000. Upon consummation of this transaction the
Company will have received approximately $800,000 with the remaining $495,000
held by the lender as security. Such security is to be released after 24 months
subject to a satisfactory payment record by the Company. The amounts financed
will bear interest at 11 1/2% per annum compounded monthly and is to be repaid
in 48 monthly installments. The institutional lender will have a first security
interest in the equipment and up to $750,000 of the loan is to be personally
guaranteed by the Company's president. As of December 31, 1996, $575,000 was
advanced pursuant to the above financing with the balance expected to be
received during February 1997. In connection with this transaction, the Company
issued five year warrants to purchase 50,000 shares of the Company's common
stock at $6.00 per share.
7
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
7. Subordinated Note Payable
On October 23, 1996, the Company signed a letter of intent with an
institutional investor to raise $4,100,000 in senior unsecured subordinated
debt which accrues interest at an annual rate of 14% and requires the payment
of both principal and interest five years from the date of issuance. The
Agreement was subsequently modified to increase the debt proceeds to
$4,500,000. In connection with the subordinated debt agreement, the lender
received warrants to purchase up to 439,024 shares of common stock exercisable
at $4.25 per share. On November 6, 1996, the Investor provided the Company with
a "bridge" loan of $1,500,000, at an annual interest rate of 14%. During
December 1996 the "bridge" loan was exchanged for a portion of the unsecured
subordinated debt. Additionally, during December 1996 the Company received an
additional $1,500,000 of unsecured subordinated debt with the balance of
$1,500,000 to be received during Febuary 1997.
8. Deferred Rent Payable
The Company for financial accounting purposes spreads scheduled rent
increases and rent holidays over the term of the lease using the straight -
line method.
9. Sponsorship Income
During the fiscal year ended June 30, 1995 the Company entered into
two sponsorship agreements, one with a major international electronics
manufacturer, appointing it the presenting sponsor of its New York facility,
and one with a major soft drink manufacturer. The agreements are for three and
five year terms, respectively, and provide for annual fees, capital
improvements and cross promotions for the Company. During the quarter ended
December 31, 1995, the Company entered into a three year sponsorship agreement
with a major distributor of photographic and magnetic imaging equipment.
Sponsorship revenue under these agreements aggregate approximately $1,300,000
over the respective terms. During the quarters ended December 31, 1996 and
1995, the Company recognized as income $87000 and $78,000, respectively which
represent a portion of the capital improvements and monetary fees received from
sponsors and approximately $ 28,000 and $57,000, respectively were deferred.
10. Preferred Stock
On July 7 1995, the Company consummated a stock purchase agreement
with the Prospect Street NYC Discovery Fund, L.P.("Prospect Street"), pursuant
to which the Company sold 1,090,909 shares of Series A Convertible
Participating Preferred Stock, par value $.001 per share, for $3,000,000. Net
proceeds from such investment, aggregated approximately $2,833,000. The
preferred stock issued is convertible into common stock of the Company at any
time on a share-for-share basis. Pursuant to the stock purchase agreement, the
preferred shares are subject to both demand and piggyback registration rights
beginning nine months from the date of issuance. The preferred stock has a
liquidation preference equal to $2.75 per share, or $ 3,000,000, but does not
pay any dividends unless declared by the Board of Directors. The preferred
stockholder is entitled to an aggregate of up to 24.9% of the outstanding
voting power of the company which can increase to 50.1% of the voting power if,
in the sole discretion of such referred stockholder, it becomes reasonably
necessary for the protection of its investment.
8
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
11. Due from Officer
During the six months ended December 31, 1996, the Company advanced an
aggregate of $ 725,000 to its President, pursuant to several demand notes at an
annual interest rate of 8%. The Company has received payment of $341,000
against these advances. In addition a special bonus of approximately $150,000
has been applied against the advances and pursuant to his employment contract,
the President has earned a bonus of approximately $ 46,000 for the six months
ended December 31, 1996, which has also been applied against this advance.
12. Recently Issued Accounting Standards
The Company has not elected to adopt early, the recently issued accounting
standard for stock based compensation (FAS 123). However, under FAS 123, the
warrants granted in connection with both the notes payable and subordinated
notes payable require valuation based on fair value. The fair value of the
489,024 warrants granted in connection with the above financings was calculated
using the Black-Scholes Pricing Model, which resulted in an aggregate valuation
of approximately $770,000. The value of these warrants are charged to interest
expense over the terms of the respective notes. During the quarter ended
December 31, 1996, an aggregate of approximately $35,000 was charged to
interest expense as a result of the fair value calculation relating to the
warrants described above.
9
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SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operational Overview
From its inception until December 22, 1994, the Company's primary
activities consisted of developmental activities, including the preparation of
plans relating to the design of New York Skyride, the Company's first motion
simulator film-based attraction, negotiation of a lease and a license agreement
with the operators of the Empire State Building, the location of New York
Skyride; working with engineers, architects, contractors, designers, and other
parties in connection with the construction and operation of New York Skyride;
developing software and video films in connection with New York Skyride;
developing marketing strategies; initiating marketing and corporate sponsorship
activities; selecting a management team; and obtaining financing.
On December 22, 1994, the Company commenced operations of New York
Skyride and began generating revenue from ticket sales to the attraction and
the sale of merchandise at its souvenir/concession area. New York Skyride was
opened on a preview basis until February 21, 1995, the date of its official
Grand Opening.
During April 1996, the Company signed a 20 year renewable lease for an
additional 35,000 square feet of space within the Empire State Building
adjacent to and above the current location of New York Skyride. The Company had
intended to utilize the additional space to create a mixed use location based
entertainment center. However, development plans for the additional space have
been deferred until such time as the XS New York project (described below) is
operating profitibly and further assessment is made with respect to the cost
and funding of the XS Chicago and Sydney Skyride projects (described below). It
is likely, however, that the Company will be unable to develop the additional
space within the Empire State Building in the near term, in which event, the
Company will be forced to surrender this space to the Empire State Building or
assign or sublet such space. The Company is currently exploring it's options
with respect to these alternatives, which in any event, will not have a
material impact on the Company.
On December 27, 1996, the Company commenced operations, through its
wholly-owned subsidiary, Skyline Virtual Reality, Inc., of an interactive
virtual reality entertainment center, XS New York, which is located in the
heart of Times Square in New York City. XS New York features the latest in
state-of-the-art entertainment technology including the latest in virtual
reality hardware and software, simulation technology and interactive
participation game experiences. Additionally, the facility includes a
"Cybercafe" which offers light food and refreshments and computer terminals
which are linked to the World Wide Web and Internet. Accordingly, although the
Company expended significant amounts for the development of XS New York,
revenue from this project during the quarter ending December 31, 1996 is not
significant.
Historically, in the New York metropolitan area, the summer months,
which include significant tourist traffic, represents the busiest period of the
year. During each of the quarters ending December 31, 1996 and 1995, New York
Skyride was visited by approximately 160,000 customers. Additionally, the Times
Square area, where XS New York is located, is visited by approximately 20 to 30
million tourists annually, a large percentage of whom visits during the spring
and summer months and during the December holiday season.
10
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Promoting New York Skyride and XS New York to tourist boards (such as the New
York Convention and Visitors Bureau), travel agents, managers of group
activities and visitors to New York City represents a primary focus of the
Company's marketing efforts for these attractions. Since tourists and visitors
are a primary target, special volume discounts are offered to groups such as
conventions and trade associations, as well as through travel agent packages.
School groups are also a significant market for New York Skyride and XS New
York, and special programs are being implemented to target these audiences,
especially during the slower tourist periods in the fall and winter months.
Additionally, the marketing efforts have focused significant attention on
promoting New York Skyride and XS New York for birthday parties and special
events.
During September 1996, the Company entered into a 15 year lease for
approximately 21,000 square feet of space in the Woodfield Mall outside of
Chicago, in Schaumberg, Illinois. The Company, through a newly created
subsidiary, Skyline Chicago Inc., plans to develop a state-of-the-art
interactive virtual reality entertainment center, XS Chicago, similar to the XS
New York project located in Times Square. The XS Chicago location will be
situated near the Rainforest Cafe, a successful themed restaurant, and other
retail establishments that attract tourists and regional area residents. The
Woodfield mall, one of the largest and most heavily visited malls in the United
States, boasts annual attendance of approximately 20 million people. The
Company expects to open its XS Chicago facility during the Fall of 1997.
During December 1996, the Company signed a letter of intent to develop a
simulator attraction to be located in the Centrepoint Shopping Center which
adjoins the world famous Sydney Tower in Sydney, Australia. Centrepoint is the
leading shopping and tourist attraction in Sydney, Australia, and will be the
merchandising and promotional center for the 2000 Olympics, which will take
place in Sydney. The tower alone attracts 1,300,000 visitors per year and an
additional 20,000,000 people visit the adjoining shopping center. The letter of
intent provides for an eight year renewable lease for approximately 16,500
square feet of space located on the promenade level of the Tower, which is the
entry point to the Tower. The Company has negotiated for the sale of a combined
ticket to both the Tower and the Company's attraction. The base rent ranges
from $225,000 in Year 1 to $600,000 in Year 8. There is also a provision for
percentage rent of 6.5% of gross sales in excess of $ 7,000,000. The Company
also has a right of first refusal on certain additional space located within
the shopping center which may be used for development of an "XS-type"
attraction in the future.
The Company hopes to finalize lease documentation by March of 1997 and
expects to pattern the Tower project after New York Skyride, but with a
uniquely Australian theme. The Company anticipates that it will open its
"Australian Skyride" during March 1998. There can be no assurance, however,
that the Company will be able to successfully finalize lease negotiations with
the landlord of the Sydney Tower and the Centerpoint Shopping Center, or if
finalized, that it will be able to arrange for adequate financing of these
projects and complete construction of the "Australian Skyride" by the date
anticipated if at all.
The Company, through a newly created subsidiary, Skyline Magic, Inc.,
entered into a 50/50 Joint Venture in order to produce and manage a
"Broadway-style" show featuring the talents of Joseph Gabriel, an
internationally renowned magician. The show, "Magic on Broadway", is currently
showing at the Lambs Theater in New York City and is expected to run initially
until April 1997. The joint venture will have the option to extend the
engagement on a weekly basis . The Company receives revenues from ticket and
merchandise sales and administrative fees.
The Company will continue to market and promote its various activities
through traditional print advertising in publications that go to New York City
tourists and others, as well as broaden its advertising and promotional
programs to the general public through local radio and newspaper advertising.
The Company is in the process of developing its marketing plans for its XS
Chicago attraction to be located in the
11
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Woodfield Mall and the Australian Skyride and expects to employ similar
advertising and promotional programs throughout such local areas and
surrounding regions.
Results of Operations
Revenues. Revenues generated during the three and six months ended
December 31, 1996, aggregated $1,749,000 and $3,786,000, respectively,
compared to $1,448,000 and $3,176,000, respectively for the three and six
months ended December 31, 1995. The increase in revenue for the three and six
months ended December 31, 1996, from the prior year period is primarily due to
the additional revenues of approximately $275,000 generated from Magic on
Broadway and an increased average ticket price for New York Skyride combined
with higher attendance for the six month period. Additionally, a sponsorship
agreement with a major distributor of photographic and magnetic imaging
equipment was signed during December 31, 1995 thereby contributing a full
quarter of sponsorship income during the quarter ended December 31, 1996,
compared to a partial period during the quarter ended December 31, 1995.
Management expects to continue to supplement its primary revenue stream
from ticket sales for New York Skyride by soliciting corporate sponsorships
from a number of key consumer product companies. During the three and six month
period ended December 31, 1996 the Company earned approximately $87,000 and
$173,000 in sponsorship income as a result of monthly fees and capital
improvements received. Current agreements with the Company's three sponsors are
expected to provide annual sponsorship fees aggregating approximately
$1,300,000 during the five year duration of such agreements which commenced
November 1994. Approximately $702,000 of such income has been received to date,
of which $120,000 was received during the six month periods ended December 31,
1996 and 1995. Additionally, management expects that these sponsorships will
generate additional revenue for the Company in the form of increased ticket
sales through joint marketing and promotional programs.
Operating expenses . Operating expenses incurred during the three and
six months ended December 31, 1996, aggregated $2,398,000 and $ 3,985,000,
respectively, compared to $ 1,257,000 and $2,588,000, respectively, for the
three and six months ended December 31,1995. The increase is due primarily to
an increase of approximately $150,000 in payroll and related expenses at the
New York Skyride for the three months ended December 31, 1996, as well as
certain start-up expenses of approximately $550,000 relating to the opening of
XS New York. These XS New York related expenses include, among other things,
payroll and related expenses of approximately $257,000, real estate taxes of
approximately $43,000, consulting and promotional expenses of approximately
$83,000 and an allocation of corporate overhead and administrative expenses of
approximately $105,000. Additionally, the Compny expended $250,000 in
connection with its involvement in "Magic on Braodway".
Net Income and Earnings Per Share . Net Income / (Loss) and Earnings/
(Loss) Per Share were $(512,000) and $(.18), and $387,000 and $ .14,
respectively, for the three and six months ended December 31, 1996 as compared
to $177,000 and $ .06, and $557,000 and $.20, respectively, for the three and
six months ended December 31, 1995. The net loss of $(512,000) for the quarter
ended December 31, 1996 was the result of a Loss of approximately $(553,000)
related to certain start-up costs attributable to XS New York (see operating
expenses), and a Loss of approximately $(250,000) as a result of the Company's
involvement in "Magic on Broadway". These losses were partially offset by
income of approximately $60,000 from New York Skyride and a deferred tax
benefit of $229,000. During the quarter ended December 31, 1995, New York
Skyride operations produced income of $177,000 with no deferred tax benefit
realized.
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As a result of net operating loss carryforwards from prior years, the
Company recognized net deferred taxbenefits of $595,000 or $.20 per share and
$229,000 or $.08 per share for the quarters ending September 30, 1996 and
December 31, 1996, respectively. For the three and six months ended December
31, 1995 there was a provision for certain state and local taxes of $15,000 and
$30,000, respectively, with no benefit recognized for net operating loss
carryforwards.
Working Capital. Working capital deficiency at December 31, 1996, was
approximately $(182,000) compared to working capital of approximately
$1,917,000 at December 31, 1995. The reduction in working capital is primarily
the result of the XS New York buildout of $5,726,000 and deferred project
leasing and financing costs aggregating $409,000 related to the Company's
capital investments in XS New York and XS Chicago.
Liquidity and Capital Resources
On July 7, 1995, the Company consummated a private placement with
Prospect Street whereby 1,090,909 shares of Series A Convertible Participating
Preferred Stock (the "Preferred Stock") were sold for gross proceeds of $2.75
per share, or $3,000,000. The Preferred Stock is convertible into common stock
of the Company at any time on a share-for-share basis. The holders of the
Preferred Stock are entitled to an aggregate of up to 24.9% of the outstanding
voting power of the Company on all matters which come before the shareholders.
Additionally, so long as 272,727 shares of Preferred Stock remain outstanding,
the holders thereof will have the ability, to elect a majority of the Board of
Directors and obtain up to 50.1% of the outstanding voting power of the Company
in the event that the holders of the Preferred Stock determine in good faith
that such action is reasonably necessary for the protection of their
investment. The Preferred Stock is subject to a registration rights agreement
granting both demand and piggyback registration rights. Net proceeds from such
investment was $2,833,333.
The Company used a portion of the net proceeds of the Preferred Stock
sale to repay certain indebtedness in connection with the New York Skyride
project and used the balance of the proceeds for working capital, which
included expansion of the Company's business through developing attractions at
new locations, including the XS New York project.
As a result of the Company's development of XS New York, the Company
incurred capital expenditures of approximately $5,726,000 consisting of
$694,000 in design and consulting fees, $3,840,000 in construction and theming,
$224,000 for signage, and approximately $968,000 for equipment purchases.
Additionally, the Company anticipates incurring capital expenditures for
additional construction and signage work aggregating approximately $900,000 .
In order to complete the construction of XS New York and provide additional
working capital for growth and expansion, the Company raised additional secured
and unsecured debt through its relationships with its institutional investors
and lenders as described below.
On October 23, 1996, the Company signed a letter of intent with
Prospect Street to obtain up to $4,100,000 in senior unsecured subordinated
debt which accrues interest at an annual rate of 14% and requires the payment
of both principal and interest 5 years from the date of issuance. The agreement
was subsequently modified to increase the debt proceeds to $4,500,000. In
connection with the subordinated debt agreement, the lender received warrants
to purchase up to 439,024 shares of common stock at an exercise price of $4.25
per share. As part of this financing, on November 6, 1996, Prospect Street
provided the Company with a bridge loan of $1,500,000, at an annual interest
rate of 14%, which bridge loan was exchanged for a portion of the subordinated
debt described above and an additional $1,500,000 in subordinated debt was
received in December 1996. The final balance of $1,500,000 is expected to be
received during February 1997.
13
<PAGE>
During November 1996, an institutional lender agreed to finance the
acquisition of the equipment for the Company's XS New York site up to an
aggregate of $1,295,000. Upon consummation of this transaction, the Company
will have received approximately $800,000 with the remaining $495,000 to be
held by the lender as security. Such security is to be released after 24 months
subject to a satisfactory payment history by the Company. The amounts financed
will bear annual interest at 11 1/2% and is to be repaid in 48 monthly
installments. As of December 31, 1996, $575,000 was advanced pursuant to the
above financing with the balance expected to be received during February 1997.
In connection with this transaction, the Company issued warrants to purchase up
to 50,000 shares of the Company's common stock at $6.00 per share.
During December 1996, the Company refinanced its existing equipment
loan on the equipment located at its New York Skyride location for aggregate
proceeds of $1,500,000 of which approximately $491,000 was applied to satisfy
the amounts due under the original loan. The loan bears annual interest at 11
1/2% and is to be repaid in 48 monthly installments.
The Company estimates the capital expenditures required to develop
the XS Chicago and Australian Skyride facilities to be approximately $5,
000,000 and $5,500,000, respectively. These estimates include the construction
of the facility, equipment hardware and software, and design and theming costs.
In order to develop these attractions the Company will require additional debt
or equity financingwhich the Company is attempting to secure. However, there
can no asurance that such financing will be available on terms acceptable to
the Company, or at all, or that there will not be construction and other delays
affecting completion of these projects.
Further there can be no assurance that demands placed on the Company's
financial resources by multiple projects, or any one project in particular,
will not affect the Company's ability to successfully complete or finance one
or more of such projects, which would adversely affect the Company's expansion
and planned growth strategy. In this regard, the Company has deferred
development plans for the additional space at the Empire State Building site
until such time as the XS New York project is operating profitably and further
assessments are made with respect to the source of the XS Chicago and
Australian Skyride projects. Accordingly, there can be no assurance that the
additional space at the Empire State Building will be successfully developed
without a strategic partner, or at all. The Company is reviewing its options
with respect to this space, including surrendering, subleting or assigning
such space, none of which actions are anticipated to have a material effect on
the Company.
The Company's long term goal is to develop simulator and other
location based entertainment attractions in other major cities in the United
States, and other countries. There are, however, only a limited number of
locations in a small number of cities that are suitable for such attractions,
and there can be no assurance at all that the Company could obtain a lease at
any such locations or develop a successful attraction at such locations. Also,
development of additional attractions will require the Company to obtain
financing for such ventures, and there can be no assurance that such financing
will be available, or available on terms and conditions that are acceptable to
the Company. Additionally, it is possible that the Company would find it
necessary to have one or more local partners involved in any additional
attractions it might attempt to develop, further limiting the revenues that the
Company could generate from development of simulator attractions at other
locations.
The Company continually explores expansion opportunities both in
the United States and abroad. From time to time, the Company may be involved in
negotiations for additional sites or other entertainment-based projects,
however, current negotiations, if any, are too preliminary to warrant
additional disclosure at this time. The Company will keep investors informed as
other prospects mature.
Inflation
The Company believes that the impact of inflation on its operations
since its inception has not been material.
14
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Seasonality
The Company's business is seasonal in nature, based in part, on higher
volumes of tourists in the New York City Metropolitan area during the spring
and summer months and during the December holiday season. Similar seasonal
trends are anticipated for the XS Chicago location. The Australian Skyride,
located in the southern hemisphere is much less seasonal and provides for a
relatively constant flow of traffic with its peak months being November -
January, March and July. The Company will direct a portion of its marketing and
promotional efforts in the NYC Metro area to (i) attracting a larger percentage
of the Observatory traffic at the Empire State Building, thereby, increasing
volume to (i) New York Skyride and (ii) attracting visitors to XS New York and
Magic on Broadway, particularly during non-peak seasons. In addition, the
Company will employ similar advertising and promotional programs, during these
periods, throughout the Chicago metropolitan area and other surrounding regions
for its XS Chicago site upon commencement of operations.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The following summarizes the votes at the Annual Meeting of the
Company Shareholders held on November 26, 1996:
Matter For Witheld
------ --- -------
1. Election of Directors:
Zalman Silber 6,241,902 4,630
Jay Coleman 6,241,902 4,630
David Shamilzadeh 6,241,802 4,730
Neil S. Belloff 6,241,502 5,030
John F. Barry, III 6,241,902 4,630
Ronald D. Celmer 6,241,902 4,630
2. Ratifications of selection of Richard A. Eisner & Company, LLP as
independent auditors for the 1997 fiscal year:
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
6,227,932 1,600 17,000 -0-
Item 5. Other information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a)10.27 Senior credit agreement dated December 20, 1996 between the
Company and Prospect street and Bank of New York as trustee for
the Employees retirement plan of the Brooklyn Union Gas Company.
10.28 Subsidiary Guaranty Agreement dated December 20, 1996 between the
Company and Prospect Street.
10.29 Indemnity, Subrogation and Contribution aqreement dated December
20, 1996 between the Company and Prospect Street
10.30 Amended and restated Registration Rights Agreement dated December
20, 1996 between the Company, Prospect Street, and Bank of New
York as Trustee for the Employees Retirement Plan of The Brooklyn
Union Gas Company.
10.31 Senior Promissory Note dated December 20, 1996 between the Company
and Prospect Street.
16
<PAGE>
10.32 Senior Promissory Note dated December 20, 1996 between the Company
and Bank of Bank of New York as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company.
10.33 Stock Purchase Warrant Agreements dated December 20, 1996 between
the Company, Prospect Street and Bank of New York as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas Company.
10.34 Loan and Security agreement dated December 4, 1996 between the
Company and Peoples Bank.
10.35 Loan and Security agreement dated December 4, 1996 between the
Company and the Independent Resources, Inc.
10.36 Loan and Security agreement dated December 4, 1996 between the
Company and the PhoenixCor, Inc .
10.37 Guarantees of Zalman Silber dated December 4, 1996 relating to the
Loan and Security Agreements with People's Bank and PhoenixCor,
Inc.
(b) No reports on Form 8-K dated have been filed during the
quarter.
17
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:
-----------------------------
Zalman Silber
President and Chief Executive Officer
By:
-----------------------------
Steven Schwartz
Executive Vice President - Finance
Principal financial and accounting officer
Dated: February 13, 1997
18
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3.1 Certificate of Incorporation of Registrant. (1)
3.2 By-laws of Registrant. (1)
3.3 Certificate of Amendment of Certificate of
Incorporation relating to the issuance of the
Preferred Stock. (2)
4.1 See Exhibits 3.1 and 3.2
10.1 The Company's 1994 Stock Incentive Plan for the Registrant.
(as amended and restated) (9)
10.2 The Company's Stock Option Plan for Non-Employee Directors.
(as amended and restated) (9)
10.3 Employment Agreement dated October 1, 1993 between the
Registrant and Zalman Silber. (1)
10.4 Lease Agreement dated February 26, 1993 between the Company
and the Empire State Building Company. (1)
10.5 License Agreement dated February 26, 1993 between the Company
and the Empire State Building Company. (1)
10.6 Purchase Agreement dated February 14, 1994 between the
Company and Interactive Simulation, Inc. (3)
10.7 Film Production Agreement dated April 7, 1994 between the
Company and Empire Productions, Inc., and Chromavision
Corp. (3)
10.8 Lease Agreement dated April 14, 1994 between the Company and
the Empire State Building Company relating to the Company's
executive offices. (3)
10.9 Lease Agreement dated February 8, 1994 between the Company
and the Empire State Building Company relating to additional
space. (3)
10.10 Construction contract dated July 5, 1994 between the Company
and Signature Construction Group Inc.(4)
19
<PAGE>
INDEX TO EXHIBITS (Continued)
Exhibit
Number Description
- ------- -----------
10.11 Loan and security agreement dated November 16, 1994 between
the Company and PhoenixCor, Inc. (5)
10.12 Employment Agreement dated August 15, 1994 between the
Company and Steven Schwartz. (5)
10.13 Sponsorship Agreement dated February 21, 1995 between the
Company and Dentsu USA, Inc. on behalf of JVC Company of
America. (6)
10.14 Stock Purchase Agreement, dated as of July 7, 1995,between
the Company and Prospect Street Fund. (2)
10.15 Registration Rights Agreement dated as of July 7,1995 between
the Company and Prospect Street relating to the Common Stock
issuable upon conversion of the Preferred Stock. (2)
10.16 Guarantee of Zalman Silber, as of July 7, 1995, relating to
the guarantee of the Company's obligations under the Stock
Purchase Agreement. (2)
10.17 Stockholders' Agreement dated as of July 7, 1995 between
Zalman Silber and Prospect Street. (2)
10.18 Amendment to Employment Agreement dated June 29, 1995 between
the Company and Zalman Silber. (7)
10.19 Agreement dated March 16, 1995 by and between Skyline,
PhoenixCor, Inc. and Zalman Silber relating to the release of
certain security deposits, and the Rider dated March 16, 1995
to the Individual Guaranty of Zalman Silber. (7)
10.20 Lease agreement dated March 1996 between the Company and the
Empire State Building Company relating to additional
space. (8)
10.21 Amendment, dated March 1996, to the Company's original lease
and licensing agreement with the Empire State Building
Company. (8)
10.22 Lease agreement dated March 1996 between the Company and One
Times Square Center Partners, L. P., for space located at
1457-1463 Broadway, New York, NY. (8)
10.23 Lease agreement dated September 5, 1996 between the Company
and Woodfield Associates, for space located at the Woodfield
Mall in Schaumberg, Illinois. (9)
10.24 Letter of Intent relating to senior unsecured subordinated
debt financing dated October 23, 1996 between the Company and
Prospect Street.(10)
10.25 Note Purchase Agreement dated November 6, 1996 between the
Company and Prospect Street. (10)
10.26 Guarantee of Zalman Silber dated November 6, 1996 relating to
the Note Purchase Agreement. (10)
10.27 Senior credit agreement dated December 20, 1996 between the
Company and Prospect street and Bank of New York as trustee
for the Employees retirement plan of the Brooklyn Union Gas
Company.
20
<PAGE>
10.28 Subsidiary Guaranty Agreement dated December 20, 1996 between
the Company and Prospect Street.
10.29 Indemnity, Subrogation and Contribution aqreement dated
December 20, 1996 between the Company and Prospect Street
10.30 Amended and restated Registration Rights Agreement dated
December 20, 1996 between the Company, Prospect Street, and
Bank of New York as Trustee for the Employees Retirement Plan
of The Brooklyn Union Gas Company.
10.31 Senior Promissory Note dated December 20, 1996 between the
Company and Prospect Street.
10.32 Senior Promissory Note dated December 20, 1996 between the
Company and Bank of Bank of New York as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company.
10.33 Stock Purchase Warrant Agreements dated December 20, 1996
between the Company, Prospect Street and Bank of New York as
Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company.
10.34 Loan and Security agreement dated December 4, 1996 between
the Company and Peoples Bank
10.35 Loan and Security agreement dated December 4, 1996 between
the Company and the Independent Resource Inc.
10.36 Loan and Security agreement dated December 4, 1996 between
the Company and the PhoenixCor, Inc.
10.37 Guarantees of Zalman Silver dated December 4, 1996 relating
to the Loan and Security Agreements with People's Bank and
PhoenixCor, Inc.
21 Subsidiaries of the Company. (9)
27.1 Financial Data Schedule
21
<PAGE>
INDEX TO EXHIBITS (Continued)
-------------------------------------------------------------
(1) Previously filed as exhibit to Registration Statement on Form SB-2
(Commission File No. 33-73276) declared effective on February 14,1994.
(2) Previously filed as an exhibit to the Company's current report on Form
8-K filed on July 21, 1995.
(3) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1994.
(4) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended September 30, 1994.
(5) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended December 31, 1994.
(6) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended March 31,1995.
(7) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1995.
(8) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended March 31, 1996.
(9) Previously filed as an exhibit to the Company's annual report on Form
10-KSB for the fiscal year ended June 30, 1996.
(10) Previously filed as an exhibit to the Company's quarterly report on
Form 10-QSB for the quarter ended September 30, 1996.
22
<PAGE>
[Execution Copy]
SENIOR CREDIT AGREEMENT
dated as of December 20, 1996
by and among
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.,
NEW YORK SKYLINE, INC.,
SKYLINE VIRTUAL REALITY, INC.,
SKYLINE CHICAGO, INC.,
SKYLINE MAGIC, INC.,
SKYLINE LAS VEGAS, INC.,
PROSPECT STREET NYC DISCOVERY FUND, L.P.,
and
BANK OF NEW YORK, AS TRUSTEE
FOR THE EMPLOYEES RETIREMENT PLAN
OF THE BROOKLYN UNION GAS COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS.......................................................................... 1
1.1 Definitions................................................................. 1
ARTICLE II
THE CREDITS.......................................................................... 12
2.1 Commitments................................................................. 12
2.2 Loans....................................................................... 12
2.3 Borrowing Procedure......................................................... 13
2.4 Issuance of Notes, Evidence of Debt, Repayment of Loans..................... 13
2.5 Interest on Loans........................................................... 14
2.6 Default Interest............................................................ 14
2.7 Termination of Commitments.................................................. 14
2.8 Optional Prepayment......................................................... 14
2.9 Pro Rata Treatment.......................................................... 15
2.10 Sharing of Setoffs.......................................................... 15
2.11 Payments.................................................................... 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS...................................... 16
3.1 Organization................................................................ 16
3.2 Power and Authority......................................................... 16
3.3 Capital Stock............................................................... 17
3.4 Subsidiaries................................................................ 18
3.5 No Conflicts................................................................ 18
3.6 Governmental Approvals and Filings.......................................... 18
3.7 Books and Records........................................................... 19
3.8 SEC Documents............................................................... 19
3.9 Absence of Changes.......................................................... 19
3.10 No Undisclosed Liabilities.................................................. 21
3.11 Taxes....................................................................... 21
3.12 Legal Proceedings........................................................... 23
3.13 Compliance With Laws and Orders............................................. 23
3.14 Benefit Plans; ERISA........................................................ 23
3.15 Real Property............................................................... 24
3.16 Tangible Personal Property.................................................. 24
3.17 Intellectual Property Rights................................................ 25
3.18 Contracts................................................................... 25
3.19 Licenses.................................................................... 26
</TABLE>
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3.20 Insurance................................................................... 26
3.21 Affiliate Transactions...................................................... 26
3.22 Employees; Labor Relations.................................................. 26
3.23 Environmental Matters....................................................... 26
3.24 Suppliers................................................................... 27
3.25 Inventory................................................................... 28
3.26 Registration Rights......................................................... 28
3.27 Brokers..................................................................... 28
3.28 New York City Advanced Technology Company; Small Business Matters........... 28
3.29 Exemption from Registration; Restrictions on Offer and Sale of Same or
Similar Securities.......................................................... 28
3.30 No Default.................................................................. 29
3.31 Use of Proceeds; Margin Stock............................................... 29
3.32 Investment Company Act...................................................... 29
3.33 Public Utility Holding Company Act.......................................... 29
3.34 Financial Condition......................................................... 29
3.35 Senior Credit Documents..................................................... 30
3.36 Disclosure.................................................................. 30
ARTICLE IV
CONDITIONS TO INITIAL LOANS.......................................................... 30
4.1 Borrowing Certificate....................................................... 30
4.2 Representations and Warranties.............................................. 31
4.3 Performance................................................................. 31
4.4 Secretary's Certificate..................................................... 31
4.5 Orders and Laws............................................................. 31
4.6 Regulatory Consents and Approvals........................................... 31
4.7 Third Party Consents........................................................ 32
4.8 Opinion of Counsel.......................................................... 32
4.9 Good Standing Certificates.................................................. 32
4.10 UCC Filing Searches......................................................... 32
4.11 Operative Agreements........................................................ 32
4.12 Issuance of Notes........................................................... 32
4.13 Issuance of Warrants; Listing of Common Stock............................... 33
4.14 Interest on Demand Note..................................................... 33
4.15 Certain Expenses............................................................ 33
4.16 Potential Event of Default; Event of Default................................ 33
4.17 Additional Matters.......................................................... 33
ARTICLE V
CONDITIONS TO EACH ADDITIONAL LOAN................................................... 33
5.1 Borrowing Certificate....................................................... 34
5.2 Representations and Warranties.............................................. 34
</TABLE>
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<TABLE>
<S> <C>
5.3 Issuance of Notes........................................................... 34
5.4 Issuance of Warrants; Listing of Common Stock............................... 34
5.5 Compliance; No Default...................................................... 34
5.6 Effect of Each Additional Borrowing......................................... 34
5.7 Additional Matters.......................................................... 34
ARTICLE VI
AFFIRMATIVE COVENANTS................................................................ 35
6.1 Financial Statements and Reports; Inspection................................ 35
6.2 Corporate Existence; Compliance............................................. 35
6.3 Payment of Liabilities...................................................... 35
6.4 Insurance; Maintenance of Properties........................................ 36
6.5 Notice of Certain Events.................................................... 36
6.6 Economic Impact Information................................................. 36
6.7 New York City Advanced Technology Company................................... 36
6.8 Reservation of Shares; Exchange of Securities............................... 37
6.9 Venture Capital Operating Company Status.................................... 37
6.10 Subsidiaries................................................................ 37
6.11 Further Assurances.......................................................... 37
ARTICLE VII
NEGATIVE COVENANTS................................................................... 38
7.1 Indebtedness................................................................ 38
7.2 Liens....................................................................... 38
7.3 Merger, Consolidation, Sale of Assets....................................... 38
7.4 Lease Obligations........................................................... 39
7.5 Loans and Investments....................................................... 39
7.6 Dividends, Etc.............................................................. 39
7.7 Subsidiaries................................................................ 40
7.8 Sale and Leaseback.......................................................... 40
7.9 Charter Documents; Directors................................................ 40
7.10 Certain Limitations......................................................... 40
7.11 Conflicting Agreements...................................................... 40
7.12 Use of Proceeds............................................................. 40
7.13 Affiliate Transactions...................................................... 41
7.14 Change in Nature of Business................................................ 41
ARTICLE VIII
EVENTS OF DEFAULT.................................................................... 41
8.1 Failure To Make Payments When Due........................................... 41
8.2 Default in Other Agreements................................................. 41
8.3 Breach of Certain Covenants and Agreements.................................. 41
8.4 Breach of Warranty.......................................................... 42
</TABLE>
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8.5 Involuntary Bankruptcy; Appointment of Receiver, Etc........................ 42
8.6 Voluntary Bankruptcy; Appointment of Receiver, Etc.......................... 42
8.7 Judgments and Attachments................................................... 42
8.8 Other Agreements............................................................ 43
8.9 Change of Control........................................................... 43
8.10 Public Warrant Redemption or Exercise....................................... 43
ARTICLE IX
MISCELLANEOUS........................................................................ 43
9.1 Notices..................................................................... 43
9.2 Participations in Loans and Senior Notes.................................... 45
9.3 New Additional Lender....................................................... 45
9.4 Indemnity................................................................... 46
9.5 Entire Agreement............................................................ 46
9.6 Expenses.................................................................... 47
9.7 Consideration for Warrants.................................................. 47
9.8 Further Assurances; Post-Closing Cooperation................................ 47
9.9 Amendments and Waivers...................................................... 47
9.10 Independence of Covenants................................................... 48
9.11 No Third Party Beneficiary.................................................. 48
9.12 No Assignment; Binding Effect............................................... 48
9.13 Headings.................................................................... 48
9.14 Invalid Provisions.......................................................... 48
9.15 Governing Law............................................................... 48
9.16 Consent to Jurisdiction and Service of Process.............................. 48
9.17 Waiver of Jury Trial........................................................ 49
9.18 Counterparts................................................................ 50
</TABLE>
Exhibit A -- Borrowing Certificate
Exhibit B -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit C -- Amended and Restated Registration Rights Agreement
Exhibit D -- Form of Senior Note
Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Warrant
Exhibit G -- Secretary's Certificate
Exhibit H -- Opinion of Counsel to the Borrowers
ANNEXES
Annex 2.1 -- Commitments
Annex 2.11 -- Offices of Lenders
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<PAGE>
SENIOR CREDIT AGREEMENT, dated as of December 20, 1996, by
and among SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York corporation (the
"Company"), NEW YORK SKYLINE, INC., a New York corporation ("NYSI"), SKYLINE
VIRTUAL REALITY, INC., a Delaware corporation ("SVRI"), SKYLINE CHICAGO, INC.,
a Delaware corporation ("SCI"), SKYLINE MAGIC, INC., a Delaware corporation
("SMI"), SKYLINE LAS VEGAS, INC., a Delaware corporation ("SLVI") (the Company,
NYSI, SVRI, SCI, SMI and SLVI each a "Borrower" and together, the "Borrowers"),
PROSPECT STREET NYC DISCOVERY FUND, L.P., a Delaware limited partnership
("Prospect"), and BANK OF NEW YORK, AS TRUSTEE FOR THE EMPLOYEES RETIREMENT
PLAN OF THE BROOKLYN UNION GAS COMPANY ("Bug").
WHEREAS, capitalized terms not otherwise defined herein have
the meanings set forth in Section 1.1; and
WHEREAS, the Borrowers wish to obtain financing and the
Lenders desire to provide such financing to the Borrowers;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Additional Borrowing" means the Loans made by the Lenders to
the Borrowers pursuant to Section 2.1(b).
"Additional Borrowing Date" means each date on which an
Additional Loan is made.
"Additional Lenders" means Bug and any New Additional Lender.
"Additional Loan Commitment" means with respect to each
Additional Lender, the commitment of such Additional Lender to make Additional
Loans hereunder, in an aggregate principal amount at any time outstanding not
in excess of the amount set forth opposite the name
<PAGE>
of such Additional Lender in the column entitled "Additional Loan Commitment"
in the table appearing on Annex 2.1 or, with respect to any New Additional
Lender, as shall be set forth on the signature page hereto.
"Additional Loan Commitment Termination Date" means the
earliest to occur of (i) September 20, 1997; (ii) any prepayment of any Loan;
(iii) a Change of Control; (iv) a breach by any Borrower of any of the
provisions contained in Section 7.3; and (v) any Event of Default or Potential
Event of Default, unless, in the case of this clause (v), the Additional
Lenders whose Additional Commitments represent in excess of fifty percent (50%)
of all Additional Commitments notify the Borrowers in writing that, with
respect to any particular Event of Default or Potential Event of Default, that
such Additional Lenders have elected not to terminate the Additional Loan
Commitment.
"Additional Loans" means the loans made by the Additional
Lenders to the Borrowers pursuant to Section 2.1(b).
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common
control with, that Person, (b) any other Person that owns or controls (i) 5% or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) 5% or more of any class of equity securities (including any equity
securities issuable upon the exercise of any option or convertible security) of
that Person or any of its Affiliates, or (c) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as applied to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person,
whether through ownership of voting securities or by contract or otherwise.
"Agreement" means this Senior Subordinated Credit Agreement,
the Exhibits, Annexes and the Disclosure Schedule and the certificates or other
documents or instruments delivered in accordance herewith, as the same may be
amended from time to time in accordance with the terms hereof.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any
corporation or other business organization of which such Person is an officer
or partner or is the beneficial owner, directly or
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<PAGE>
indirectly, of ten percent (10%) or more of any class of equity securities, any
trust or estate in which such Person has a substantial beneficial interest or
as to which such Person serves as a trustee or in a similar capacity and any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.
"Benefit Plan" means any Plan established by any Borrower or
any Subsidiary, or any predecessor or Affiliate of any of the foregoing, to
which any Borrower or any Subsidiary contributes or has contributed, or under
which any employee, former employee or director of any Borrower or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of any Borrower
or any Subsidiary, including without limitation financial statements, Tax
Returns and related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and
plans and environmental studies and plans.
"Borrower" has the meaning ascribed to it in the forepart of
this Agreement.
"Borrowing" means a group of Loans made by the Lenders on a
single date.
"Borrowing Certificate" means a certificate executed and
delivered by the Borrowers in order to request a Borrowing in accordance with
the terms of Section 2.3 and substantially in the form of Exhibit A hereto.
"Bug" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Combination" means with respect to any Person any
(i) merger, consolidation or combination to which such Person is a party, (ii)
any sale, dividend, split or other disposition of any capital stock or other
equity interests of such Person, (iii) any tender offer (including without
limitation a self-tender), exchange offer, recapitalization, liquidation,
dissolution or similar transaction, (iv) any sale, dividend or other
disposition of all or a material portion of the Assets and Properties of such
Person (even if less than all or substantially all) or (v) the entering into of
any agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
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"Business or Condition" means, with respect to any Person,
the business, condition (financial or otherwise), results of operations, Assets
and Properties and prospects of such Person.
"Capital Lease Obligations" means, as to any Person, any
obligation of such Person which is or should be classified and accounted for as
a capital lease for financial reporting purposes in accordance with GAAP, and
the amount of such obligation shall be the capitalized amount thereof
determined in accordance with GAAP on a consolidated basis.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Change of Control" means either (i) the acquisition after
the date hereof of ownership, directly or indirectly, beneficially or of
record, by any Person or group (within the meaning of the Exchange Act), other
than any Lender or any Affiliate of any Lender, of shares representing more
than 20% of the aggregate ordinary voting power (in the absence of
contingencies) represented by the issued and outstanding capital stock of the
Company; or (ii) Zalman Silber shall cease to be the President of the Company;
or (iii) except for transfers to (A) Prospect or any of its Affiliates, or (B)
any "Permitted Transferee" of Zalman Silber under the Stockholders Agreement,
Zalman Silber shall cease to own, beneficially and of record, 100% of the Class
A Common Stock or (iv) the shares of Class A Common Stock outstanding on the
date hereof shall cease to be outstanding.
"Class A Common Stock" has the meaning ascribed thereto in
Section 3.3.
"Closing" means the making of the Initial Loans hereunder.
"Closing Date" means the date on which the Initial Loans
are made.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Commitment" means, with respect to each Lender, the sum of
such Lenders Initial Loan Commitment and Additional Loan Commitment; provided,
however, that with respect to any New Additional Lender, Commitment shall mean
such Lender's Additional Loan Commitment.
"Common Stock" has the meaning ascribed thereto in
Section 3.3.
"Company" has the meaning ascribed to it in the forepart of
this Agreement (and includes, unless the context otherwise requires, any
predecessor of the Company).
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"Contract" means any agreement, lease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract
(whether written or oral).
"Defined Benefit Plan" means each Plan which is subject to
Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Demand Note" has the meaning ascribed to it in
Section 2.2(b).
"Disclosure Schedule" means the schedules delivered to the
Lenders by the Borrowers herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as are
required to be included therein by the Borrowers pursuant to this Agreement.
"Environmental Law" means any Law relating to human health,
or protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or otherwise relating to the
treatment, storage, disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Event of Default" has the meaning ascribed to it in
Article VIII.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Final Maturity Date" means December 20, 2001.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision, and shall include,
without limitation, any stock exchange, quotation service and the National
Association of Securities Dealers.
"Hazardous Material" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (B) any chemicals, materials, substances or wastes which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes,"
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"restricted hazardous wastes," "toxic substances," "toxic pollutants" or words
of similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now or hereafter prohibited,
limited or regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (iv) all obligations
of such Person in respect of the deferred purchase price of property or
services (excluding accounts payable incurred in the ordinary course of
business), (v) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (vi) all guarantees by
such Person of Indebtedness of others, (vii) all Capital Lease Obligations of
such Person, (viii) all obligations, contingent or otherwise, of such Person as
an account party in respect of letters of credit and letters of guaranty and
(ix) all obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"Indemnified Liabilities" has the meaning ascribed to it in
Section 9.4.
"Indemnitees" has the meaning ascribed to it in Section 9.4.
"Indemnitor" has the meaning ascribed to it in Section 9.4.
"Indemnity, Subrogation and Contribution Agreement" means the
form of Indemnity, Subrogation and Contribution Agreement attached as Exhibit B
hereto, as such agreement may be amended, modified or restated from time to
time.
"Independent Credit Agreement" means the Loan and Security
Agreement (Equipment) dated as of November 27, 1996 between Independent
Resources, Inc., a New York corporation and the Company, as such agreement may
be amended, modified or restated from time to time.
"Initial Loan Commitment" means, with respect to each Lender,
the commitment of such Lender to make an Initial Loan hereunder, in an
aggregate principal amount as set forth opposite the name of such Lender in the
column entitled "Initial Loan Commitment" in the table appearing on Annex 2.1.
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"Initial Loans" means the loans made by the Lenders to the
Borrowers pursuant to Section 2.1(a).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by any Borrower
or any Subsidiary (other than securities issued by any Subsidiary of any
Borrower or any Subsidiary).
"Investment Period" means the period commencing on the
Closing Date and ending on later of (i) the date on which all Loans and all
other amounts owing under this Agreement and any operative Agreement have been
indefeasibly paid in full in cash and the Commitments have been terminated and
(ii) the date on which no Lender holds any Preferred Stock, Warrants, Common
Stock or other debt or equity securities of any Borrower.
"IRS" means the United States Internal Revenue Service.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Lenders" means each of Prospect, Bug and any Person made a
Lender pursuant to Section 9.2 or any New Additional Lender pursuant to Section
9.3.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a
Person, whether absolute, accrued, contingent (or based upon a contingency),
known or unknown, fixed or otherwise, or whether due or to become due.
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
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"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loans" means the Initial Loans and the Additional Loans.
"Loan Period" means the period commencing on the Closing Date
and ending on the date on which all Loans and all other amounts owing under
this Agreement and any Operative Agreement have been indefeasibly paid in full
in cash and the Commitments have been terminated.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses, including without limitation interest,
reasonable expenses of investigation, court costs, reasonable fees and expense
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and
expenses to include without limitation, all fees and expenses, including
without limitation reasonable fees and expenses of attorneys, incurred in
connection with (i) the investigation or defenses of any third party or other
claim with respect to which any Lender may be indemnified pursuant to Section
10.4 hereof (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise). Also included within the meaning of Loss shall
be the diminution in value of any securities of any Borrower held by any
Lender, including without limitation, the Warrants and Shares of Common Stock
issuable upon exercise thereof.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"NASDAQ" has the meaning ascribed to it in Section 4.13.
"New Additional Lender" has the meaning ascribed to it in
Section 9.3.
"New York City Advanced Technology Company" means any company
which satisfies the following criteria: (i) the chief executive office or other
senior-level managerial office is in New York City and (ii) (A) for a company
with fifty (50) or fewer full-time employees, at least seventy-five percent
(75%) of the company's full-time employees are persons required to pay New York
City income tax (resident or nonresident) or (B) for a company with more than
fifty (50) full-time employees, at least forty (40) of the company's full-time
employees, plus fifty percent (50%) of the company's full-time employees in
excess of fifty (50) employees, are persons required to pay New York City
income-tax (resident or nonresident).
"Note Purchase Agreement" means the Note Purchase Agreement
dated as of November 6, 1996 by and between the Company and Prospect, as such
agreement may be amended, modified or restated from time to time.
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"NYSI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of NYSI).
"Operative Agreements" means the Senior Notes, the Warrants
and the Registration Rights Agreement and any support or other agreements
entered into in connection with the transactions contemplated by this
Agreement.
"Option" with respect to any Person means any security,
right, subscription, warrant, option, "phantom" stock right or other Contract
that gives the right to (i) purchase or otherwise receive or be issued any
shares of capital stock of such Person or any security of any kind convertible
into or exchangeable or exercisable for any shares of capital stock of such
Person or (ii) receive any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
without limitation any rights to participate in the equity, income or election
of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien (other than those described in clause (i)) arising in the
ordinary course of business by operation of Law with respect to a Liability
that is not yet due or delinquent, (iii) any minor imperfection of title or
similar Lien which individually or in the aggregate with other such Liens does
not impair the value or marketability of the property subject to such Lien or
interferes with the use of such property in the conduct of the business of any
Borrower or any Subsidiary of any Borrower and which do not secure obligations
for money borrowed and (iv) any Liens securing Indebtedness permitted under
clause (ii) of Section 7.1.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited
to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
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"Potential Event of Default" means a condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within any
applicable grace or cure period.
"Preferred Stock" has the meaning ascribed to it in
Section 3.3.
"Prospect" has the meaning ascribed to it in the forepart of
this Agreement.
"Public Warrants" means the Company's Redeemable Class A
Warrants and Redeemable Class B Warrants issued in connection with the
Company's initial public offering in February 1994.
"Registration Rights Agreement" means the Amended and
Restated Registration Rights Agreement dated as of the Closing Date by and
among the Company and the Lenders, substantially in the form and to the effect
of Exhibit C hereto, as such agreement may be amended, modified or restated
from time to time.
"Regulation G, T. and X" means Regulation G, T. and X of the
Board of Governors of the Federal Reserve System as in effect from time to
time.
"Release" has the meaning ascribed to it in Section 3.23(a).
"Required Lenders" means, at any time, Lenders whose
principal amount of and accrued and unpaid interest on outstanding Loans
represent in excess of fifty percent (50%) of all outstanding Loans at such
time.
"Responsible Officer" means the Chief Executive Officer and
Chief Financial Officer of a Borrower.
"SBA" means the U.S. Small Business Administration.
"SBA Act" means the Small Business Act of 1953, as amended,
and the Small Business Act of 1958, as amended.
"SBA Regulations" means the rules and regulations of the SBA
promulgated under the SBA Act (13 CFR 107 et seq.; and 13 CFR 121 et seq.
collectively).
"SBIC" means a Small Business Investment Company licensed by
the SBA under Section 301(c) of the Small Business Investment Act of 1958, as
amended.
"SCI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SCI).
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"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning ascribed to it in Section 3.8.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Senior Note" means one or more of the Senior Notes of the
Borrowers issued pursuant to Section 2.4(a), in the form attached as Exhibit D
hereto.
"SLVI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SLVI.
"Stock Purchase Agreement" means the Stock Purchase Agreement
dated as of July 7, 1995 by and between the Company and Prospect, as such
agreement may be amended, modified or restated from time to time.
"Stockholders Agreement" means the Stockholders Agreement
dated as of July 7, 1995 among the Company and its Stockholders, as such
agreement may be amended, modified or restated from time to time.
"Subsidiary" means any Person in which any Borrower, directly
or indirectly through Subsidiaries or otherwise, beneficially owns more than
fifty percent (50%) of either the equity interests or the voting power.
"Subsidiary Guarantee Agreement" means the form of Subsidiary
Guarantee Agreement attached as Exhibit E hereto, as such agreement may be
amended, modified or restated from time to time.
"Subsidiary Guarantor" means each Subsidiary that delivers a
Subsidiary Guarantee Agreement as required pursuant to Section 6.10.
"SVRI" has the meaning ascribed to it in the forepart of this
Agreement (and includes, unless the context otherwise requires, any predecessor
of SVRI).
"Tax Losses" has the meaning ascribed to it in
Section 3.11(i).
"Tax" or "Taxes" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem,
value added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
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"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"Transfer Tax" has the meaning set forth in Section 6.3.
"Warrant" means, collectively, one or more warrants issued to
the Lenders in connection with this Agreement, in the form attached as Exhibit
F hereto and any warrants issued in exchange or replacement thereof.
(b) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the phrases "ordinary course of business" and "ordinary course of business
consistent with past practice" refer to the business and practice of a Borrower
or a Subsidiary. All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP.
ARTICLE II
THE CREDITS
2.1 Commitments. Subject to the terms and conditions and
relying upon the representations and warranties of the Borrowers herein set
forth, (a) each of Prospect and Bug agrees, severally and not jointly, to make
an Initial Loan to the Borrowers on the Closing Date in an aggregate principal
amount not to exceed its Initial Loan Commitment and (b) each Additional Lender
agrees, severally and not jointly, to make Additional Loans to the Borrowers,
at any time and from time to time on or after the date hereof, and until the
Additional Loan Commitment Termination Date, in an aggregate principal amount
not to exceed such Additional Lender's Additional Loan Commitment. Amounts paid
or prepaid in respect of Loans may not be reborrowed.
2.2 Loans.
(a) Each Loan shall be made as part of a Borrowing consisting
of Loans made by the Lenders ratably (subject to Section 9.3) in accordance
with their respective Initial Loan Commitments or Additional Loan Commitments,
as applicable; provided, however, that the failure of any Lender to make any
Loan shall not in itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible
for the failure of any other Lender to make any Loan required to be made by
such other Lender). The Loans comprising any Borrowing shall be in an aggregate
principal amount that is (i) not
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less than $500,000 and, in each case, in an integral multiple of $100,000 or
(ii) equal to the remaining available balance of the applicable Commitment.
(b) Each Lender (other than Prospect) shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available or next day funds to such account in New York City as the
Borrowers may designate in the applicable Borrowing Certificate. The Initial
Loan to be made by Prospect hereunder shall be made by the surrender to the
Company for cancellation of the Demand Promissory Note (the "Demand Note") in
the initial aggregate principal amount of $1,500,000 issued by the Company to
Prospect on November 6, 1996 against payment in full in cash to Prospect of all
accrued and unpaid interest on the Demand Note and the issuance to Prospect of
a Senior Note in the aggregate principal amount of Prospect's Initial Loan
Commitment.
2.3 Borrowing Procedure. In order to request the Initial
Borrowing, the Borrowers shall hand deliver or telecopy to each of Prospect and
Bug a duly completed Borrowing Certificate not later than 11:00 a.m., New York
time, at least one (1) Business Day prior to the Closing Date. In order to
request an Additional Borrowing, the Borrowers shall notify each Additional
Lender by telephone of its intent to request an Additional Borrowing and shall
hand deliver or telecopy to each Additional Lender a duly completed Borrowing
Certificate not later than 11:00 a.m., New York City time, at least seven (7)
Business Days before a proposed Additional Borrowing. Each Borrowing
Certificate shall be irrevocable, shall be signed by or on behalf of the
Borrowers by a Responsible Officer and shall specify the following information:
(i) the date of the requested Borrowing (which shall be a Business Day); (ii)
the number and location of the account in New York City to which funds are to
be disbursed; (iii) the amount of the requested Borrowing; and (iv) the amount
of each Lender's portion of the requested Borrowing.
2.4 Issuance of Notes, Evidence of Debt, Repayment of Loans.
(a) Each Borrower shall execute and deliver to each of
Prospect and Bug on the date of the Initial Loan and to each Additional Lender
on the date of each Additional Loan, a Senior Note dated the date of the
Initial Loan or such Additional Loan, as applicable, in the aggregate principal
amount of such Loan and with other appropriate insertions.
(b) The Borrowers, jointly and severally, unconditionally
promise to pay to each Lender the then unpaid principal amount of each Loan of
such Lender, together with all accrued and unpaid interest thereon, on the
Final Maturity Date.
(c) Each Lender shall maintain an account or accounts
evidencing the Indebtedness of the Borrowers to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid such Lender from time to time under this
Agreement.
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(d) The entries made in the accounts maintained pursuant to
paragraph (c) above shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided, however, that the failure of any
Lender to maintain such accounts or any error therein shall not in any manner
affect the obligations of any Borrower to repay the Loans in accordance with
their terms.
2.5 Interest on Loans.
(a) Subject to the provisions of Section 2.6, the Loans shall
bear interest (computed on the basis of the actual number of days elapsed over
a year of 360 days) at a rate per annum of 14%.
(b) Interest on each Loan shall be payable on the Final
Maturity Date.
2.6 Default Interest. Upon the occurrence and during the
continuance of an Event of Default, interest will accrue on the unpaid
principal amount of all Loans, all unpaid interest on any Loan and any other
amounts payable hereunder, to the extent permitted by law, at a rate per annum
of 21%.
2.7 Termination of Commitments. The Initial Loan Commitments
shall automatically terminate at 5:00 p.m., New York City time, on the Closing
Date. The Additional Loan Commitments shall automatically terminate at 5:00
p.m., New York City time, on the Additional Loan Commitment Termination Date.
2.8 Optional Prepayment.
(a) The Borrowers shall have the right at any time and from
time to time to prepay any Borrowing, in whole or in part, upon at least thirty
(30) days' prior notice to each Lender given by telephone (promptly confirmed
by written or telecopy notice) before 11:00 a.m., New York City time; provided,
however, that each partial prepayment shall be in an amount that is an integral
multiple of $50,000 and not less than $250,000.
(b) Optional prepayments of Loans shall be allocated pro rata
between the then outstanding Loans, and shall be accompanied by the cash
payment of all accrued and unpaid interest on the portion of the principal then
being prepaid plus, if any such prepayment is made prior to December 20, 2001,
a premium equal to the applicable percentage of the principal amount being
prepaid, determined as follows:
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During the 12-Month Period
Beginning December 20 Applicable Percentage
-------------------------- ---------------------
1996 5%
1997 4%
1998 3%
1999 2%
2000 1%
(c) Each notice of prepayment shall specify the prepayment
date and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrowers to prepay such
Borrowing by the amount stated therein on the date stated therein.
2.9 Pro Rata Treatment.
Each payment or prepayment of principal, interest or premium
with respect to any Loan shall be allocated pro rata among the Lenders in
accordance with their respective applicable outstanding Loans.
2.10 Sharing of Setoffs.
Each Lender agrees that if it shall, through the exercise of
a right of lien, setoff or counterclaim against any Borrower or any Subsidiary
Guarantor, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans as a result
of which the unpaid principal portion of its Loans shall be proportionately
less than the unpaid principal portion of the Loans of any other Lender, it
shall be deemed simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to such other Lender the purchase price for, a
participation or interest in the Loans as the case may be, of such other
Lender, so that the aggregate unpaid principal amount of the Loans and
participations or interests in Loans held by each Lender shall be in the same
proportion to the aggregate unpaid principal amount of all Loans then
outstanding as the principal amount of its Loans prior to such exercise of
lien, setoff or counterclaim or other event was to the principal amount of all
Loans outstanding prior to such exercise of lien, setoff or counterclaim or
other event; provided, however, that if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.10 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. Each Borrower and each
Subsidiary Guarantor expressly consents to the foregoing arrangements and
agrees that any Lender holding a participation or interest in a Loan deemed to
have been so purchased may exercise any and all rights of banker's lien, setoff
or counterclaim with respect to
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any and all moneys owing by any Borrower to such Lender by reason thereof as
fully as if such Lender had made a Loan directly to such Borrower in the amount
of such participation.
2.11 Payments
(a) The Borrowers (and, if applicable, any Subsidiary
Guarantor) shall make each payment (including principal of, interest on and
prepayment premium with respect to, any Borrowing, and any fees or expenses or
other amounts) hereunder and under any Operative Agreement not later than 11:00
a.m., New York City time, on the date when due in immediately available United
States Dollars, without setoff or counterclaim. Each such payment shall be made
to the Lenders at their respective offices set forth on Annex 2.11 hereto.
(b) Whenever any payment (including principal of, interest on
and premium with respect to, any Loan, and any fees or expenses or other
amounts) hereunder or under any Operative Agreement shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest, prepayment premiums or
fees or expenses, if applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
Each Borrower hereby represents and warrants, jointly and
severally, to each Lender as follows:
3.1 Organization. Each Borrower is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
its jurisdiction of organization. Section 3.1 of the Disclosure Schedule lists
all lines of business in which any Borrower is participating or engaged. Each
Borrower is duly qualified, licensed or admitted to do business and is in good
standing in those jurisdictions in which the ownership, use or leasing of its
Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except where the failure to be
so qualified, licensed or admitted will not have a material adverse effect on
the Business or Condition of such Borrower. Each Borrower has, prior to the
execution of this Agreement, delivered to each Lender true and complete copies
of the certificate of incorporation and by-laws of such Borrower as in effect
on the date hereof.
3.2 Power and Authority. Each Borrower has the full corporate
power and authority to execute and deliver this Agreement and the Operative
Agreements and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including without
limitation to issue and sell (pursuant to this Agreement), on the Closing Date
and on the date of each Additional Borrowing, the Senior Notes and, in the case
of
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the Company, the Warrants and the Common Stock and any other securities
issuable upon exercise of any Warrant. The execution and delivery by each
Borrower of this Agreement and the Operative Agreements to which it is a party,
and the performance by such Borrower of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary action of
the board of directors of such Borrower, which action of the board of directors
is the only corporate action necessary to authorize the execution, delivery and
performance by such Borrower of this Agreement and the Operative Agreements.
This Agreement has been duly and validly executed and delivered by each
Borrower and constitutes, and upon the execution and delivery by such Borrower
of the Operative Agreements to which it is a party, such Operative Agreements
will constitute, legal, valid and binding obligations of such Borrower
enforceable against such Borrower in accordance with their respective terms.
3.3 Capital Stock. The authorized capital stock of the
Company consists of 19,000,000 shares of Common Stock, par value $.001 per
share ("Common Stock"), 1,000,000 shares of Class A Common Stock, par value
$.001 per share ("Class A Common Stock") and 5,000,000 shares of Series A
Convertible Participating Preferred Stock, par value $.001 per share
("Preferred Stock"), of which 1,495,000 shares, 960,000 shares and 1,090,909
shares, respectively, are duly authorized, validly issued, outstanding, fully
paid and nonassessable, free and clear of all Liens, and have been issued in
compliance with applicable federal and state securities laws. Section 3.3 of
the Disclosure Schedule lists for each Borrower (other than the Company) the
amount of its authorized and outstanding capital stock, all of which are duly
authorized, validly issued, fully paid and non-assessable, owned, beneficially
and of record, by the Company free and clear of all Liens, and have been issued
in compliance with applicable federal and state securities laws. Except for
this Agreement, as disclosed in Section 3.3 of the Disclosure Schedule and as
disclosed in Note I to the audited financial statements for the Company's
fiscal year ended June 30, 1996 included in the SEC Documents, there are no
outstanding Options with respect to any Borrower. With respect to each Option,
Section 3.3 of the Disclosure Schedule or Note I to the audited financial
statements for the Company's fiscal year ended June 30, 1996 included in the
SEC Documents sets forth the number of securities issuable thereunder and the
current exercise price therefor. There are no preemptive rights or agreements,
arrangements or understandings to issue pre-emptive rights with respect to the
issuance or sale of any Borrower's capital stock. On the Closing Date and on
the date of each Additional Borrowing, the delivery of the Senior Notes and the
Warrants to the Lenders, and on each date of any issuance of Common Stock or
other securities issuable upon exercise of any Warrant, the issuance of such
Common Stock or other securities, will transfer to the Lenders good and valid
title to the Senior Notes, the Warrants and such Common Stock or other
securities, free and clear of all Liens. Neither the execution, delivery or
performance by any Borrower of this Agreement nor the issuance of the Senior
Notes, the Warrants, or the Common Stock or other securities issuable upon
exercise of any Warrant will give rise to or result in (with or without notice,
lapse of time, or both) any antidilution adjustment, acceleration of vesting or
other change under or to any Option, except as disclosed in Section 3.3 of the
Disclosure Schedule.
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3.4 Subsidiaries. Except for other Borrowers and except as
disclosed in Section 3.4 of the Disclosure Schedule, no Borrower owns, nor has
any Borrower heretofore owned, directly or indirectly, any equity or similar
interest in, or any interest convertible into or exchangeable for any equity or
similar interest in, any Person.
3.5 No Conflicts. The execution and delivery by the Borrowers
of this Agreement do not, and the execution and delivery by the Borrowers of
the Operative Agreements to which any of them is a party, the performance by
the Borrowers of their respective obligations under this Agreement and such
Operative Agreements and the consummation of the transactions contemplated
hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
any Borrower or any Subsidiary;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.6 of the
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to any Borrower or any
Subsidiary or any of their respective Assets and Properties;
(c) except as disclosed in Section 3.5 of the Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any Borrower or any Subsidiary to obtain any consent, approval or
action of, make any filing with or give any notice to any Person as a result or
under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, any Contract
or License to which any Borrower or any Subsidiary is a party or by which any
of their respective Assets and Properties is bound; or
(d) except as disclosed in Section 3.5 of the Disclosure
Schedule, result in the creation or imposition of any Lien upon any Borrower or
any Subsidiary or any of their respective Assets and Properties.
3.6 Governmental Approvals and Filings. Except as disclosed
in Section 3.6 of the Disclosure Schedule, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part
of any Borrower or any Subsidiary is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Agreements
to which it is a party or the consummation of the transactions contemplated
hereby or thereby, including, without limitation, for purposes of maintaining
the listing of the Company's securities on the National Association of
Securities Dealers Automated Quotation System.
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3.7 Books and Records. The minute books and other similar
records of each Borrower as made available to each Lender prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the stockholders, the boards of directors and committees of
the boards of directors of such Borrower.
3.8 SEC Documents. The Company has made available to each
Lender a true and complete copy of each report, schedule, form, statement and
other document filed by the Company with the SEC (as such documents have since
the time of their filing been amended, the "SEC Documents") which are all the
documents that the Company was required to file with the SEC through the date
hereof. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any SEC Document has been revised or superseded
by a later-filed SEC Document, none of the SEC Documents currently contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and with the rules and regulations of the SEC with respect
thereto. Except as set forth in the notes thereto, all such financial
statements were prepared in accordance with GAAP (except, in the case of the
unaudited statements, for the omission of normal year end adjustments and
footnote disclosures) consistently applied throughout the periods involved, are
true and correct in all material respects, and fairly present the consolidated
financial condition, results of operations, changes in stockholders' equity and
cash flow of the Company and its consolidated Subsidiaries as of the respective
dates thereof and for the respective periods covered thereby. Except for those
Subsidiaries listed in Section 3.8 of the Disclosure Schedule, the financial
condition and results of operations of each Subsidiary are, and for all periods
referred to in this Section 3.8 have been, consolidated with those of the
Company.
3.9 Absence of Changes. Since June 30, 1996 there has not
been any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be expected
to result in a material adverse change in the Business or Condition of any
Borrower. None of the other representations or warranties set forth in this
Agreement shall be deemed to limit the foregoing. In addition, without limiting
the foregoing, except as disclosed in Section 3.9 of the Disclosure Schedule or
the SEC Documents, there has not occurred since June 30, 1996:
(i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of the Company
or any Subsidiary of the Company not wholly owned by the Company, or
any direct or indirect redemption,
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purchase or other acquisition by the Company or any Subsidiary of the
Company of any such capital stock of or any Option with respect to the
Company or any Subsidiary of the Company not wholly owned by the
Company;
(ii) any authorization, issuance, sale or other disposition
by any Borrower of any shares of capital stock of or Option with
respect to any Borrower, or any modification or amendment of any right
of any holder of any outstanding shares of capital stock of or Option
with respect to any Borrower;
(iii) other than pursuant to the terms of existing employment
contracts (x) any increase in the salary, wages or other compensation
of any officer, employee or consultant of any Borrower whose annual
salary is, or after giving effect to such change would be, $50,000.00
or more; (y) any establishment or modification of (A) targets, goals,
pools or similar provisions in respect of any fiscal year under any
Benefit Plan, employment Contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar
provisions in respect of any Benefit Plan, employment Contract or
other employee compensation arrangement; or (z) any adoption, entering
into, amendment, modification or termination (partial or complete) of
any Benefit Plan;
(iv) (A) incurrences by any Borrower or any Subsidiary of
Indebtedness in an aggregate principal amount for all Borrowers and
Subsidiaries taken together exceeding $50,000.00 (net of any amounts
discharged during such period), or (B) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance
of a scheduled payment date with respect to, or waiver of any right of
any Borrower or any Subsidiary under, any Indebtedness of or owing to
any Borrower or any Subsidiary (in either case other than any
Indebtedness of any Borrower or any Subsidiary owing to any other
Borrower or any other wholly-owned Subsidiary);
(v) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the real or
personal property or equipment of any Borrower or any Subsidiary in an
aggregate amount for all Borrowers and Subsidiaries taken together
exceeding $50,000.00;
(vi) any write-off or write-down of or any determination to
write off or down any of the Assets and Properties of any Borrower or
any Subsidiary in an aggregate amount for all Borrowers and
Subsidiaries taken together exceeding $50,000.00;
(vii) any acquisition of any Assets and Properties of any
Person or disposition of, or incurrence of a Lien (other than a
Permitted Lien) on, any Assets and Properties of any Borrower or any
Subsidiary;
(viii) any entering into, amendment, modification,
termination (partial or complete) or granting of a waiver under or
giving any consent with respect to any
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Contract with respect to (A) any Contract which is required (or had it
been in effect on the date hereof would have been required) to be
disclosed in the Disclosure Schedule pursuant to Section 3.18(a) or
(B) any material License held by any Borrower;
(ix) any capital expenditures or commitments for additions to
property, plant or equipment of any Borrower or any Subsidiary
constituting capital assets in an aggregate amount for all Borrowers
and Subsidiaries taken together exceeding $50,000.00;
(x) any commencement or termination by any Borrower or any
Subsidiary of any line of business;
(xi) any transaction by any Borrower or any Subsidiary with
any officer, director, Affiliate or Associate of such Borrower or such
Subsidiary, other than pursuant to any Contract in effect on June 30,
1996 or other than pursuant to any contract of employment;
(xii) any entering into of an agreement to do or engage in
any of the foregoing, including without limitation with respect to any
Business Combination not otherwise restricted by the foregoing
paragraphs; or
(xiii) any change in the accounting methods or procedures of
any Borrower or any Subsidiary or any other transaction involving or
development affecting any Borrower or any Subsidiary outside the
ordinary course of business consistent with past practice.
3.10 No Undisclosed Liabilities. Except as reflected or
reserved against in the audited financial statements for the Company's fiscal
year ended June 30, 1996 included in the SEC Documents or in the notes thereto
or as disclosed in Section 3.10 of the Disclosure Schedule, there are no
Liabilities of, relating to or affecting any Borrower or any Subsidiary or any
of their respective Assets and Properties, other than Liabilities incurred in
the ordinary course of business consistent with past practice since June 30,
1996 and other Liabilities which in the aggregate are not material to the
Business or Condition of any Borrower or any Subsidiary and are not for tort or
for breach of contract.
3.11 Taxes. (a) Except as disclosed in Section 3.11 of the
Disclosure Schedule, all Tax Returns required to have been filed by or with
respect to any Borrower or any Subsidiary have been duly filed, and each such
Tax Return correctly and completely reflects, in all material respects, the
income, franchise or other Tax liability and all other information required to
be reported thereon. Except as disclosed in Section 3.11 of the Disclosure
Schedule, all Taxes owed by any Borrower or any Subsidiary have been paid.
(b) Except as disclosed in Section 3.11 of the Disclosure
Schedule, the provisions for Taxes due by each Borrower in the audited
financial statements for the Company's
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fiscal year ended Taxes, being current Taxes not yet due and payable, whether
or not disputed, of each Borrower.
(c) Neither any Borrower nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by a jurisdiction in which any Borrower or any Subsidiary does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(d) Each Borrower and each Subsidiary has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or
other third party.
(e) There is no dispute or claim concerning any Tax liability
of any Borrower or any Subsidiary either (i) claimed or raised by any taxing
authority or (ii) otherwise known to any Borrower or any Subsidiary. Section
3.11 of the Disclosure Schedule indicates those Tax Returns, if any, that have
been audited, and indicates those Returns that currently are the subject of
audit. Each Borrower has delivered to each Lender complete and correct copies
of all federal, state, local and foreign income Tax Returns filed by, and all
Tax examination reports and statements of deficiencies assessed against or
agreed to by, such Borrower or any of its Subsidiaries since the incorporation
of such Borrower.
(f) Neither any Borrower nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Tax assessment or deficiency.
(g) Except as disclosed in Section 3.11 of the Disclosure
Schedule, neither any Borrower nor any Subsidiary has received any written
ruling related to Taxes or entered into any written and legally binding
agreement with a taxing authority relating to Taxes.
(h) Neither any Borrower nor any Subsidiary has liability for
Taxes of any Person other than itself or its Subsidiaries (i) under Section
1.1502-6 of the Treasury regulations (or any similar provision of state, local
or foreign law), (ii) as a transferee or successor, (iii) by Contract or (iv)
otherwise.
(i) Except as disclosed in Section 3.11 of the Disclosure
Schedule, there currently are no limitations on the utilization of the net
operating losses, built-in losses, capital losses, tax credits or other similar
items of any Borrower or any Subsidiary ("Tax Losses") under (i) Section 382 of
the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv)
Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A of the
Treasury regulations or (vi) Section 1.1502-21 and Section 1.1502-21A of the
Treasury regulations, in each case treating any proposed provision as if it
were currently in effect.
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(j) At June 30, 1996, the Company had aggregate Tax Losses
for federal income Tax purposes with expiration dates as disclosed in the SEC
Documents.
3.12 Legal Proceedings. Except as disclosed in Section 3.12
of the Disclosure Schedule, there are no Actions or Proceedings pending or, to
the knowledge of any Borrower and the Subsidiaries, threatened against,
relating to or affecting any Borrower or any Subsidiary or any of their
respective Assets and Properties which (i) could reasonably be expected to
result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements or otherwise
result in a material diminution of the benefits contemplated by this Agreement
or any of the Operative Agreements to any Lender, or (ii) if determined
adversely to any Borrower or any Subsidiary, could reasonably be expected to
result in (x) any injunction or other equitable relief against any Borrower or
any Subsidiary that would interfere in any material respect with its business
or operations or (y) Losses by any Borrower or any Subsidiary, individually, or
in the aggregate with Losses in respect of other such Actions or Proceedings,
in an amount, for all Borrowers and Subsidiaries taken together exceeding
$50,000.00.
3.13 Compliance With Laws and Orders. Except as disclosed in
Section 3.13 of the Disclosure Schedule, neither any Borrower nor any
Subsidiary is or has at any time since its incorporation been, or has received
any notice that it is or has been, in violation of or in default under, in any
material respect, any Law or Order applicable to such Borrower or such
Subsidiary or any of its Assets and Properties.
3.14 Benefit Plans; ERISA. No Borrower nor any Subsidiary
maintains or contributes to any Defined Benefit Plans. Except as disclosed in
Section 3.14 of the Disclosure Schedule:
(a) each Benefit Plan and the administration thereof
complies, and has at all times complied, in all material respects with the
requirements of all applicable Law, including ERISA and the Code;
(b) no Benefit Plan is intended to qualify under section
401(a) of the Code;
(c) no Borrower nor any Subsidiary is now, nor has it at any
time been, a member of a controlled group, as defined in Section 412(n)(6)(B)
of the Code, with any other enterprise;
(d) no Borrower nor any Subsidiary presently maintains or
contributes to, nor has it at any time maintained or contributed to, any
single-employer plan (within the meaning of section 3(41) of ERISA) or any
multiemployer plan (within the meaning of section 3(37) of ERISA) subject to
Title IV of ERISA, and no Borrower nor any Subsidiary is aware of any
circumstances pursuant to which any Borrower or any Subsidiary could have
liability to any party under Title IV of ERISA;
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(e) no Borrower nor any Subsidiary has incurred any liability
for any tax imposed under section 4971 through 4980B of the Code or civil
liability under section 502(i) or (l) of ERISA which could have a material
adverse effect on the Business or Condition of such Borrower or such
Subsidiary;
(f) no Benefit Plan provides health or death benefit coverage
beyond the termination of an employee's employment, except as required by Part
6 of Subtitle B of Title I of ERISA or section 4980B of the Code;
(g) no suit, actions or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities) have been
brought against or with respect to any Benefit Plan; and
(h) all contributions to Benefit Plans that were required to
be made under such Benefit Plans have been made, and all benefits accrued under
any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with GAAP and each Borrower and each Subsidiary has
performed all material obligations required to be performed under all Benefit
Plans.
3.15 Real Property. Neither any Borrower nor any Subsidiary
owns any real property. Subject to the terms of the respective leases under
which any Borrower or Subsidiary leases any parcel of real property, each
Borrower and each Subsidiary has a valid and subsisting leasehold estate in and
the right to quiet enjoyment of the real properties leased by it for the full
term of the lease thereof. Each such lease is a legal, valid and binding
agreement, enforceable in accordance with its terms, of a Borrower or a
Subsidiary and of each other Person that is a party thereto, and except as set
forth in Section 3.15(c) of the Disclosure Schedule, there is no, and neither
any Borrower nor any Subsidiary has received notice of any, default (or any
condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder. Neither any Borrower nor any Subsidiary owes
any brokerage commissions with respect to any such leased space. Except as
disclosed in Section 3.15 of the Disclosure Schedule, the improvements on the
real property leased by any Borrower or any Subsidiary are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of the Borrowers and the
Subsidiaries, there are no condemnation or appropriation proceedings pending or
threatened against any of such real property or the improvements thereon.
3.16 Tangible Personal Property. Each Borrower and each
Subsidiary is in possession of and has good and marketable title to, or has
valid leasehold interests in or valid rights under Contract to use, all
tangible personal property used in the conduct of its business, including all
tangible personal property reflected on the audited financial statements for
the Company's fiscal year ended June 30, 1996 included in the SEC Documents or
in the notes thereto and tangible personal property acquired since June 30,
1996 other than property disposed of since such date in the ordinary course of
business consistent with past practice. All such
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tangible personal property is free and clear of all Liens, other than Permitted
Liens and Liens disclosed in Section 3.16 of the Disclosure Schedule, and is
adequate and suitable for the conduct by each Borrower and each Subsidiary of
the business presently conducted by each of them, and is in good working order
and condition, ordinary wear and tear excepted, and its use complies in all
material respects with all applicable Laws.
3.17 Intellectual Property Rights. Except as disclosed in
Section 3.17 of the Disclosure Schedule, (i) a Borrower or a Subsidiary, as the
case may be, has the right to use all Intellectual Property used in its
business, (ii) all registrations, on behalf of such Borrower or such Subsidiary
with, and applications to, Governmental or Regulatory Authorities in respect of
such Intellectual Property are valid and in full force and effect and are not
subject to the payment of any Taxes or maintenance fees or the taking of any
other actions by such Borrower or such Subsidiary, as the case may be, to
maintain their validity or effectiveness, (iii) there are no restrictions on
the direct or indirect transfer of any license, or any interest therein, held
by such Borrower or such Subsidiary, as the case may be, in respect of such
Intellectual Property, (iv) the Borrowers have delivered to each Lender
documentation with respect to any invention, process, design, computer program
or other know-how or trade secret included in such Intellectual Property, which
documentation is accurate in all material respects and reasonably sufficient in
detail and content to identify and explain such invention, process, design,
computer program or other know-how or trade secret, (v) the Borrowers and the
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their trade secrets, (vi) neither any Borrower nor
any Subsidiary is, or has received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property and (vii) neither any Borrower nor
any Subsidiary has any knowledge that such Intellectual Property is being
infringed by any other Person. Neither any Borrower nor any Subsidiary has
received notice that any Borrower or any Subsidiary is infringing any
Intellectual Property of any other Person, no claim is pending or, to the
knowledge of the Borrowers and the Subsidiaries, has been made to such effect
and, to the knowledge of the Borrowers and the Subsidiaries, neither any
Borrower nor any Subsidiary is infringing any Intellectual Property Rights of
any other Person.
3.18 Contracts. (a) Each Contract material to the business of
any Borrower is in full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 3.18(a) of the Disclosure Schedule
neither any Borrower, any Subsidiary nor, to the knowledge of the Borrowers and
the Subsidiaries, any other party to such Contract is, or has received notice
that it is, in violation or breach of or default under any such Contract (or
with notice or lapse of time or both, would be in violation or breach of or
default under any such Contract).
(b) Except as disclosed in Section 3.18(b) of the Disclosure
Schedule, neither any Borrower nor any Subsidiary is a party to or bound by any
Contract that has been or could reasonably be expected to be, individually or
in the aggregate with any other such Contracts, materially adverse to the
Business or Condition of such Borrower or such Subsidiary.
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3.19 Licenses. Each Borrower and each Subsidiary owns or
validly holds all Licenses that are material to its business or operations,
each of which is valid, binding and in full force and effect. Neither any
Borrower nor any Subsidiary is, or has received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any such License.
3.20 Insurance. The insurance policies of each Borrower and
each Subsidiary, in light of the respective business, operations and Assets and
Properties of the Borrowers and the Subsidiaries, are in amounts and have
coverages that are reasonable and customary for Persons engaged in such
businesses and operations and having such Assets and Properties. Neither any
Borrower nor any Subsidiary has received notice that any insurer under any
policy referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.
3.21 Affiliate Transactions. (a) Except as disclosed in the
SEC Documents or in Section 3.21(a) of the Disclosure Schedule, (i) there are
no Liabilities between any Borrower or any Subsidiary, on the one hand, and any
officer, director, Affiliate or Associate of any Borrower or any Subsidiary or
any Associate of any such officer, director or Affiliate (other than any
Borrower or any Subsidiary), on the other, (ii) no such officer, director,
Affiliate or Associate provides or causes to be provided any assets, services
or facilities to any Borrower or any Subsidiary, (iii) neither any Borrower nor
any Subsidiary provides or causes to be provided any assets, services or
facilities to any such officer, director, Affiliate or Associate and (iv)
neither any Borrower nor any Subsidiary beneficially owns, directly or
indirectly, any Investment Assets of any such officer, director, Affiliate or
Associate.
(b) Except as disclosed in Section 3.21(b) of the Disclosure
Schedule, each of the Liabilities and transactions listed in Section 3.21(a) of
the Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis on competitive terms.
3.22 Employees; Labor Relations. Except as disclosed in
Section 3.22 of the Disclosure Schedule, (i) no employee of any Borrower or any
Subsidiary is presently a member of a collective bargaining unit and, to the
knowledge of the Borrowers and the Subsidiaries, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
employees of any Borrower or any Subsidiary, and (ii) no unfair labor practice
complaint or sex or age discrimination claim has been brought against any
Borrower or any Subsidiary before the National Labor Relations Board or any
other Governmental or Regulatory Authority. There has been no work stoppage,
strike or other concerted action by employees of any Borrower or any
Subsidiary. Each Borrower and each Subsidiary has complied in all material
respects with all applicable Laws relating to the employment of labor,
including without limitation those relating to wages, hours and collective
bargaining.
3.23 Environmental Matters. Each Borrower and each Subsidiary
has obtained all Licenses which are required in respect of its business,
operations or Assets and Properties
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under applicable Environmental Laws. Each Borrower and each Subsidiary, and its
operations and properties, is and has been in compliance in all material
respects with the terms and conditions of all such Licenses and with any
applicable Environmental Law. Except as set forth in Section 3.23 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) No Order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
knowledge of the Borrowers and the Subsidiaries, threatened by any Governmental
or Regulatory Authority with respect to any alleged failure by any Borrower or
any Subsidiary to have any License under Environmental Laws required in
connection with the conduct of the business or operations of any Borrower or
any Subsidiary or with respect to any treatment, storage, recycling,
transportation, disposal or "release" as defined in 42 U.S.C. Section 9601(22)
("Release"), of any Hazardous Material, and neither any Borrower nor any
Subsidiary is aware of any facts or circumstances which could reasonably be
expected to form the basis for any such Order, complaint, penalty or
investigation.
(b) There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to their knowledge, threatened
against any Borrower or any Subsidiary pursuant to Environmental Laws which
could reasonably be expected to result in a fine, penalty or other obligation,
cost or expense.
(c) Neither any Borrower, any Subsidiary nor, to the
knowledge of the Borrowers and the Subsidiaries, any prior owner or lessee of
any property now or previously owned or leased by any Borrower or any
Subsidiary has handled any Hazardous Material on any property now or previously
owned or leased by any Borrower or any Subsidiary.
(d) Neither any Borrower nor any Subsidiary has transported
or arranged for the transportation of any Hazardous Material to any location
which is the subject of any Action or Proceeding that could lead to claims
against any Lender, any Borrower or any Subsidiary for clean-up costs, remedial
work, damages to natural resources or personal injury claims, including, but
not limited to, claims under CERCLA.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of any Borrower or any
Subsidiary and, to the knowledge of the Borrowers and the Subsidiaries, no
property now or previously owned or leased by any Borrower or any Subsidiary is
listed or proposed for listing on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring
investigation or clean-up.
3.24 Suppliers. Section 3.24 of the Disclosure Schedule lists
the ten (10) largest suppliers of the Borrowers and the Subsidiaries, on the
basis of cost of goods or services purchased for the most recent fiscal year.
Except as disclosed in Section 3.24 of the Disclosure Schedule, no such
supplier has ceased or materially reduced its sales or provision of services to
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any Borrower or any Subsidiary since June 30, 1996, or to the knowledge of the
Borrowers and the Subsidiaries, has threatened to cease or materially reduce
such sales or provision of services after the date hereof. Except as disclosed
in Section 3.24 of the Disclosure Schedule, to the knowledge of the Borrowers
and the Subsidiaries, no such supplier is threatened with bankruptcy or
insolvency.
3.25 Inventory. All items included in the inventory of the
Borrowers and the Subsidiaries are the property of the Borrowers and the
Subsidiaries, free and clear of any Lien other than Permitted Liens, have not
been pledged as collateral, are not held by the Borrowers or any Subsidiary on
consignment from others in any material amount and conform in all material
respects to all standards applicable to such inventory or its use or sale
imposed by Governmental or Regulatory Authorities.
3.26 Registration Rights. Except for the Registration Rights
Agreement, no Borrower and no Subsidiary has granted registration rights to any
holder of any of the securities of such Borrower or such Subsidiary.
3.27 Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Borrowers
directly with the Lenders without the intervention of any Person on behalf of
the Borrowers in such manner as to give rise to any valid claim by any Person
against any Lender, any Borrower or any Subsidiary for a finder's fee,
brokerage commission or similar payment.
3.28 New York City Advanced Technology Company; Small
Business Matters. Each of the Borrowers as a group is a New York City Advanced
Technology Company. Each Borrower, together with its "affiliates" (as that term
is defined in 13 CFR, Section 121.401), is a "Small Business" within the meaning
of the SBA Regulations, including 13 CFR Section 121.103. The Standard
Industrial Classification Code of each Borrower is 7999. The information
regarding each Borrower and its affiliates set forth in the SBA Form 480, Form
652 and Section A of Form 1031 is accurate and complete. Copies of such forms
shall have been completed by the Borrowers and delivered to Prospect at the
Closing. No Borrower nor any Subsidiary presently engages in any activities for
which an SBIC is prohibited from providing funds by SBA Regulations, including
13 CFR Section 107.804 and Section 107.901. No Borrower has received any
"Financing" (as defined in the SBA Regulations) from any SBIC, other than
Prospect.
3.29 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. The offer and sale of the Senior Notes and
the Warrants (and any shares of Common Stock issuable upon exercise of the
Warrants) made pursuant to this Agreement is exempt from the registration
requirements of the Securities Act. No Borrower nor any Person authorized to
act on its behalf has, in connection with the offering of the Senior Notes or
Warrants (and any shares of Common Stock issuable upon exercise of the
Warrants), engaged in (A) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 501(c) under
the Securities Act, (B) any action involving a public offering
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within the meaning of section 4(2) of the Securities Act, or (C) any action
that would require the registration under the Securities Act of the offering
and sale of the Senior Notes or Warrants (and any shares of Common Stock
issuable upon exercise of the Warrants) pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws. No Borrower has
made, nor will it make, directly or indirectly, any offer or sale of Senior
Notes or Warrants (or any shares of Common Stock) or of securities of the same
or a similar class as the Senior Notes or the Warrants (or Common Stock) if as
a result the offer and sale of the Senior Notes or the Warrants (or Common
Stock) contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Securities Act. As used herein, the terms
"offer" and "sale" have the meanings specified in Section 2(3) of the
Securities Act.
3.30 No Default. No event has occurred and is continuing
which constitutes a Potential Event of Default or an Event of Default.
3.31 Use of Proceeds; Margin Stock. The proceeds of the Loans
will be used solely for the purposes specified in Section 3.31 of the
Disclosure Schedule. None of such proceeds will be used to, or to reduce or
retire any Indebtedness which was originally incurred to, purchase or carry a
Margin Stock, or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of Regulations G, T or X. No Borrower has
taken or will take any action which might cause this Agreement or any of the
Operative Agreements to violate Regulations G, T or X, or any other regulations
of the Board of Governors of the Federal Reserve System or to violate Section 8
of the Exchange Act or any rule or regulation thereunder, in each case as now
in effect or as the same may hereafter be in effect.
3.32 Investment Company Act. No Borrower is an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.33 Public Utility Holding Company Act. No Borrower is a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
3.34 Finacial Condition. No Borrower is entering into the
arrangements contemplated by this Agreement and the other Operative Agreements
with actual intent to hinder, delay or defraud either present or future
creditors. On and as of the Closing Date and on and as of the date of each
Additional Borrowing, after giving effect to all debts incurred or to be
created in connection herewith:
(a) The present fair salable value of the assets of each
Borrower and each Subsidiary (on a going concern basis) will exceed the
probable respective Liabilities of such Borrower and such Subsidiary;
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(b) No Borrower or Subsidiary has incurred, nor does it
intend to or believe that it will incur, Liabilities beyond its ability to pay
such Liabilities as such Liabilities mature (taking into account the timing and
amounts of cash to be received from any source, and of amounts to be payable on
or in respect of Liabilities), and the amount of cash available to such
Borrower or Subsidiary after taking into account all other anticipated uses of
funds is anticipated to be sufficient to pay all such amounts on or in respect
of Liabilities, when such amounts are required to be paid; and
(c) Each Borrower and each Subsidiary will have sufficient
capital with which to conduct its present and proposed business and the
respective property of such Borrower and Subsidiary does not constitute
unreasonably small capital with which to conduct its present or proposed
business.
3.35 Senior Credit Documents. The Borrowers have delivered to
the each Lender true and correct copies of the Senior Credit Documents as in
effect on the date hereof. The representations and warranties of the Borrowers
contained in the Senior Credit Agreement are true and correct in all material
respects. There exists no defaults with respect to the Senior Credit Agreement
nor any basis for the exercise by any party thereto of any rights of
acceleration, cancellation, or recession or any rights of offset.
3.36 Disclosure. To the knowledge of each Borrower and each
Subsidiary, all material facts regarding the Business or Condition of each
Borrower and each Subsidiary have been disclosed to the Lenders in or in
connection with this Agreement. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to any Lenders pursuant to any
provision of this Agreement (including without limitation the SEC Documents and
the financial statements contained therein), contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE IV
CONDITIONS TO INITIAL LOANS
The obligations of each Lender to make Initial Loans
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by the Lenders in their sole discretion):
4.1 Borrowing Certificate. Each Lender shall have received a
Borrowing Certificate as required by Section 2.3.
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4.2 Representations and Warranties. Each of the
representations and warranties made by any Borrower in this Agreement (other
than those made as of a specified date earlier than the Closing Date) shall be
true and correct in all material respects (if not qualified by materiality or
material adverse effect) and in all respects (if qualified by materiality or
material adverse effect) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects (if not
qualified by materiality or material adverse effect) and in all respects (if
qualified by materiality or material adverse effect) on and as of such earlier
date.
4.3 Performance. Each Borrower shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by
such Borrower at or before the Closing.
4.4 Secretary's Certificate. Each Borrower shall have
delivered to each Lender a certificate, dated the Closing Date and executed by
the Secretary or any Assistant Secretary of such Borrower, substantially in the
form and to the effect of Exhibit G hereto.
4.5 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated by
this Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to any Lender, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action (i) which could reasonably be
expected to result in the issuance of any such Order or the enactment,
promulgation or deemed applicability to, any Lender, any Borrower, or the
transactions contemplated by this Agreement or any of the Operative Agreements
of any such Law; or (ii) wherein an unfavorable judgment, decree or Order would
prevent the carrying out of this Agreement or any of the transactions or events
contemplated hereby, declare unlawful the transactions or events contemplated
by this Agreement or present a risk of damages to any Lender.
4.6 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit any Lender or any Borrower to perform
its obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to each Lender, (c) shall not impose any limitations or
restrictions on any Lender, (d) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (e) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements shall
have occurred.
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4.7 Third Party Consents. The consents (or in lieu thereof
waivers) disclosed in Section 4.6 of the Disclosure Schedule, and all other
consents (or in lieu thereof waivers) to the performance by any Lender or any
Borrower of its obligations under this Agreement and the Operative Agreements
or to the consummation of the transactions contemplated hereby and thereby as
are required under any Contract to which any Lender or any Borrower is a party
or by which any of their respective Assets and Properties are bound and where
the failure to obtain any such consent (or in lieu thereof waiver) could
reasonably be expected, individually or in the aggregate with other such
failures, to materially adversely affect any Lender or the Business or
Condition of any Borrower or otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement and the Operative
Agreements to any Lender, (a) shall have been obtained, (b) shall be in form
and substance reasonably satisfactory to each Lender, (c) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived and
(d) shall be in full force and effect.
4.8 Opinion of Counsel. The Lenders shall have received the
opinion of Rosenman & Colin, counsel to the Borrowers, dated the Closing Date,
substantially in the form of Exhibit H hereto.
4.9 Good Standing Certificates. The Borrowers shall have
delivered to each Lender (a) copies of the certificates or articles of
incorporation (or other comparable corporate charter documents), including all
amendments thereto, of each Borrower certified by the Secretary of State or
other appropriate official of the jurisdiction of incorporation of such
Borrower, (b) certificates from the Secretary of State or other appropriate
official of the respective jurisdictions of incorporation to the effect that
each of the Borrowers is in good standing or subsisting in such jurisdiction,
listing all charter documents of each Borrower on file, and (c) a certificate
from the Secretary of State or other appropriate official in each jurisdiction
in which any Borrower is qualified or admitted to do business to the effect
that such Borrower is duly qualified or admitted and in good standing in such
jurisdiction.
4.10 UCC Filing Searches. The Borrowers shall have delivered
to the Lenders the results of Uniform Commercial Code filing searches made with
respect to each Borrower in the jurisdictions in which any Assets and
Properties of any Borrower are located, together with copies of financing
statements disclosed by such searches and such searches shall disclose no Liens
on any such Assets and Properties other than Permitted Liens.
4.11 Operative Agreements. Each Operative Agreement shall
have been duly executed and delivered by the respective parties thereto other
than the Lenders and shall be in full force and effect.
4.12 Issuance of Notes. Each Borrower shall have issued
Senior Notes to each Lender as required by Section 2.4(a).
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4.13 Issuance of Warrants; Listing of Common Stock. The
Company shall have issued Warrants to each Lender to purchase shares of Company
Common Stock at the rate of one (1) share of Company Common Stock for each
$10.25 in aggregate principal amount of Senior Notes issued by the Borrowers to
such Lender hereunder (subject to appropriate adjustment for stock splits,
stock dividends, recapitalizations, reorganizations and similar events). The
Company shall have received approval for the listing of all shares of Common
Stock issuable upon exercise of the maximum number of Warrants issuable
hereunder on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ").
4.14 Interest on Demand Note. All accrued and unpaid interest
on the Demand Note shall have been paid in full in cash to Prospect as provided
in Section 2.2(b).
4.15 Certain Expenses. Prospect shall have received from the
Borrowers a nonrefundable $60,000 closing fee. The Lenders shall have received
from the Borrowers payment of all out-of-pocket expenses incurred by any Lender
in connection with this Agreement and the Note Purchase Agreement and the
transactions contemplated hereby and thereby. The Borrowers shall not be
obligated to pay the costs and expenses of Lenders' counsel in connection with
the negotiation, execution and delivery of this Agreement and the Note Purchase
Agreement in excess of $40,000 in the aggregate.
4.16 Potential Event of Default; Event of Default. No event
shall have occurred and be continuing or would result from the consummation of
the Borrowing contemplated by the Borrowing Certificate which would constitute
a Potential Event of Default or an Event of Default.
4.17 Additional Matters. All corporate and other proceedings
to be taken on the part of any Borrower in connection with the transactions
contemplated by this Agreement and the Operative Agreements and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Lender, and each Lender shall have received copies of all such documents, legal
opinions and other evidences in respect of any aspect or consequence of any
transaction contemplated hereby or thereby as it shall reasonably request.
ARTICLE V
CONDITIONS TO EACH ADDITIONAL LOAN
The obligations of the Additional Lenders to make Additional
Loans hereunder are subject to the fulfillment of each of the following
conditions on each respective Additional Borrowing Date (all or any of which
may be waived in whole or in part by the Additional Lenders in their sole
discretion):
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5.1 Borrowing Certificate. Each Additional Lender shall have
received a Borrowing Certificate as required by Section 2.3.
5.2 Representations and Warranties. Each of the
representations and warranties made by any Borrower in this Agreement (other
than those made as of a specified date earlier than the Additional Borrowing
Date) shall be true and correct in all material respects (if not qualified by
materiality or material adverse effect) and in all respects (if qualified by
materiality or material adverse effect) on and as of the Additional Borrowing
Date as though each representation or warranty was made on and as of such date,
and any representation or warranty made as of a specified date earlier than the
Additional Borrowing Date shall also have been true and correct in all material
respects (if not qualified by materiality or material adverse effect) and in
all respects (if qualified by materiality or material adverse effect) on and as
of such earlier date.
5.3 Issuance of Notes. Each Borrower shall have issued Senior
Notes to each Additional Lender as required by Section 2.4(a).
5.4 Issuance of Warrants; Listing of Common Stock. The
Company shall have issued Warrants to each Additional Lender to purchase shares
of Company Common Stock at the rate of one (1) share of Company Common Stock
for each $10.25 in aggregate principal amount of Senior Notes issued by the
Borrowers to such Additional Lender hereunder (subject to appropriate
adjustment for stock splits, stock dividends, recapitalizations,
reorganizations and similar events). The Common Stock required to be listed
pursuant to Section 4.13 shall continue to be listed on the NASDAQ.
5.5 Compliance; No Default. Each Borrower and each Subsidiary
shall be in compliance with all the terms and provisions set forth herein and
in each other Operative Agreements on its part to be observed or performed, and
at the time of and immediately after the Additional Borrowing, no Potential
Event of Default or Event of Default shall have occurred and be continuing.
5.6 Effect of Each Additional Borrowing. Each Additional
Borrowing shall be deemed to constitute a representation and warranty by each
Borrower on the Additional Borrowing Date as to the matters specified in
Sections 5.2 and 5.5.
5.7 Additional Matters. All corporate and other proceedings
to be taken on the part of any Borrower and any Subsidiary in connection with
the transactions contemplated by this Agreement and the Operative Agreements
and all documents incident thereto shall be reasonably satisfactory in form and
substance to each Additional Lender and each Additional Lender shall have
received copies of all such documents, legal opinions and other evidences in
respect of any aspect or consequence of any transactions contemplated hereby or
thereby as it shall reasonably request.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees with each Lender that,
with respect to Sections 6.1 through 6.9 and Section 6.11, at all times during
the Investment Period and, with respect to Section 6.10, at all times during
the Loan Period, each Borrower will, and will cause each of its Subsidiaries
to, comply with each of the covenants and agreements contained in this Article
VI.
6.1 Financial Statements and Reports; Inspection. As promptly
as practicable, and in no event later than the presentation of the following
materials to the Company's management or the filing thereof with the SEC, the
Company will deliver to the Purchaser true and complete copies of all reports
filed with the SEC and all such other financial statements, reports and
analyses as may be prepared or received by the Company, any Borrower or any
Subsidiary relating to the business or operations of the Company, any Borrower
or any Subsidiary or as any Lender may otherwise reasonably request. Each
Borrower will furnish Prospect with the following information certified by such
Borrower's chief executive officer, president, treasurer or chief financial
officer within 120 days after and as at the close of each fiscal year of such
Borrower: (i) a statement that such Borrower and its "affiliates" (within the
meaning ascribed thereto in 13 CFR Section 121.103) is eligible for Financing
under the SBIC Regulations and (ii) a statement verifying the use of the
proceeds received hereunder (including the intended use of any such unused
proceeds as of the date of such certification), until all of the proceeds
received hereunder have been used by the Borrowers. At the request of Prospect,
each Borrower will permit Prospect and/or the SBA and/or any Person designated
by Prospect to inspect any of the properties, corporate books and financial
records of any Borrower and its Subsidiaries, to discuss their respective
affairs and finances with the responsible officers of such Borrower and its
Subsidiaries and to make extracts from the copies of such books and records, all
at such time as Prospect may reasonably request, including, but not limited to,
for purpose of verifying information provided to Prospect and required by
the SBA.
6.2 Corporate Existence; Compliance. Each Borrower shall
cause to be done all things necessary to preserve and keep in full force and
effect the corporate existence of such Borrower and each of its Subsidiaries
and all necessary approvals and licenses of any Governmental or Regulatory
Authority and comply with all Laws applicable to such Borrower or any such
Subsidiary and comply with all agreements to which any Borrower or any such
Subsidiary is a party, the violation of which could reasonably be expected to
result in a material adverse change in the Business or Condition of such
Borrower or such Subsidiary.
6.3 Payment of Liabilities. Each Borrower shall, and shall
cause each of its Subsidiaries to, pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all
Liabilities (including Taxes) of such Borrower and such Subsidiaries, except
where the amount or validity thereof is currently being contested in good
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faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of such Borrower. The Borrowers
shall also pay any New York State Real Estate Transfer Tax, New York City Real
Property Transfer Tax and New York Stock Transfer Tax ("Transfer Tax") and any
similar Taxes imposed by any other state (and any penalties or interest
relating to such Transfer Taxes), which become payable in connection with the
transactions contemplated by this Agreement, the Note Purchase Agreement, any
Operative Agreement, the Senior Notes, the Demand Notes or the Warrants and
cooperate with the Lenders in the preparation, execution and filing of any
required returns with respect to any Transfer Tax and in the determination of
the portion of the consideration allocable to real property in New York State
or New York City (or in any other jurisdiction, if applicable).
6.4 Insurance; Maintenance of Properties. Each Borrower shall
keep adequately insured by duly licensed insurers all Assets and Properties of
such Borrower and each Subsidiary of such Borrower, and also keep such Borrower
or such Subsidiary, as the case may be, adequately insured at all times with
responsible insurance carriers against liability on account of damage to
persons or property and under all applicable workers' compensation laws. All
such insurance shall be in such amounts and with such coverage as is consistent
with coverage usually carried by corporations of a similar size engaged in the
same or similar business similarly situated and as is reasonably satisfactory
to each Lender. Each Borrower shall maintain and preserve all of the Assets and
Properties of such Borrower and any Subsidiary of such Borrower necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.
6.5 Notice of Certain Events. Each Borrower shall promptly
notify each Lender in writing (i) of the commencement of any Action or
Proceeding to which such Borrower or any Subsidiary of such Borrower is a party
where the amount in controversy is in excess of $100,000, singularly or
cumulatively, for all claims arising from a single incident, to which such
Borrower or any such Subsidiary may be a party and (ii) of any Potential Event
of Default or Event of Default specifying the nature and extent thereof and the
action (if any) which is proposed to be taken with respect thereto.
6.6 Economic Impact Information. Promptly after the end of
each fiscal year (but in any event prior to January 31 of each year), each
Borrower shall deliver to Prospect a written assessment of the economic impact
of Prospect's investment in such Borrower, specifying the full-time equivalent
jobs created or retained in connection with the investment, the impact of such
investment on the businesses of such Borrower and its Subsidiaries in terms of
revenue and profits of such Borrower's and such Subsidiaries' business and on
taxes paid by such Borrower and its Subsidiaries and their respective
employees.
6.7 New York City Advanced Technology Company. The Borrower
shall remain qualified as a New York City Advanced Technology Company; provided
that a Borrower shall not be required to comply with this Section 6.7 at any
time (i) after twenty-four (24) months from the date of the Closing if such
Borrower determines in its reasonable judgment that such
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continued compliance would materially adversely affect the Business or
Condition of such Borrower, and has given thirty (30) days prior written notice
of such determination to Prospect, (ii) after any class of securities of such
Borrower have become publicly traded securities, or (iii) that a written
request by such Borrower to Prospect to permit such Borrower to cease to comply
with this section shall have been approved by a majority of the members of
Prospect's Advisory Board.
6.8 Reservation of Shares; Exchange of Securities. The
Company will, for so long as any Lender has any rights to exercise any Warrant,
keep reserved the full number of shares of Common Stock issuable upon exercise
of the Warrants. In the event that Prospect determines, in its sole discretion,
that a Regulatory Problem may otherwise exist, Prospect shall have the right to
require the Company to take all steps as may be necessary to permit, as soon as
practicable, all or part of any voting securities held by Prospect to be
converted into non-voting securities of the Company, which securities, at the
option of Prospect, would be convertible into such voting securities originally
held by Prospect.
6.9 Venture Capital Operating Company Status. Each Lender
shall have the right to consult with and advise the management of each Borrower
and to receive all materials provided to members of the board of directors of
each Borrower so long as may be required to enable each Lender to qualify as a
"venture capital operating company" within the meaning of Section 2510.3-101 of
the plan asset regulations promulgated by the United States Department of Labor
("VCOC"). In addition, in the event that (i) any Lender is not entitled to
designate at least one (1) member for election to the board of directors of
each Borrower, or (ii) the United States Department of Labor through formal or
informal rules, regulations or interpretations provides, or it is otherwise
established through governmental or court action, that such representation does
not constitute the exercise of management rights of the kind necessary to
enable such Investor to continue to qualify as a VCOC, then the Borrowers and
such Lender shall in good faith negotiate provisions to enable such Lender to
exercise the minimum amount of such management rights in order to continue to
qualify as a VCOC.
6.10 Subsidiaries. Each Borrower shall cause each Subsidiary
of such Borrower not a Borrower hereunder, immediately upon becoming a
Subsidiary, to enter into a Subsidiary Guarantee as Guarantor thereunder. Each
Borrower shall, and shall cause each Subsidiary of such Borrower to, enter into
an Indemnity, Subrogation and Contribution Agreement will respect to each
Subsidiary Guarantor.
6.11 Further Assurances. Each Borrower shall, and shall cause
each Subsidiary to, take such further actions and otherwise assist and
cooperate with each Lender required to make any filings or obtain any approvals
with or from any Governmental or Regulatory Authority, including obtaining any
approval as may be necessary in order to effect the exercise of any Warrant.
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ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees with each Lender that,
with respect to Sections 7.14 and 7.15, at all times during the Investment
Period and, with respect to Sections 7.1 through 7.13, at all times during the
Loan Period, each Borrower will, and will cause each of its Subsidiaries to,
comply with each of the covenants and agreements contained in this Article VII.
7.1 Indebtedness. No Borrower shall, nor shall it permit any
of its Subsidiaries to, directly or indirectly create, incur, assume, extend
the maturity of, or otherwise become directly or indirectly liable with respect
to, any Indebtedness other than, without duplication:
(i) Indebtedness under this Agreement;
(ii) Indebtedness under the Independent Credit
Agreement in an aggregate amount not to exceed $4,000,000 at any one time
outstanding;
(iii) Indebtedness constituting Capital Lease
Obligations; and
(iv) as an endorser of negotiable instruments for the
payment of money deposited to such Borrower's or such Subsidiary's bank account
for collection in the ordinary course of business.
7.2 Liens. Other than Permitted Liens, no Borrower shall, nor
shall it permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume or permit to exist any Lien upon or with respect to any of its
Assets and Properties, whether now owned hereafter acquired or any income or
profits therefrom, or assign or otherwise convey any right to receive income to
secure any Indebtedness, except for Liens (other than Permitted Liens) securing
Indebtedness of up to an aggregate amount of $250,000 at any time outstanding
for all Borrowers and Subsidiaries taken together.
7.3 Merger, Consolidation, Sale of Assets. No Borrower will,
nor will it permit any of its Subsidiaries to, voluntarily liquidate or
dissolve, or consolidate or merge with or into any other Person, or permit any
other Person to consolidate with or merge with or into it or participate in a
share exchange with or sell, lease, transfer, contribute or otherwise dispose
of any of its Assets and Properties to any other Person (other than sales of
inventory and worn out and obsolete assets in the ordinary course of business
as such business is conducted in compliance with Section 7.14), except that,
subject in any event to compliance with the last paragraph of this Section:
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(a) any Borrower (other than the Company) may consolidate
with or merge into any other Borrower; any Subsidiary Guarantor may consolidate
with or merge into any other wholly-owned Subsidiary Guarantor if a
wholly-owned Subsidiary Guarantor shall be the continuing or surviving
corporation; any Subsidiary Guarantor may consolidate with or merge into any
Borrower if such Borrower shall be the continuing or surviving corporation; and
(b) any Borrower (other than the Company) may sell, lease,
transfer, contribute or otherwise dispose of its Assets and Properties in whole
or in part to any other Borrower; any Subsidiary Guarantor may sell, lease,
transfer, contribute or otherwise dispose of its Assets and Properties in whole
or in part to any other wholly-owned Subsidiary Guarantor or to any Borrower,
and may, following any such disposition in whole, liquidate and dissolve.
No liquidation, dissolution, consolidation, merger, sale,
lease, transfer, contribution or other disposition referred to in clauses (a)
and (b) of this Section 7.3 shall be permitted unless at the time of and
immediately after giving effect to any such transaction no Potential Event of
Default or Event of Default shall have occurred.
7.4 Lease Obligations. No Borrower shall, except for real
property leases requiring annual lease payments not exceeding $250,000 in the
aggregate, create or suffer to exist or permit any Subsidiary to create or
suffer to exist, any obligations for the payment of rental for any property
under leases or agreements to lease having a term of one year or more.
7.5 Loans and Investments. No Borrower shall, nor shall it
permit any of its Subsidiaries to, hold any Investment Assets, or make or keep
outstanding any advance or loans, except that (i) the Borrowers and the
Subsidiaries may invest in (i) direct obligations of, obligations fully
guaranteed by, and repurchase agreements fully secured by, the United States of
America or any agency thereof, (ii) certificates of deposit of any commercial
bank which is a member of the Federal Reserve System, (iii) money market
accounts or other similar low-risk, liquid investments approved by the board of
directors of such Borrower or such Subsidiary, as the case may be, and (iv) any
Borrower and any Subsidiary may make loans or advances to any wholly-owned
Subsidiary of such Borrower or such Subsidiary, provided, that such Subsidiary
is either a Borrower or a Subsidiary Guarantor at the time of such loan.
7.6 Dividends, Etc. Except for the contemplated repurchase by
the Company of up to 300,000 shares of Common Stock pursuant to the plan
adopted by the Company on March 21, 1996, no Borrower shall, nor shall it
permit any of its Subsidiaries to, declare or pay any cash or asset dividend on
any of its shares or make any other distribution or disposition of any Assets
and Properties to stockholders in respect of its shares (or otherwise), or
make, or commit to make, any payment on account of the purchase, redemption or
other retirement of any of its shares or warrants or options therefor, except
that any wholly-owned Subsidiary of any Borrower or any Subsidiary may declare
and pay dividends to such Borrower or such Subsidiary.
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7.7 Subsidiaries. No Borrower shall, nor shall it permit any
of its Subsidiaries to, unless prior written notice has been given to the
Required Lenders, organize or cause to exist any Subsidiary.
7.8 Sale and Leaseback. No Borrower shall, nor shall it
permit any of its Subsidiaries to, enter into any arrangement with any Person
providing for the leasing by such Borrower or such Subsidiary of real or
personal property which has been or is to be sold or transferred by such
Borrower or such Subsidiary to such Person.
7.9 Charter Documents; Directors. No Borrower shall, nor
shall it permit any of its Subsidiaries to, amend the certificate of
incorporation or by-laws of such Borrower or such Subsidiary as in effect on
the date hereof (or, in the case of any future Subsidiary, the date of
incorporation of such Subsidiary) or change the size or composition of such
Borrower's or such Subsidiary's board of directors, except as permitted
pursuant to the Stock Purchase Agreement and the certificate of incorporation
of the Company.
7.10 Certain Limitations. No Borrower shall, nor shall it
permit any of its Subsidiaries to, directly or indirectly, create or otherwise
cause or allow to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (i) pay dividends or make any
other distributions on its capital stock or any other interest or participation
in, or measured by, its profits owned by, or pay any Indebtedness owed to, such
Borrower or such Subsidiary, (ii) make loans or advances to such Borrower or
such Subsidiary or (iii) transfer any of its Assets and Properties to such
Borrower or such Subsidiary. No Borrower shall, nor shall it permit any of its
Subsidiaries to, enter into any agreement with any Person other than (i) the
Lenders pursuant to this Agreement or any Operative Agreement and (ii) the
Senior Lender pursuant to the Senior Credit Documents, which prohibits or
limits the ability of such Borrower or such Subsidiary to create, incur, assume
or suffer to exist any Lien upon any of the Assets and Properties or revenues
of such Borrower or such Subsidiary, whether now owned or hereafter acquired.
7.11 Conflicting Agreements. No Borrower shall, nor shall it
permit any of its Subsidiaries to, enter into any agreements or arrangements
which by their terms or reasonably foreseeable effect restricts or adversely
affects such Borrower's or such Subsidiary's right and ability to meet its
obligations to any Lender hereunder or under any of the Operative Agreements to
which it is a party.
7.12 Use of Proceeds. No Borrower shall, directly or
indirectly, use any of the proceeds received from the Lenders hereunder to
engage in any activities with respect to which an SBIC is prohibited from
providing funds by SBA Regulations, including without limitation 13 CFR
Section 107.720.
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7.13 Affiliate Transactions. Except for loans at market
interest rates made by any Borrower or any Subsidiary to officers and directors
of such Borrower or Subsidiary in an aggregate principal amount not to exceed
$250,000 (unless a higher amount is approved in writing by the Required
Lenders) for all Borrowers and Subsidiaries taken together, no Borrower shall,
nor shall it permit any of its Subsidiaries to, enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate (other than any
Lender), unless such transaction is (i) otherwise permitted under this
Agreement, (ii) in the ordinary course of such Borrower's or such Subsidiary's
business and (iii) upon fair and reasonable terms no less favorable to such
Borrower or such Subsidiary than it would obtain in a comparable arm's length
transaction with a Person that is not an Affiliate.
7.14 Change in Nature of Business. No Borrower shall engage,
nor shall it permit any of its Subsidiaries to engage, in any business other
than the business currently conducted by such Borrower or such Subsidiary and
activities reasonably related thereto.
ARTICLE VIII
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing:
8.1 Failure To Make Payments When Due. Failure to pay any
installment of principal or interest of any Loan when due, whether at stated
maturity, by acceleration, by notice of prepayment, or otherwise; or
8.2 Default in Other Agreements. Any event or condition
occurs that results in any Indebtedness of any Borrower or any Subsidiary in
excess of $100,000 in the aggregate for all Borrowers and Subsidiaries taken
together becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of such Indebtedness or any trustee or agent on its or their
behalf to cause any such Indebtedness to become due, or to require the
prepayment repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; or
8.3 Breach of Certain Covenants and Agreements. Failure of
any Borrower to perform or comply with (i) any term or condition contained in
Section 6.1, Section 6.6 or Article VII, or (ii) any other term contained in
this Agreement or the Operative Agreements and, in the case of clause (ii),
such failure shall not have been remedied or waived within thirty (30) days
after receipt of written notice from the Required Lenders of such default; or
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8.4 Breach of Warranty. Any representation or warranty made
(or deemed made) by any Borrower or any Subsidiary in this Agreement or any
Operative Agreement or in any statement or certificate at any time given by
such Borrower or such Subsidiary pursuant hereto or thereto or in connection
herewith or therewith shall be false in any material respect (if not qualified
by materiality or material adverse effect) and in any respect (if qualified by
materiality or material adverse effect) on the date as of when made; or
8.5 Involuntary Bankruptcy; Appointment of Receiver, Etc. (a)
A court having jurisdiction in the premises shall enter a decree or order for
relief in respect of any Borrower or any of its Subsidiaries in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted and remain unstayed under any applicable federal or
state law; or (b) an involuntary case is commenced against any Borrower or any
of its Subsidiaries under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar powers over
any Borrower or any of its Subsidiaries or over all or a substantial part of
any of their respective Assets and Properties, shall have been entered; or an
interim receiver, trustee or other custodian of any Borrower or any of its
Subsidiaries for all or a substantial part of their respective Assets and
Properties is involuntarily appointed; or a warrant of attachment, execution or
similar process is issued against any substantial part of the Assets and
Properties of any Borrower or any of its Subsidiaries, and the continuance of
any such events in this clause (b) for sixty (60) days unless dismissed,
bonded, stayed, vacated or discharged; or
8.6 Voluntary Bankruptcy; Appointment of Receiver, Etc. Any
Borrower or any of its Subsidiaries shall have an order for relief entered with
respect to it or commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or shall consent to
the entry of an order for relief in an involuntary case, or to the conversion
of an involuntary case to a voluntary case, under any such law, or shall
consent to the appointment of or making possession by a receiver, trustee or
other custodian for all or a possession by a receiver, trustee or other
custodian for all or a substantial part of its Assets and Properties; the
making by any Borrower or any of its Subsidiaries of any assignment for the
benefit of creditors the admission by any Borrower or any of its Subsidiaries
in writing of its inability to pay its debts as such debts become due; or the
board of directors of any Borrower or any of its Subsidiaries (or any committee
thereof) adopts any resolution or otherwise authorizes action to approve any of
the foregoing; or
8.7 Judgements and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving in any individual case or
in the aggregate at any time an amount in excess of $100,000 (not covered by
insurance) shall be entered or filed against any Borrower or any of its
Subsidiaries or any of their respective Assets and Properties and shall remain
undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days
or in any event later than five (5) days prior to the date of any proposed sale
thereunder; or
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8.8 Other Agreements. Any material provision of this
Agreement or any other Operative Agreement shall cease to be a valid and
binding obligation against each Borrower and each Subsidiary, as the case may
be, except in accordance with its terms or any Borrower or any Subsidiary, as
the case may be, shall so state in writing;
8.9 Change of Control. A Change of Control shall occur;
or
8.10 Public Warrant Redemption or Exercise. (a) An aggregate
of 1% or more of the Public Warrants are redeemed by the Company in one or more
transactions; or (b) fifty percent (50%) or more of the total number of Public
Warrants are exercised by the holders thereof in one or more transactions.
THEN, (i) upon the occurrence of any Event of Default
described in the foregoing Section 8.5 or 8.6, the unpaid principal amount of
and accrued interest on each Loan shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by each Borrower and each
Subsidiary, and the obligations of the Lenders hereunder shall thereupon
terminate and (ii) upon the occurrence of any other Event of Default, the
Required Lenders may, by written notice to the Borrowers, declare the Loans to
be, and the same shall forthwith become, due and payable, as specified below,
together with accrued interest thereon, and if such Event of Default results
from a failure to comply with Section 2.8, together with the prepayment premium
applicable thereto, if any, and the obligations of the Lenders hereunder shall
thereupon terminate.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
If to Prospect, to:
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, NY 10177
Facsimile No.: (914) 490-1566
Attn: Ronald D. Celmer
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with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
If to Bug, to
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
c/o The Brooklyn Union Gas Company
One Metrotech Center
Brooklyn, NY 11201-3850
Attn: Thomas Riordan
If to the Borrowers, to:
Skyline Multimedia Entertainment, Inc.
Empire State Building
350 Fifth Avenue
Suite 612
New York, NY 10118
Facsimile No.: (212) 564-0652
Attn: Zalman Silber
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Fax: 212-940-8776
Attn: Neil S. Belloff, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the third Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided in this Section, be deemed given
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on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom
a copy of such notice is to be delivered pursuant to this Section). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such
change to the other party hereto.
9.2 Participations in Loans and Senior Notes
(a) Each Lender shall have the right at any time, to sell,
assign, transfer or negotiate all or any part of any Loan or Senior Note to one
or more Persons. In the case of any sale, assignment, transfer or negotiation
of all or part of the Loan or Senior Note authorized under this Section 9.2(a),
the assignee, transferee or recipient shall have, to the extent of such sale,
assignment, transfer or negotiation, the same rights, benefits and obligations
as it would if it were a Lender with respect to such Loan or Senior Note,
including, without limitation, the right to approve or disapprove actions
which, in accordance with the terms hereof, require the approval of a Lender.
(b) Each Lender may grant participations in all or any part
of any Loan or Senior Note to one or more Persons.
(c) In connection with any sales, assignments or transfers of
any Loan or Senior Note referred to in Section 9.2(a), the applicable Lender
shall give notice to the Borrowers of such sale, assignment, or transfer and
the identity of the purchasers, assignees and transferees, as the case may be,
and obtain agreements from the purchasers, assignees and transferees, as the
case may be, that all information given to such parties will be held in strict
confidence subject to customary exceptions.
(d) In the event of an assignment by any Lender, or any
subsequent assignment, the term "Lender" herein shall be deemed to refer to
each such Lender.
9.3 New Additional Lender. Upon the consent of the Required
Lenders, one (1) additional Person (the "New Additional Lender") shall be made
a party to this Agreement by executing a counterpart of this Agreement. The New
Additional Lender shall have an Additional Loan Commitment of up to $1,100,000
as shall be set forth on the counterpart of this Agreement executed by such
Additional Lender. In the event that the New Additional Lender is made a party
to this Agreement pursuant to this Section 9.3, Bug shall not, from and after
such time, make any Additional Loan pursuant to any Borrowing Request until
such time as the unused Additional Commitment of such New Additional Lender
bears the same relationship to its Commitment as the unused Additional
Commitment of Bug bears to Bug's Commitment. In the event that the New
Additional Lender is made a party to this Agreement, the terms "Additional
Lender" and "Lender" herein shall be deemed to refer to such New Additional
Lender.
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9.4 Indemnity. In addition to the payment of expenses
pursuant to Section 4.15 and Section 9.6, whether or not the transactions
contemplated hereby shall be consummated, each of the Borrowers and each of
their respective Subsidiaries (as "Indemnitor") agrees, jointly and severally,
to indemnify each Lender, each holder of any Loan or, Senior Note and any
Warrant and any stockholder, general partner, limited partner, officer,
director, agent and Affiliate of any such Lender or holder (collectively called
the "Indemnitees"), in respect of, and hold them harmless from and against, any
and all Losses suffered, incurred or sustained by any of them or to which any
of them becomes subject, in any manner arising out of or relating to this
Agreement, the Operative Agreements, the Lenders' agreements to make the Loans
or the use or intended use of the proceeds of any of the Loans hereunder (the
"Indemnified Liabilities"); provided, that the Indemnitor shall not have any
obligation to an Indemnitee hereunder with respect to an Indemnified Liability
to the extent that such Indemnified Liability arises solely from the gross
negligence or willful misconduct of that Indemnitee. Each Indemnitee shall give
the Indemnitor prompt written notice of any claim that might give rise to
Indemnified Liabilities setting forth a description of those elements of such
claim of which such Indemnitee has knowledge; provided, that any failure to
give such notice shall not affect the obligations of the Indemnitor unless (and
then solely to the extent) the ability of the Indemnitor to provide such
indemnification is prejudiced thereby. The Indemnitor shall have the right at
any time during which such claim is pending to select counsel to defend and
control the defense thereof and settle any claims for which it is responsible
for indemnification hereunder (provided that no Indemnitor will settle any such
claim without (i) the appropriate Indemnitee's prior written consent which
consent shall not be unreasonably withheld or (ii) obtaining an unconditional
release of the appropriate Indemnitee from all claims arising out of or in any
way relating to the circumstances involving such claim) so long as in any such
event, the Indemnitor shall have stated in a writing delivered to the
Indemnitee that, as between the Indemnitor and the Indemnitee, the Indemnitor
is responsible to the Indemnitee with respect to such claim to the extent and
subject to the limitations set forth herein; provided, however, that the
Indemnitor shall not be entitled to control the defense of any claim in the
event that in the reasonable opinion of counsel for the Indemnitee there are
one or more defenses available to the Indemnitee which are not available to the
Indemnitor; provided, further, that with respect to any claim as to which the
Indemnitee is controlling the defense, the Indemnitor will not be liable to any
Indemnitee for any settlement of any claim pursuant to this Section 9.4 that is
effected without its prior written consent. To the extent that the undertaking
to indemnify and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any Law or public policy, the Company
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable Law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitee for any of them.
9.5 Entire Agreement. This Agreement, the Operative
Agreements and Article VIII of the Note Purchase Agreement supersede all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof.
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9.6 Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Borrowers shall pay all out-of-pocket expenses
incurred by any Lender in connection with this Agreement and the Note Purchase
Agreement and the transactions contemplated hereby and thereby; provided,
however, that the Borrowers shall not be obligated to pay the costs and
expenses of Lenders' counsel in connection with the negotiation, execution and
delivery of this Agreement and the Note Purchase Agreement in excess of
$40,000. Except as otherwise expressly provided in this Agreement (including
without limitation as provided in this Section 9.6 and in Section 4.15),
whether or not the transactions contemplated hereby are consummated, each party
will pay its own costs and expenses.
9.7 Consideration for Warrants. The Lenders and the Borrowers
acknowledge and agree that, for all purposes (including tax and accounting),
the fair market value of the Warrants to be issued hereunder is $.50 for each
Warrant Share (as defined in the Warrants) issuable thereunder (subject to
adjustment for stock splits, stock dividends, recapitalization, reorganizations
and similar events which occur on or after the Closing Date). Each Lender and
each Borrower shall file their respective Tax Returns in a manner which is
consistent with such valuation and shall not take any contrary position with
any taxing authority.
9.8 Further Assurances; Post-Closing Cooperation. At any time
or from time to time after the Closing, each Borrower shall, and shall cause
each of its Subsidiaries to, execute and deliver to any Lender such other
documents and instruments, provide such materials and information and take such
other actions as such Lender may reasonably request more effectively to vest
title to the Senior Notes and the Warrants in such Lender and otherwise to
cause such Borrower or such Subsidiaries to fulfill their respective
obligations under this Agreement and the Operative Agreements to which it is a
party.
9.9 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of any Senior Note,
or consent to any departure by any Borrower therefrom, shall in any event be
effective without the written concurrence of the Required Lenders and each
Borrower and an opinion of counsel of the Borrowers to the effect that such
amendment, modification, termination, or waiver does not violate the Senior
Credit Agreement; provided, that no amendment, modification, waiver or consent
shall, unless in writing and signed by each Lender, do any of the following:
(a) reduce the principal of, or interest on any Loan or any fees, premiums or
other amounts payable hereunder; (b) postpone any date fixed for any payment of
principal of, or premium or interest on, any Loan or any fees or other amounts
payable hereunder; or (c) amend this Section 9.8; provided, further, however,
that no Lender shall be subject to any additional or increased obligations
without the written consent of such Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on any Borrower in any case shall entitle
such Borrower or any other Borrower to any further notice or demand in similar
or other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 9.8 shall be binding upon each
holder of any Loan and any Senior Note at the time outstanding and each future
holder of any Loan and any Senior Note.
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9.10 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of an Event of Default or Potential Event of Default
if such action is taken or condition exists.
9.11 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights, and this Agreement
does not confer any such rights, upon any other Person other than any Person
entitled to indemnity under Section 9.4.
9.12 No assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any Borrower
without the prior written consent of each Lender and any attempt to do so will
be void, except for assignments and transfers by operation of Law. Subject to
the preceding sentence, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors and
assigns.
9.13 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.14 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future
Law, and if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (a) such provision will
be fully severable, (b) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (d) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.
9.15 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
9.16 Consent to Jurisdiction and Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER WITH RESPECT TO THIS
AGREEMENT, ANY OPERATIVE AGREEMENT, ANY LOAN, ANY SENIOR NOTE OR
-48-
<PAGE>
ANY WARRANT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT EACH BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY LOAN, ANY SENIOR NOTE AND ANY
WARRANT. EACH BORROWER DESIGNATES AND APPOINTS THE CORPORATION TRUST COMPANY
AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY ANY OF THEM IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY EACH OF THEM TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO EACH BORROWER AT ITS ADDRESS PROVIDED IN SECTION 9.1, EXCEPT THAT
UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY
SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
ANY BORROWER REFUSES TO ACCEPT SERVICE, SUCH BORROWER HEREBY AGREES THAT
SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.
9.17 Waiver of Jury Trial. EACH BORROWER HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY
COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT,
ANY OPERATIVE AGREEMENT, ANY LOAN, ANY SENIOR NOTE OR ANY WARRANT OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF; AND
EACH BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION
WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO ASSERT
ANY SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE THE
PROSECUTION OF OR RECOVERY UPON SAME. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY ANY BORROWER AGAINST
ANY LENDER FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL
MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN
ANY WAY RELATED TO
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<PAGE>
THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; EACH BORROWER
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES. EACH BORROWER AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE LENDERS WOULD NOT EXTEND TO
ANY BORROWER ANY LOAN HEREUNDER IF THIS SECTION WERE NOT PART OF THIS
AGREEMENT.
9.18 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:____________________________________
Name: Zalman Silber
Title: President and CEO
NEW YORK SKYLINE, INC.
By:____________________________________
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:____________________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:____________________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:____________________________________
Name:
Title:
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<PAGE>
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:
-52-
<PAGE>
Annex 2.1
<TABLE>
<CAPTION>
Lender Initial Loan Commitment Additional Loan Commitment
- ------ ----------------------- --------------------------
<S> <C> <C>
Prospect Street NYC (1)$1,500,000 None
Discovery Fund, L.P.
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company $1,000,000 $500,000
</TABLE>
- ------------
(1) Loan to be made by surrender of $1,500,000 Demand Promissory Note
as provided in Section 2.2(b).
-53-
<PAGE>
Annex 2.12
Lenders' Offices
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, NY 10177
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
c/o The Brooklyn Union Gas Company
One Metrotech Center
Brooklyn, NY 11201-3850
-54-
<PAGE>
SUBSIDIARY GUARANTEE AGREEMENT dated as
of ______________, among each of the Persons
listed on Schedule I hereto (each such Person
individually, a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors")
Prospect Street NYC Discovery Fund, L.P.
("Prospect") and the Bank of New York, as
Trustee for the Employees Retirement Plan of
the Brooklyn Union Gas Company ("Bug") and any
other lender from time to time a party to the
Credit Agreement (defined below)
(collectively, the "Lenders").
Reference is made to the Senior Credit Agreement dated as of
December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among Skyline Multimedia Entertainment, Inc., New York
Skyline, Inc., Skyline Virtual Reality, Inc., Skyline Chicago, Inc., Skyline
Magic, Inc. and Skyline Las Vegas, Inc. (collectively, the "Borrowers"), and the
Lenders. Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of the Subsidiary Guarantors is a wholly owned Subsidiary
of the Borrower specified in Schedule 1 hereto and acknowledges that it will
derive substantial benefit from the making of the Loans by the Lenders. The
obligations of the Lenders to make Loans are conditioned on, among other things,
the agreement by the Borrowers to cause any of their respective subsidiaries
created subsequent to the date of the Credit Agreement to execute and deliver a
Subsidiary Guarantee Agreement in the form hereof. As consideration for Loans
previously made, and in order to induce the Lenders to make Additional Loans,
the Subsidiary Guarantors are willing to execute this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Subsidiary Guarantor
unconditionally guarantees, jointly with the other Subsidiary Guarantors and
severally, as a primary obligor and not merely as a surety, (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or
<PAGE>
more dates set for prepayment or otherwise, and (ii) other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
any Borrower to any Lender under the Credit Agreement and any Operative
Agreement and (b) the due and punctual performance of all covenants, agreements,
obligations and liabilities of each Borrower under or pursuant to the Credit
Agreement and any Operative Agreement (all the monetary and other obligations
referred to in the preceding clauses (a) and (b) being collectively called the
"Obligations"). Each Subsidiary Guarantor further agrees that the Obligations
may be extended or renewed, in whole or in part, without notice to or further
assent from it, and that it will remain bound upon its guarantee notwithstanding
any extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Subsidiary Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the greatest amount that would
not render such Subsidiary Guarantor's obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any provisions of applicable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Subsidiary Guarantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically excluding,
however, the liabilities of such Subsidiary Guarantor (a) in respect of
intercompany indebtedness to any Borrower or Affiliate of any Borrower to the
extent that such indebtedness would be discharged in an amount equal to the
amount paid by such Subsidiary Guarantor hereunder and (b) under any guarantee
of indebtedness, which guarantee contains a limitation as to maximum amount
similar to that set forth in this paragraph, pursuant to which the liability of
such Subsidiary Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of such Subsidiary Guarantor pursuant to (i)
applicable law or (ii) any agreement providing for an equitable allocation among
such Subsidiary Guarantor and other Affiliates of any Borrower of obligations
arising under guarantees by such parties (including the Indemnity, Subrogation
and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent
permitted by applicable law, each Subsidiary Guarantor waives presentment to,
demand of payment from and protest to any Borrower of any of the Obligations,
and also waives notice of acceptance of its guarantee and notice of protest for
nonpayment. To the fullest extent permitted by applicable law, the obligations
of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure
of any Lender to assert any claim or demand or to enforce or exercise any right
or remedy against any Borrower or any other Subsidiary Guarantor under the
provisions of the Credit Agreement or otherwise, (b) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of this Agreement, any guarantee or any other
2
<PAGE>
agreement, including with respect to any other Subsidiary Guarantor under this
Agreement or (c) the failure of any Borrower or any Subsidiary to comply with
Section 19.
SECTION 3. Guarantee of Payment. Each Subsidiary Guarantor
further agrees that its guarantee constitutes a guarantee of payment when due
and not of collection, and waives any right to require that any
resort be had by any Lender to any balance of any deposit account or credit on
the books of any Lender in favor of any Borrower or any other Person.
SECTION 4. No Discharge or Diminishment of Guarantee. The
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Obligations), including any claim of
waiver, release, surrender, alteration or compromise of any of the Obligations,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of any Lender to assert any claim or demand or to enforce any remedy
under the Credit Agreement, any Operative Agreement or any other agreement, by
any waiver or modification of any provision of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the Obligations, or
by any other act or omission that may or might in any manner or to any extent
vary the risk of any Subsidiary Guarantor or that would otherwise operate as a
discharge of any Subsidiary Guarantor as a matter of law or equity (other than
the indefeasible payment in full in cash of all the Obligations and the
termination of the Commitments).
SECTION 5. Defenses of the Borrowers Waived. To the fullest
extent permitted by applicable law, each of the Subsidiary Guarantors waives any
defense based on or arising out of any defense of any Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any Borrower, other than the final
and indefeasible payment in full in cash of the Obligations and the termination
of the Commitments. The Lenders may, at their election, foreclose on any
security held by one or more of them by one or more judicial or nonjudicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any other accommodation
with any Borrower or any other guarantor or exercise any other right or remedy
available to them against any Borrower or any other Subsidiary Guarantor or
other guarantor, without affecting or impairing in any way the liability of any
Subsidiary Guarantor hereunder except to the extent the Obligations have been
fully and indefeasibly paid in cash and the Commitments have been terminated.
Pursuant to applicable law, each of the Subsidiary Guarantors waives any defense
arising out of any such election even though such election operates, pursuant to
applicable law, to impair or to extinguish any right of reimbursement or
subrogation or other right or remedy of such Subsidiary Guarantor against any
Borrower or any other Subsidiary Guarantor or other guarantor, as the case may
be, or any security.
3
<PAGE>
SECTION 6. Agreement to Pay; Subordination. In furtherance of
the foregoing and not in limitation of any other right that any Lender has at
law or in equity against any Subsidiary Guarantor by virtue hereof, upon the
failure of any Borrower to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice of prepayment or
otherwise, each Subsidiary Guarantor hereby promises to and will forthwith pay,
or cause to be paid, to the Lenders in cash the amount of such unpaid
Obligations. Upon payment by any Subsidiary Guarantor of any sums to any
Borrower or any Lender as provided above, all rights of such Subsidiary
Guarantor against any Borrower arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full in cash of all the Obligations. In addition, any indebtedness
of any Borrower now or hereafter held by any Subsidiary Guarantor is hereby
subordinated in right of payment to the prior payment in full of the
Obligations. If any amount shall erroneously be paid to any Subsidiary
Guarantor on account of (i) such subrogation, contribution, reimbursement,
indemnity or similar right or (ii) any such Indebtedness of any Borrower, such
amount shall be held in trust for the benefit of the Lenders and shall forthwith
be paid to the Lenders to be credited against the payment of the Obligations,
whether matured or unmatured, in accordance with terms of the Credit Agreement.
SECTION 7. Information. Each of the Subsidiary Guarantors
assumes all responsibility for being and keeping itself informed of the
Borrowers' financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Obligations and the nature, scope and
extent of the risks that such Subsidiary Guarantor assumes and incurs hereunder,
and agrees that no Lender will have any duty to advise any of the Subsidiary
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 8. Representations and Warranties. Each of the
Subsidiary Guarantors represents and warrants as to itself that all
representations and warranties relating to it contained in the Credit Agreement
are true and correct in all material respects (if not qualified by materiality
or material adverse effect) and in all respects (if qualified by materiality or
material adverse effect) on and as of the date hereof. Each of the Subsidiary
Guarantors represents and warrants to the Lenders that this Agreement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 9. Termination. The Guarantees made hereunder (a)
shall terminate when all the Obligations have been indefeasibly paid in full and
the Commitments have been terminated and (b) shall continue to be effective or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any Obligation is rescinded or must otherwise be restored by any Lender or
any Subsidiary Guarantor upon the bankruptcy or reorganization of any Borrower,
any Subsidiary Guarantor or otherwise.
SECTION 10. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors
4
<PAGE>
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Subsidiary Guarantors that are contained in this Agreement shall
bind and inure to the benefit of each party hereto and their respective
successors and assigns. This Agreement shall become effective as to any
Subsidiary Guarantor when a counterpart hereof executed on behalf of such
Subsidiary Guarantor shall have been delivered to the Lenders, and a counterpart
hereof shall have been executed on behalf of the Lenders, and thereafter shall
be binding upon such Subsidiary Guarantor and the Lenders and their respective
successors and assigns, and shall inure to the benefit of such Subsidiary
Guarantor and the Lenders, and their respective successors and assigns, except
that no Subsidiary Guarantor shall have the right to assign or transfer any of
its rights or obligations hereunder or any interest herein (and any such
attempted assignment or transfer shall be void) without the prior written
consent of the Required Lenders, except in connection with any transaction
permitted by Section 7.3 of the Credit Agreement.
SECTION 11. Waivers; Amendment. (a) No failure or delay of
any Lender in exercising any right, power or remedy hereunder shall operate as a
wavier thereof, nor shall any single or partial exercise of any such right,
power or remedy, or any abandonment or discontinuance of steps to enforce such
right, power or remedy, preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The rights, powers and remedies
of any Lender hereunder and under the Credit Agreement are cumulative and are
not exclusive of any rights, powers or remedies provided by law or otherwise.
No waiver of any provision of this Agreement or consent to any departure by any
Subsidiary Guarantor therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in similar or
other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
between the Subsidiary Guarantors with respect to which such waiver, amendment
or modification relates and the Required Lenders.
SECTION 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
SECTION 13. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 10.1 of the Credit
Agreement. All communications and notices hereunder to each Subsidiary
Guarantor shall be given to it in care of the Borrowers.
5
<PAGE>
SECTION 14. Survival of Agreement; Severability. (a) All
covenants, agreements, representations and warranties made by the Subsidiary
Guarantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the Lenders and shall survive the making by the
Lenders of the Loans regardless of any investigation made by any of them or on
their behalf, and shall continue in full force and effect until the indefeasible
payment in full in cash of the Obligations and the termination of the
Commitments.
(b) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
SECTION 15. Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
SECTION 16. Rules of Interpretation. The rules of
interpretation specified in Section 1.1(b) of the Credit Agreement shall be
applicable to this Agreement.
SECTION 17. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY SUBSIDIARY GUARANTOR WITH RESPECT
TO THIS AGREEMENT, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT EACH SUBSIDIARY GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH SUBSIDIARY GUARANTOR
DESIGNATES AND APPOINTS THE CORPORATION TRUST COMPANY AND SUCH OTHER PERSONS AS
MAY HEREAFTER BE SELECTED BY ANY OF THEM IRREVOCABLY AGREEING IN WRITING TO
SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY EACH OF
THEM TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO EACH SUBSIDIARY
GUARANTOR AT ITS ADDRESS
6
<PAGE>
PROVIDED IN SCHEDULE I HERETO, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY SUBSIDIARY GUARANTOR REFUSES
TO ACCEPT SERVICE, SUCH SUBSIDIARY GUARANTOR HEREBY AGREES THAT SERVICE UPON IT
BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST ANY SUBSIDIARY GUARANTOR IN THE
COURTS OF ANY OTHER JURISDICTION.
SECTION 18. Waiver of Jury Trial. EACH SUBSIDIARY GUARANTOR
HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF; AND EACH SUBSIDIARY GUARANTOR HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM
OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE
NATURE OF SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT
THE FAILURE SO TO ASSERT ANY SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM WOULD
PERMANENTLY PRECLUDE THE PROSECUTION OF OR RECOVERY UPON SAME. NOTWITHSTANDING
ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY
ANY SUBSIDIARY GUARANTOR AGAINST ANY LENDER FOR ANY LOST PROFITS OR ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT
(OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH,
ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER
OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; EACH SUBSIDIARY
GUARANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR
ANY SUCH DAMAGES. EACH SUBSIDIARY GUARANTOR AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE LENDERS
WOULD NOT EXTEND TO ANY BORROWER ANY LOAN UNDER THE CREDIT AGREEMENT IF THIS
SECTION WERE NOT PART OF THIS AGREEMENT.
SECTION 19. Additional Subsidiary Guarantors. Upon execution
and delivery after the date hereof by the Lenders and any Subsidiary of any
Borrower required to become a party to this Agreement pursuant to Section 6.10
of the Credit Agreement, of an instrument in the form of Annex 1, such
Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and
effect as if originally named as a Subsidiary Guarantor herein. The execution
and delivery of any instrument adding an additional Subsidiary Guarantor as a
party to this Agreement shall not require the consent of any other Subsidiary
Guarantor hereunder. The rights
7
<PAGE>
and obligations of each Subsidiary Guarantor hereunder shall remain in full
force and effect notwithstanding the addition of any new Subsidiary Guarantor as
a party to this Agreement.
SECTION 20. Right of Setoff. If an Event of Default shall
have occurred and be continuing, the Lenders are hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other Indebtedness at any time owing by any Lender
to or for the credit or the account of any Subsidiary Guarantor against any or
all the obligations of such Subsidiary Guarantor now or hereafter existing under
this Agreement held by such Lender, irrespective of whether or not such Lender
shall have made any demand under this Agreement and although such obligations
may be unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including other rights of setoff) which such
Lender may have.
SECTION 21. Expenses. Each Subsidiary Guarantor agrees,
jointly and severally, to reimburse each Lender for its reasonable out-of-pocket
expenses in connection with this Agreement, including the fees, disbursements
and other charges of counsel for such Lender.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I HERETO,
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
<PAGE>
BANK OF NEW YORK, as Trustee for the
Employees Retirement Plan of the Brooklyn
Union Gas Company
By:_________________________________
Name:
Title:
[NAME OF NEW ADDITIONAL LENDER]
By:_________________________________
Name:
Title:
<PAGE>
SCHEDULE I to the Subsidiary
Guarantee Agreement
Subsidiary Guarantors
---------------------
Name of Subsidiary Address of Subsidiary Name of Borrower
- ------------------ --------------------- ----------------
<PAGE>
ANNEX 1 to the Subsidiary
Guarantee Agreement
SUPPLEMENT NO. ____ dated as of
__________, to the SUBSIDIARY GUARANTEE AGREEMENT
dated as of ________ __, ____, among each of the
Persons listed on Schedule I thereto (each such
subsidiary individually, a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors") Prospect
Street NYC Discovery Fund, L.P. ("Prospect") and the
Bank of New York, as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company
("Bug") and any other lender from time to time a
party to the Credit Agreement (as defined below)
(collectively, the "Lenders").
Reference is made to the Senior Credit Agreement dated as of
December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement") among Skyline Multimedia Entertainment, Inc., New York
Skyline, Inc., Skyline Virtual Reality, Inc., Skyline Chicago, Inc., Skyline
Magic, Inc. and Skyline Las Vegas, Inc. (collectively, the Borrowers"), and the
Lenders. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
The Subsidiary Guarantors have entered into the Guarantee
Agreement in order to induce the Lenders to make Additional Loans and as
consideration for Loans previously made. Pursuant to Section 6.10 of the Credit
Agreement, each Subsidiary of any Borrower that was not in existence on the date
of the Credit Agreement is required to enter into the Guarantee Agreement as a
Subsidiary Guarantor upon becoming a Subsidiary. Section 19 of the Guarantee
Agreement provides that additional Subsidiaries of any Borrower may become
Subsidiary Guarantors under the Guarantee Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary of the
Borrower (the "New Subsidiary Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Subsidiary
Guarantor under the Guarantee Agreement in order to induce the Lenders to make
Additional Loans and as consideration for Loans previously made.
Accordingly, the Lenders and the New Subsidiary Guarantor
agree as follows:
SECTION 1. Guarantee Agreement. In accordance with Section 19
of the Guarantee Agreement, the New Subsidiary Guarantor by its signature below
becomes a Subsidiary Guarantor under the Guarantee Agreement with the same force
and effect as if originally named therein as a Subsidiary Guarantor and the New
Subsidiary Guarantor hereby (a) agrees to all the terms and provisions of the
Guarantee Agreement applicable to it as a Subsidiary Guarantor thereunder and
(b) represents and warrants that the representations and warranties made by it
as a Subsidiary Guarantor thereunder are true and correct on and as of the date
hereof. Each reference to a "Subsidiary Guarantor" in the Guarantee Agreement
shall be deemed to
<PAGE>
include the New Subsidiary Guarantor. The Guarantee Agreement is hereby
incorporated herein by reference.
SECTION 2. Representations and Warranties. The New Subsidiary
Guarantor represents and warrants to the Lenders that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. Counterparts. This Supplement 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. This Supplement
shall become effective when the Lenders shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Subsidiary
Guarantor and the Lenders.
SECTION 4. Effect on Guarantee Agreement. Except as expressly
supplemented hereby, the Guarantee Agreement shall remain in full force and
effect.
SECTION 5. Governing Law. THIS SUPPLEMENT 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.
SECTION 6. Severability. If any provision of this Supplement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Supplement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Supplement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Supplement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Supplement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 13 of the Guarantee
Agreement.
SECTION 8. Expenses. The New Subsidiary Guarantor agrees to
reimburse each Lender for its reasonable out-of-pocket expenses in connection
with this Supplement, including the fees, disbursements and other charges of
counsel for such Lender.
2
<PAGE>
IN WITNESS WHEREOF, the New Subsidiary Guarantor and the
Lenders have duly executed this Supplement to the Guarantee Agreement as of the
day and year first above written.
[NAME OF NEW SUBSIDIARY GUARANTOR],
By_______________________________
Name:
Title:
Address:
------------------------
------------------------
------------------------
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:
3
<PAGE>
[NAME OF NEW ADDITIONAL LENDER]
By:________________________________
Name:
Title:
4
<PAGE>
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT
dated as of _____________, among Skyline
Multimedia Entertainment, Inc., New York Skyline,
Inc., Skyline Virtual Reality, Inc., Skyline
Chicago, Inc., Skyline Magic, Inc. and Skyline Las
Vegas, Inc. (collectively, the "Borrowers") and
Prospect Street NYC Discovery Fund, L.P.
("Prospect") and the Bank of New York as Trustee
for the Employees Retirement Plan of the Brooklyn
Union Gas Company ("Bug") and any other lender
from time to time a party to the Credit Agreement
(as defined below) (collectively, the "Lenders").
Reference is made to (a) the Senior Credit Agreement dated as
of December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among the Borrowers and Lenders, and (b) the Subsidiary
Guarantee Agreement entered into in connection with the Credit Agreement (as
amended, modified or restated from time to time, the "Guarantee Agreement"),
among the Subsidiary Guarantors and the Lenders. Capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The Subsidiary Guarantors have guaranteed such Loans and the
other Obligations (as defined in the Guarantee Agreement) of the Borrowers under
the Credit Agreement pursuant to the Guarantee Agreement. The obligations of the
Lenders to make Loans are conditioned on, among other things, the execution and
delivery by the Borrowers and the Subsidiary Guarantors of an agreement in the
form hereof. As consideration for Loans previously made, and in order to induce
the Lenders to make Additional Loans, the Borrowers and the Subsidiary
Guarantors are willing to execute this Agreement.
Accordingly, each Borrower, each Subsidiary Guarantor and the
Lenders agree as follows:
I. SECTION Indemnity and Subrogation. In addition to all such
rights of indemnity and subrogation as the Subsidiary Guarantors may have under
applicable law (but subject to Section 3), each Borrower agrees that in the
event a payment shall be made by any Subsidiary Guarantor under the Guarantee
Agreement, such Borrower shall indemnify such Subsidiary Guarantor for the
full amount of such payment, and such Subsidiary Guarantor shall
<PAGE>
be subrogated to the rights of the Person to whom such payment shall have been
made to the extent of such payment.
SECTION 2. Contribution and Subrogation. Each Subsidiary
Guarantor (a "Contributing Subsidiary Guarantor") agrees (subject to Section 3)
that, in the event a payment shall be made by any other Subsidiary Guarantor
under the Guarantee Agreement and such other Subsidiary Guarantor (the "Claiming
Subsidiary Guarantor") shall not have been fully indemnified by the Borrowers as
provided in Section 1, the Contributing Subsidiary Guarantor shall indemnify the
Claiming Subsidiary Guarantor in an amount equal to the amount of such payment
or the greater of the book value or the fair market value of such assets, as the
case may be, in each case multiplied by a fraction of which the numerator shall
be the net worth of the Contributing Subsidiary Guarantor on the date hereof and
the denominator shall be the aggregate net worth of all the Subsidiary
Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor
becoming a party hereto pursuant to Section 12, the date of the Supplement
hereto executed and delivered by such Subsidiary Guarantor). Any Contributing
Subsidiary Guarantor making any payment to a Claiming Subsidiary Guarantor
pursuant to this Section 2 shall be subrogated to the rights of such Claiming
Subsidiary Guarantor under Section 1 to the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of
this Agreement to the contrary, all rights of the Subsidiary Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or subrogation
under applicable law or otherwise shall be fully subordinated to the
indefeasible payment in full in cash of the Obligations. No failure on the part
of any Borrower or any Subsidiary Guarantor to make the payments required by
Sections 1 and 2 (or any other payments required under applicable Law or
otherwise) shall in any respect limit the obligations and liabilities of any
Subsidiary Guarantor with respect to its obligations hereunder, and each
Subsidiary Guarantor shall remain liable for the full amount of the obligations
of such Subsidiary Guarantor hereunder. The subordination effected by this
Section 3 shall prohibit (i) any exercise of a set off in respect of the
subordinated obligations, (ii) the commencement of any action seeking to enforce
the subordinated obligations and (iii) the assignment of subordinated
obligations. Any Subsidiary Guarantor receiving the any payment in respect of a
subordinated obligation in violation of this Section 3 shall be deemed to have
received such payment in trust for the benefit of the Lenders and immediately
turn over such amount to the Lenders for application in respect of the
Obligations.
SECTION 4. Representations and Warranties. Each of the
Subsidiary Guarantors represents and warrants to the Lenders that this Agreement
has been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
SECTION 5. Termination. This Agreement (a) shall survive and
be in full force and effect until the indefeasible payment in full in cash of
the Obligations and the termination of the Commitments, and (b) shall continue
to be effective or be reinstated, as the case may be, if at
2
<PAGE>
any time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by the any Lender or any Subsidiary Guarantor upon the
bankruptcy or reorganization of any Borrower, any Subsidiary Guarantor or
otherwise.
SECTION 6. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the parties that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. This Agreement shall become effective as to any
Subsidiary Guarantor and as to any Borrower when a counterpart hereof executed
on behalf of such Subsidiary Guarantor or Borrower, as the case may be, shall
have been delivered to the Lenders, and a counterpart hereof shall have been
executed on behalf of the Lenders, and thereafter shall be binding upon such
Subsidiary Guarantor or such Borrower, as the case may be, and the Lenders and
their respective successors and assigns, and shall inure to the benefit of such
Subsidiary Guarantor or such Borrower, as the case may be, and their respective
successors and assigns, except that neither any Borrower nor any Subsidiary
Guarantor may assign or transfer any of its rights or obligations hereunder (and
any such attempted assignment or transfer shall be void) without the prior
written consent of the Required Lenders, except in connection with any
transaction permitted by Section 7.3 of the Credit Agreement. Notwithstanding
the foregoing, at the time any Subsidiary Guarantor is released from its
obligations under the Guarantee Agreement in accordance with such Guarantee
Agreement and the Credit Agreement, such Subsidiary Guarantor will cease to have
any rights or obligations under this Agreement.
SECTION 7. Waivers; Amendment. (a) No failure or delay on the
part of any Lender or any Subsidiary Guarantor in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy, or any abandonment or
discontinuance of steps to enforce such right, power or remedy, preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All rights, powers and remedies of any Lender hereunder are cumulative
and are not exclusive of any other rights, powers and remedies provided by law
or otherwise. No waiver of any provision of this Agreement or consent to any
departure by any Borrower or any Subsidiary Guarantor therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any Borrower or any
Subsidiary Guarantor in any case shall entitle such Borrower or Subsidiary
Guarantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
between the Borrowers and the Subsidiary Guarantors with respect to which such
waivers, amendment or modification relates and the Required Lenders.
3
<PAGE>
SECTION 8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
SECTION 9. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Guarantee Agreement and
addressed as specified therein.
SECTION 10. Survival of Agreement; Severability. (a) All
covenants and agreements made by the Borrowers and the Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement shall be considered to have been relied upon by
the Lenders and each Subsidiary Guarantor and shall survive the making by the
Lenders of the Loans and shall continue in full force and effect until the
indefeasible payment in full in cash of the Obligations and the termination of
the Commitments.
(b) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
SECTION 11. Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
SECTION 12. Rules of Interpretation. The rules of
interpretation specified in Section 1.1(b) of the Credit Agreement shall be
applicable to this Agreement.
SECTION 13. Additional Subsidiary Guarantors. Upon execution
and delivery, after the date hereof, by the Lenders and any Subsidiary of any
Borrower required to become a party to this Agreement pursuant to Section 6.10
of the Credit Agreement, of an instrument in the form of Annex 1 hereto, such
Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and
effect as if originally named as a Subsidiary Guarantor. The execution and
delivery of any instrument adding an additional Subsidiary Guarantor as a party
to this Agreement shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and
4
<PAGE>
obligations of each Subsidiary Guarantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Subsidiary Guarantor as a
party to this Agreement.
SECTION 14. Expenses. Each Borrower and each Subsidiary
Guarantor agrees, jointly and severally, to reimburse each Lender for its
reasonable out-of-pocket expenses in connection with this Agreement, including
the fees, disbursements and other charges of counsel for such Lender.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
appearing above.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:_________________________________
Name:
Title:
NEW YORK SKYLINE, INC.
By:_________________________________
Name:
Title:
SKYLINE VIRTUAL REALITIES, INC.
By:_________________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:_________________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:_________________________________
Name:
Title:
6
<PAGE>
SKYLINE LAS VEGAS, INC.
By:_________________________________
Name:
Title:
EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I HERETO,
as a Subsidiary Guarantor,
By:__________________________
Name:
Title: Authorized Officer
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:
7
<PAGE>
[NAME OF NEW ADDITIONAL LENDER]
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
SUBSIDIARY GUARANTORS
Name of Subsidiary Address of Subsidiary Name of Borrower
- ------------------ --------------------- ----------------
<PAGE>
ANNEX 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. ____ dated as of _________, to
the Indemnity, Subrogation and Contribution agreement
dated as of ____________ (as the same may be amended,
modified or restated from time to time, the
"Indemnity, Subrogation and Contribution agreement"),
among Skyline Multimedia Entertainment, Inc., New
York Skyline, Inc., Skyline Virtual Realty, Inc.,
Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. (collectively, the
"Borrowers") and Prospect Street NYC Discovery Fund,
L.P. ("Prospect"), the Bank of New York as Trustee
for the Employees Retirement Plan of the Brooklyn
Union gas Company ("Bug") and any other lender from
time to time a party to the Credit Agreement (as
defined below) (collectively, the "Lenders").
Reference is made to (a) the Credit agreement dated as of
December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among the Borrowers and the Lenders and (b) the Guarantee
Agreement to be entered into in connection therewith (as amended, modified or
restated from time to time, the "Guarantee Agreement"), among the Subsidiary
Guarantors and the Lenders. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Indemnity,
Subrogation and Contribution Agreement and the Credit Agreement.
The Borrowers and the Subsidiary Guarantors have entered into
the Indemnity, Subrogation and Contribution Agreement in order to induce the
Lenders to make Additional Loans and as consideration for Loans previously made.
Pursuant to Section 6.10 of the Credit Agreement, each Subsidiary of any
Borrower that was not in existence on the date of the Credit Agreement is
required to enter into the Guarantee Agreement as a Subsidiary Guarantor upon
becoming a Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution
Agreement provides that additional Subsidiaries of the Company may become
Subsidiary Guarantors under the Indemnity, Subrogation and Contribution
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary of the Company (the "New Subsidiary
Guarantor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Subsidiary Guarantor under the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Additional Loans and as consideration for Loans previously made.
<PAGE>
Accordingly, the Lenders and the New Subsidiary Guarantor
agree as follows:
SECTION 1. Indemnity, Subrogation and Contribution Agreement.
In accordance with Section 12 of the Indemnity, Subrogation and Contribution
Agreement, the New Subsidiary Guarantor by its signature below becomes a
Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement
with the same force and effect as if originally named therein as a Subsidiary
Guarantor and the New Subsidiary Guarantor hereby agrees to all the terms and
provisions of the Indemnity, Subrogation and Contribution Agreement applicable
to it as a Subsidiary Guarantor thereunder. Each reference to a "Subsidiary
Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be
deemed to include the New Subsidiary Guarantor. The Indemnity, Subrogation and
Contribution Agreement is hereby incorporated herein by reference.
SECTION 2. Representations and Warranties. The New Subsidiary
Guarantor represents and warrants to the Lenders that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. Counterparts. This Supplement 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 he same instrument. This Supplement shall
become effective when the Lenders shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Subsidiary
Guarantor and the Lenders.
SECTION 4. Effect on Indemnity, Subrogation and Contribution
Agreement. Except as expressly supplemented hereby, the Indemnity, Subrogation
and Contribution Agreement shall remain in full force and effect.
SECTION 5. GOVERNING LAW. THIS SUPPLEMENT 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.
SECTION 6. Severability. If any provision of this Supplement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Supplement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Supplement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Supplement will remain in full force and
effect and will not be
2
<PAGE>
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Supplement a legal, valid
and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9 of the Indemnity,
Subrogation and Contribution Agreement.
SECTION 8. Expenses. The New Subsidiary Guarantor agrees to
reimburse each Lender for its reasonable out-of-pocket expenses in connection
with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for such Lender.
IN WITNESS WHEREOF, the New Subsidiary Guarantor and the
Lenders have duly executed this Supplement to the Indemnity, Subrogation and
Contribution Agreement as of the day and year first above written.
[NAME OF NEW SUBSIDIARY GUARANTOR]
By_____________________________
Name:
Title:
Address:
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:
3
<PAGE>
[NAME OF NEW ADDITIONAL LENDER]
By:__________________________________
Name:
Title:
4
<PAGE>
INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT
dated as of _____________, among Skyline
Multimedia Entertainment, Inc., New York Skyline,
Inc., Skyline Virtual Reality, Inc., Skyline
Chicago, Inc., Skyline Magic, Inc. and Skyline Las
Vegas, Inc. (collectively, the "Borrowers") and
Prospect Street NYC Discovery Fund, L.P.
("Prospect") and the Bank of New York as Trustee
for the Employees Retirement Plan of the Brooklyn
Union Gas Company ("Bug") and any other lender
from time to time a party to the Credit Agreement
(as defined below) (collectively, the "Lenders").
Reference is made to (a) the Senior Credit Agreement dated as
of December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among the Borrowers and Lenders, and (b) the Subsidiary
Guarantee Agreement entered into in connection with the Credit Agreement (as
amended, modified or restated from time to time, the "Guarantee Agreement"),
among the Subsidiary Guarantors and the Lenders. Capitalized terms used herein
and not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders have agreed to make Loans to the Borrowers
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. The Subsidiary Guarantors have guaranteed such Loans and the
other Obligations (as defined in the Guarantee Agreement) of the Borrowers under
the Credit Agreement pursuant to the Guarantee Agreement. The obligations of the
Lenders to make Loans are conditioned on, among other things, the execution and
delivery by the Borrowers and the Subsidiary Guarantors of an agreement in the
form hereof. As consideration for Loans previously made, and in order to induce
the Lenders to make Additional Loans, the Borrowers and the Subsidiary
Guarantors are willing to execute this Agreement.
Accordingly, each Borrower, each Subsidiary Guarantor and the
Lenders agree as follows:
I. SECTION Indemnity and Subrogation. In addition to all such
rights of indemnity and subrogation as the Subsidiary Guarantors may have under
applicable law (but subject to Section 3), each Borrower agrees that in the
event a payment shall be made by any Subsidiary Guarantor under the Guarantee
Agreement, such Borrower shall indemnify such Subsidiary Guarantor for the
full amount of such payment, and such Subsidiary Guarantor shall
<PAGE>
be subrogated to the rights of the Person to whom such payment shall have been
made to the extent of such payment.
SECTION 2. Contribution and Subrogation. Each Subsidiary
Guarantor (a "Contributing Subsidiary Guarantor") agrees (subject to Section 3)
that, in the event a payment shall be made by any other Subsidiary Guarantor
under the Guarantee Agreement and such other Subsidiary Guarantor (the "Claiming
Subsidiary Guarantor") shall not have been fully indemnified by the Borrowers as
provided in Section 1, the Contributing Subsidiary Guarantor shall indemnify the
Claiming Subsidiary Guarantor in an amount equal to the amount of such payment
or the greater of the book value or the fair market value of such assets, as the
case may be, in each case multiplied by a fraction of which the numerator shall
be the net worth of the Contributing Subsidiary Guarantor on the date hereof and
the denominator shall be the aggregate net worth of all the Subsidiary
Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor
becoming a party hereto pursuant to Section 12, the date of the Supplement
hereto executed and delivered by such Subsidiary Guarantor). Any Contributing
Subsidiary Guarantor making any payment to a Claiming Subsidiary Guarantor
pursuant to this Section 2 shall be subrogated to the rights of such Claiming
Subsidiary Guarantor under Section 1 to the extent of such payment.
SECTION 3. Subordination. Notwithstanding any provision of
this Agreement to the contrary, all rights of the Subsidiary Guarantors under
Sections 1 and 2 and all other rights of indemnity, contribution or subrogation
under applicable law or otherwise shall be fully subordinated to the
indefeasible payment in full in cash of the Obligations. No failure on the part
of any Borrower or any Subsidiary Guarantor to make the payments required by
Sections 1 and 2 (or any other payments required under applicable Law or
otherwise) shall in any respect limit the obligations and liabilities of any
Subsidiary Guarantor with respect to its obligations hereunder, and each
Subsidiary Guarantor shall remain liable for the full amount of the obligations
of such Subsidiary Guarantor hereunder. The subordination effected by this
Section 3 shall prohibit (i) any exercise of a set off in respect of the
subordinated obligations, (ii) the commencement of any action seeking to enforce
the subordinated obligations and (iii) the assignment of subordinated
obligations. Any Subsidiary Guarantor receiving the any payment in respect of a
subordinated obligation in violation of this Section 3 shall be deemed to have
received such payment in trust for the benefit of the Lenders and immediately
turn over such amount to the Lenders for application in respect of the
Obligations.
SECTION 4. Representations and Warranties. Each of the
Subsidiary Guarantors represents and warrants to the Lenders that this Agreement
has been duly authorized, executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
SECTION 5. Termination. This Agreement (a) shall survive and
be in full force and effect until the indefeasible payment in full in cash of
the Obligations and the termination of the Commitments, and (b) shall continue
to be effective or be reinstated, as the case may be, if at
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<PAGE>
any time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by the any Lender or any Subsidiary Guarantor upon the
bankruptcy or reorganization of any Borrower, any Subsidiary Guarantor or
otherwise.
SECTION 6. Binding Agreement; Assignments. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the parties that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns. This Agreement shall become effective as to any
Subsidiary Guarantor and as to any Borrower when a counterpart hereof executed
on behalf of such Subsidiary Guarantor or Borrower, as the case may be, shall
have been delivered to the Lenders, and a counterpart hereof shall have been
executed on behalf of the Lenders, and thereafter shall be binding upon such
Subsidiary Guarantor or such Borrower, as the case may be, and the Lenders and
their respective successors and assigns, and shall inure to the benefit of such
Subsidiary Guarantor or such Borrower, as the case may be, and their respective
successors and assigns, except that neither any Borrower nor any Subsidiary
Guarantor may assign or transfer any of its rights or obligations hereunder (and
any such attempted assignment or transfer shall be void) without the prior
written consent of the Required Lenders, except in connection with any
transaction permitted by Section 7.3 of the Credit Agreement. Notwithstanding
the foregoing, at the time any Subsidiary Guarantor is released from its
obligations under the Guarantee Agreement in accordance with such Guarantee
Agreement and the Credit Agreement, such Subsidiary Guarantor will cease to have
any rights or obligations under this Agreement.
SECTION 7. Waivers; Amendment. (a) No failure or delay on the
part of any Lender or any Subsidiary Guarantor in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy, or any abandonment or
discontinuance of steps to enforce such right, power or remedy, preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All rights, powers and remedies of any Lender hereunder are cumulative
and are not exclusive of any other rights, powers and remedies provided by law
or otherwise. No waiver of any provision of this Agreement or consent to any
departure by any Borrower or any Subsidiary Guarantor therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any Borrower or any
Subsidiary Guarantor in any case shall entitle such Borrower or Subsidiary
Guarantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
between the Borrowers and the Subsidiary Guarantors with respect to which such
waivers, amendment or modification relates and the Required Lenders.
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<PAGE>
SECTION 8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
SECTION 9. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Guarantee Agreement and
addressed as specified therein.
SECTION 10. Survival of Agreement; Severability. (a) All
covenants and agreements made by the Borrowers and the Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement shall be considered to have been relied upon by
the Lenders and each Subsidiary Guarantor and shall survive the making by the
Lenders of the Loans and shall continue in full force and effect until the
indefeasible payment in full in cash of the Obligations and the termination of
the Commitments.
(b) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
SECTION 11. Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
SECTION 12. Rules of Interpretation. The rules of
interpretation specified in Section 1.1(b) of the Credit Agreement shall be
applicable to this Agreement.
SECTION 13. Additional Subsidiary Guarantors. Upon execution
and delivery, after the date hereof, by the Lenders and any Subsidiary of any
Borrower required to become a party to this Agreement pursuant to Section 6.10
of the Credit Agreement, of an instrument in the form of Annex 1 hereto, such
Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and
effect as if originally named as a Subsidiary Guarantor. The execution and
delivery of any instrument adding an additional Subsidiary Guarantor as a party
to this Agreement shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and
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<PAGE>
obligations of each Subsidiary Guarantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Subsidiary Guarantor as a
party to this Agreement.
SECTION 14. Expenses. Each Borrower and each Subsidiary
Guarantor agrees, jointly and severally, to reimburse each Lender for its
reasonable out-of-pocket expenses in connection with this Agreement, including
the fees, disbursements and other charges of counsel for such Lender.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date first
appearing above.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By:_________________________________
Name:
Title:
NEW YORK SKYLINE, INC.
By:_________________________________
Name:
Title:
SKYLINE VIRTUAL REALITIES, INC.
By:_________________________________
Name:
Title:
SKYLINE CHICAGO, INC.
By:_________________________________
Name:
Title:
SKYLINE MAGIC, INC.
By:_________________________________
Name:
Title:
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<PAGE>
SKYLINE LAS VEGAS, INC.
By:_________________________________
Name:
Title:
EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I HERETO,
as a Subsidiary Guarantor,
By:__________________________
Name:
Title: Authorized Officer
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:
7
<PAGE>
[NAME OF NEW ADDITIONAL LENDER]
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
to the Indemnity, Subrogation
and Contribution Agreement
SUBSIDIARY GUARANTORS
Name of Subsidiary Address of Subsidiary Name of Borrower
- ------------------ --------------------- ----------------
<PAGE>
ANNEX 1 to
the Indemnity, Subrogation and
Contribution Agreement
SUPPLEMENT NO. ____ dated as of _________, to
the Indemnity, Subrogation and Contribution agreement
dated as of ____________ (as the same may be amended,
modified or restated from time to time, the
"Indemnity, Subrogation and Contribution agreement"),
among Skyline Multimedia Entertainment, Inc., New
York Skyline, Inc., Skyline Virtual Realty, Inc.,
Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. (collectively, the
"Borrowers") and Prospect Street NYC Discovery Fund,
L.P. ("Prospect"), the Bank of New York as Trustee
for the Employees Retirement Plan of the Brooklyn
Union gas Company ("Bug") and any other lender from
time to time a party to the Credit Agreement (as
defined below) (collectively, the "Lenders").
Reference is made to (a) the Credit agreement dated as of
December __, 1996 (as amended, modified or restated from time to time, the
"Credit Agreement"), among the Borrowers and the Lenders and (b) the Guarantee
Agreement to be entered into in connection therewith (as amended, modified or
restated from time to time, the "Guarantee Agreement"), among the Subsidiary
Guarantors and the Lenders. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Indemnity,
Subrogation and Contribution Agreement and the Credit Agreement.
The Borrowers and the Subsidiary Guarantors have entered into
the Indemnity, Subrogation and Contribution Agreement in order to induce the
Lenders to make Additional Loans and as consideration for Loans previously made.
Pursuant to Section 6.10 of the Credit Agreement, each Subsidiary of any
Borrower that was not in existence on the date of the Credit Agreement is
required to enter into the Guarantee Agreement as a Subsidiary Guarantor upon
becoming a Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution
Agreement provides that additional Subsidiaries of the Company may become
Subsidiary Guarantors under the Indemnity, Subrogation and Contribution
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary of the Company (the "New Subsidiary
Guarantor") is executing this Supplement in accordance with the requirements of
the Credit Agreement to become a Subsidiary Guarantor under the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Additional Loans and as consideration for Loans previously made.
<PAGE>
Accordingly, the Lenders and the New Subsidiary Guarantor
agree as follows:
SECTION 1. Indemnity, Subrogation and Contribution Agreement.
In accordance with Section 12 of the Indemnity, Subrogation and Contribution
Agreement, the New Subsidiary Guarantor by its signature below becomes a
Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement
with the same force and effect as if originally named therein as a Subsidiary
Guarantor and the New Subsidiary Guarantor hereby agrees to all the terms and
provisions of the Indemnity, Subrogation and Contribution Agreement applicable
to it as a Subsidiary Guarantor thereunder. Each reference to a "Subsidiary
Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be
deemed to include the New Subsidiary Guarantor. The Indemnity, Subrogation and
Contribution Agreement is hereby incorporated herein by reference.
SECTION 2. Representations and Warranties. The New Subsidiary
Guarantor represents and warrants to the Lenders that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. Counterparts. This Supplement 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 he same instrument. This Supplement shall
become effective when the Lenders shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Subsidiary
Guarantor and the Lenders.
SECTION 4. Effect on Indemnity, Subrogation and Contribution
Agreement. Except as expressly supplemented hereby, the Indemnity, Subrogation
and Contribution Agreement shall remain in full force and effect.
SECTION 5. GOVERNING LAW. THIS SUPPLEMENT 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.
SECTION 6. Severability. If any provision of this Supplement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Supplement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Supplement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Supplement will remain in full force and
effect and will not be
2
<PAGE>
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision,
there will be added automatically as a part of this Supplement a legal, valid
and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
SECTION 7. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 9 of the Indemnity,
Subrogation and Contribution Agreement.
SECTION 8. Expenses. The New Subsidiary Guarantor agrees to
reimburse each Lender for its reasonable out-of-pocket expenses in connection
with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for such Lender.
IN WITNESS WHEREOF, the New Subsidiary Guarantor and the
Lenders have duly executed this Supplement to the Indemnity, Subrogation and
Contribution Agreement as of the day and year first above written.
[NAME OF NEW SUBSIDIARY GUARANTOR]
By_____________________________
Name:
Title:
Address:
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:
3
<PAGE>
[NAME OF NEW ADDITIONAL LENDER]
By:__________________________________
Name:
Title:
4
<PAGE>
[Execution Copy]
===============================================================================
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
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
===============================================================================
<PAGE>
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
TABLE OF CONTENTS
Page
RECITALS.................................................................. 2
ARTICLE I
DEMAND REGISTRATIONS............................................ 2
1.1 Requests for Registration.............................. 2
1.2 Number of Demand Registrations; Expenses............... 3
1.3 Effected Registration Statement........................ 3
1.4 Priority on Demand Registrations....................... 3
1.5 Form of Offering; Selection of Underwriters............ 4
1.6 Other Registration Rights.............................. 4
ARTICLE II
PIGGY-BACK REGISTRATIONS........................................ 4
2.1 Right to Piggy-back.................................... 4
2.2 Piggy-back Expenses.................................... 5
2.3 Priority on Company Registrations...................... 5
2.4 Priority on Stockholder Registrations.................. 5
ARTICLE III
OTHER REGISTRATIONS............................................. 6
3.1 Other Registrations.................................... 6
ARTICLE IV
REGISTRATION PROCEDURES......................................... 6
ARTICLE V
REGISTRATION EXPENSES........................................... 10
5.1 Registration Expenses.................................. 10
5.2 Sellers' Expenses...................................... 11
ARTICLE VI
UNDERWRITTEN OFFERINGS.......................................... 11
6.1 Demand Underwritten Offerings.......................... 11
6.2 Incidental Underwritten Offerings...................... 11
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<PAGE>
ARTICLE VII
INDEMNIFICATION................................................. 12
7.1 Indemnification by the Company......................... 12
7.2 Indemnification by Holders............................. 13
7.3 Conduct of Indemnification Proceedings................. 13
7.4 Indemnity in Underwriting Agreement.................... 14
7.5 Contribution........................................... 14
7.6 Payment................................................ 15
ARTICLE VIII
RULE 144........................................................ 15
ARTICLE IX
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS..................... 16
ARTICLE X
DEFINITIONS..................................................... 16
ARTICLE XI
MISCELLANEOUS................................................... 19
11.1 No Inconsistent Agreements............................. 19
11.2 Certain Actions Affecting Registrable Securities....... 19
11.3 Deferral............................................... 19
11.4 Remedies............................................... 20
11.5 Amendments and Waivers................................. 20
11.6 Successors and Assigns................................. 20
11.7 Notices................................................ 20
11.8 Headings............................................... 22
11.9 Gender................................................. 22
11.10 Invalid Provisions..................................... 22
11.11 Governing Law.......................................... 22
11.12 Counterparts........................................... 22
ii
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as
of December 20, 1996, by and among SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a
New York corporation (the "Company"), PROSPECT STREET NYC DISCOVERY FUND, L.P.,
a Delaware limited partnership ("NYCDF") and BANK OF NEW YORK, AS TRUSTEE FOR
THE EMPLOYEES RETIREMENT PLAN OF THE BROOKLYN UNION GAS COMPANY ("Bug").
RECITALS
WHEREAS, in order to induce NYCDF to enter into that certain
Stock Purchase Agreement between NYCDF and the Company dated June 30, 1995, the
Company agreed to provide NYCDF with the registration rights set forth in the
Registration Rights Agreement dated as of June 30, 1995 (the "Existing
Registration Rights Agreement");
WHEREAS, in order to induce NYCDF and Bug to enter into that
certain Senior Credit Agreement by and among the parties hereto, dated as of
the date hereof (the "Credit Agreement"), the Company has agreed to amend and
restate the Existing Registration Rights Agreement in order to provide NYCDF
and Bug with the registration rights set forth in this Agreement; and
WHEREAS, capitalized terms used and not otherwise defined
herein have the respective meanings ascribed thereto in Article X;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 Requests for Registration. At any time and from time to time each of the
Required NYCDF Investors and the Required Bug Investors, acting alone or
jointly, may request in writing registration under the Securities Act of all or
part of their Registrable Securities (i) on Form S-1 or any similar long-form
Registration Statement ("Long-Form Registrations"), or (ii) on Form S-2 or S-3
or any similar short-form Registration Statement ("Short-Form Registrations")
if the Company qualifies to use such short form. All registrations requested
pursuant to this Section 1.1 are referred to herein as "Demand Registrations."
Demand Registrations will be Short-Form Registrations whenever the Company is
qualified to use any applicable short form. The Company will use its best
efforts to make Short-Form Registrations available for the sale of Registrable
Securities. Within ten days after receipt of any such request, the Company will
give written notice of such request to all other holders of Registrable
Securities. Thereafter, the Company will use its best efforts to effect the
registration under the
2
<PAGE>
Securities Act on the form requested by the Required NYCDF Investors or the
Required Bug Investors, as the case may be, and will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 30 days after the
receipt of the Company's notice, subject to the provisions of Section 1.4. The
Required NYCDF Investors or the Required Bug Investors, as the case may be,
after requesting a Demand Registration under this Article I may, at any time
prior to the effective date of the Registration Statement relating to such
registration, revoke such request by providing written notice to the Company.
1.2 Number of Demand Registrations; Expenses. Subject to
Section 1.3, the Company shall have no obligation to effect more than four
Demand Registration Statements at the request of the Required NYCDF Investors,
nor more than one Demand Registration Statement at the request of the Required
Bug Investors . The Company will pay all Registration Expenses in connection
with any Demand Registration, including any Demand Registration Statement that
is not deemed to be effected pursuant to the provisions of Section 1.3 hereof.
1.3 Effected Registration Statement. A registration demanded
pursuant to Section 1.1 of this Agreement shall not be deemed to have been
effected (i) unless a Registration Statement with respect thereto has been
declared effective by the Commission and the Company has complied in all
material respects with its obligations under this Agreement with respect
thereto, (ii) if after it has become effective, such registration is interfered
with by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason, and, as a
result thereof, the Registrable Securities covered thereby have not been sold,
(iii) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are
not satisfied by reason of a failure by or inability of the Company to satisfy
any thereof, or the occurrence of an event outside the control of the holders
of Registrable Securities, (iv) if holders of Registrable Securities are not
able to register and sell at least 90% of the amount of Registrable Securities
requested to be included in such registration, or (v) the Registration
Statement does not remain effective for a period of at least 180 days beyond
the effective date thereof or, with respect to an underwritten offering of
Registrable Securities, until 45 days after the commencement of the
distribution by the holders of the Registrable Securities included in such
Registration Statement. If a registration requested pursuant to this Article I
is deemed not to have been effected as provided in this Section 1.3, then the
Company shall continue to be obligated to effect the number of Demand
Registrations set forth in Section 1.2 without giving effect to such requested
registration.
1.4 Priority on Demand Registrations. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority (by number
of shares) of Registrable Securities on a Diluted Basis requested to be
included in such Demand Registration. If other securities are permitted to be
included in a Demand Registration which is an underwritten offering and the
managing underwriters advise the Company in writing that in their opinion the
number of Registrable
3
<PAGE>
Securities and other securities requested to be included exceeds the number of
Registrable Securities and other securities which can be sold in such offering
within a price range acceptable to the holders of a majority (by a number of
shares) of Registrable Securities on a Diluted Basis requested to be included
in such Demand Registration, the Company will include in such registration, to
the exclusion of any securities which are not Registrable Securities, the
number of Registrable Securities requested to be included which in the opinion
of such underwriters can be sold, pro rata among the holders of Registrable
Securities on the basis of the amount of Registrable Securities on a Diluted
Basis requested to be offered thereby.
1.5 Form of Offering; Selection of Underwriters. If the
holders of a majority (by number of shares) of Registrable Securities requested
to be included in such Demand Registration so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall be (x)
underwritten and/or (y) in the form of a "shelf" registration. The holders of a
majority (by number of shares) of Registrable Securities requested to be
included in such Demand Registration will have the right to select the
underwriters and the managing underwriter to administer any underwritten Demand
Registration.
1.6 Other Registration Rights. Except as provided in this
Agreement, without the written consent of the Required Holders, the Company
will not grant to any Person the right to request the Company to register any
equity securities of the Company, or any securities convertible, exchangeable
or exercisable for or into such securities, other than piggyback registration
rights entitling the holder thereof to participate in Company-initiated
registrations, subject to the prior rights of holders of Registrable
Securities.
ARTICLE II
PIGGY-BACK REGISTRATIONS
2.1 Right to Piggy-back. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration), and the registration form to be used may be used for
the registration of Registrable Securities (a "Piggy-back Registration"), the
Company will give prompt written notice (in any event within three Business
Days after its receipt of notice of any exercise of other demand registration
rights) to all holders of Registrable Securities of its intention to effect
such a registration and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 30 days after the receipt of the Company's notice.
Such requests for inclusion shall specify the number of Registrable Securities
intended to be disposed of and the intended method of distribution thereof.
4
<PAGE>
2.2 Piggy-back Expenses. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggy-back
Registrations.
2.3 Priority on Company Registrations. If a Piggy-back
Registration is an underwritten registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their good faith
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
in such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in such
registration, provided, that if the managing underwriters in good faith
determine that a lower number of Registrable Securities should be included,
then the Company shall be required to include in the underwriting only that
lower number of Registrable Securities, and the holders of Registrable
Securities who have requested registration shall participate in the
underwriting pro rata based upon their total ownership of Registrable
Securities on a Diluted Basis, and (iii) third, if all Registrable Securities
requested to be included in such registration are included in the registration,
other securities requested to be included in such registration.
2.4 Priority on Stockholder Registrations. If a Piggy-back
Registration is not a Demand Registration pursuant to Article I but is an
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their good faith opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering, the
Company will include in such registration (i) first, the securities requested
to be included therein by the holders requesting such registration, (ii)
second, the Registrable Securities requested to be included in such
registration, provided, that if the managing underwriters in good faith
determine that a lower number of Registrable Securities should be included,
then the Company shall be required to include in the underwriting only that
lower number of Registrable Securities, and the holders of Registrable
Securities who have requested registration shall participate in the
underwriting pro rata based upon their total ownership of Registrable
Securities on a Diluted Basis, and (iii) if all Registrable Securities
requested to be included in such registration are included in the registration,
third, other securities requested to be included in such registration.
Notwithstanding the foregoing, if Zalman Silber is among the holders requesting
registration, his securities shall be included for the priority purposes of
this Section 2.4 as covered by the reference to "other securities" in clause
(iii) of the preceding sentence.
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ARTICLE III
OTHER REGISTRATIONS
3.1 Other Registrations. If the Company has previously filed
a Registration Statement with respect to Registrable Securities pursuant to
Article I or II of this Agreement, and if such previous registration has not
been withdrawn or abandoned, the Company will not file or cause to be effected
any other registration of any of its equity securities or securities
convertible, exchangeable or exercisable for or into its equity securities
under the Securities Act (except on Form S-4 or Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of
such securities, until the earlier of (i) the date on which the Registrable
Securities included therein have been sold, or (ii) 6 months from such
effective date.
ARTICLE IV
REGISTRATION PROCEDURES
Whenever the holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and pursuant thereto the Company
will as expeditiously as possible (or, in the case of clause (q) below, will
not):
(a) promptly prepare and file with the Commission a
Registration Statement with respect to such Registrable Securities (such
Registration Statement to include all information which the holders of the
Registrable Securities to be registered thereby shall reasonably request) and
use its best efforts to cause such Registration Statement to become and remain
effective until the completion of the distribution contemplated thereby;
provided that at least ten days before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will (i)
furnish to counsel selected by the Required Holders or if no holders of
Registrable Securities are participating in such registration, holders of a
majority (by number of shares) of the securities covered by such Registration
Statement, copies of all such documents proposed to be filed, and the Company
shall not file any thereof to which such counsel shall have reasonably objected
on the grounds that such document does not comply in all material respects with
the requirements of the Securities Act or of the rules or regulations
thereunder, and (ii) notify each holder of Registrable Securities covered by
such Registration Statement of (x) any request by the Commission to amend such
Registration Statement or amend or supplement any Prospectus, or (y) any stop
order issued or threatened by the Commission, and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
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(b) (i) prepare and file with the Commission such amendments
and supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for a period of not less than 180 days (except that such 180 day
period shall be extended (x) by the length of any period that a stop order or
similar proceeding is in effect which prohibits the distribution of the
Registrable Securities, and (y) by the number of days during the period from
and including the date on which each seller of Registrable Securities shall
have received a notice delivered pursuant to clause (f) below until the date
when such seller shall have received a copy of the supplemented or amended
Prospectus contemplated by clause (f) below), and (ii) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement;
(c) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such Registration Statement, each
amendment and supplement thereto, the Prospectus included in such Registration
Statement (including each preliminary Prospectus and, in each case including
all exhibits) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any seller thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such Registration
Statement remains in effect and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this clause (d), (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction;
(e) furnish to each seller of Registrable Securities a signed
copy, addressed to such seller (and the underwriters, if any), of an opinion of
counsel for the Company dated the effective date of such Registration Statement
(and, if such Registration Statement includes an underwritten public offering,
dated the date of the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such seller, covering substantially the
same matters with respect to such Registration Statement (and the Prospectus
included therein) as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings, and such other
legal matters as the seller (or the underwriters, if any) may reasonably
request;
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(f) notify each seller of Registrable Securities, at a time
when a Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event known to the Company as a result
of which the Prospectus included in such Registration Statement, as then in
effect, contains an untrue statement of a material fact or omits to state any
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made, and,
at the request of any such seller, the Company will prepare and furnish such
seller a reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made;
(g) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed and on any Securities Exchange or National Automated Quotation
System requested by the holders of a majority (by number of shares) of such
Registrable Securities on a Diluted Basis, provided that the Company then meets
or is reasonably capable of meeting the eligibility requirements for such
exchange or system and such exchange or system is reasonably satisfactory to
the managing underwriters, and to enter into such customary agreements as may
be required in furtherance thereof, including, without limitation, listing
applications and indemnification agreements in customary form;
(h) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such Registration
Statement;
(i) enter into such customary arrangements and agreements and
take all such other actions as the holders of a majority (by number of shares)
on a Diluted Basis of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities.
(j) in connection with an underwritten offering, participate,
to the extent reasonably requested by the managing underwriters for the
offering or the holders of the Registrable Securities being sold, in customary
efforts to sell the securities in the offering, including, without limitation,
participating in "road shows";
(k) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection
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with such Registration Statement to enable them to conduct a reasonable
investigation within the meaning of the Securities Act;
(l) subject to other provisions hereof, use its best efforts
to cause such Registrable Securities covered by such Registration Statement to
be registered with or approved by such other governmental agencies or
authorities or self-regulatory organizations as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities;
(m) use its best efforts to obtain a "comfort" letter, dated
the effective date of such Registration Statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified the Company's financial statements, addressed to each seller, and to
the underwriters, if any, covering substantially the same matters with respect
to such Registration Statement (and the Prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other financial matters as
such seller (or the underwriters, if any) may reasonably request;
(n) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available to its
securityholders, in each case as soon as practicable, an earnings statement
covering a period of at least twelve months, beginning with the first month
after the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
(o) permit any holder of Registrable Securities, which
holder, in the sole judgment, exercised in good faith, of such holder might be
deemed to be a controlling person of the Company (within the meaning of the
Securities Act or the Exchange Act) to participate in the preparation of any
Registration Statement covering such holder's Registrable Securities and to
include therein material, furnished to the Company in writing, which in the
reasonable judgment of such holder should be included and which is reasonably
acceptable to the Company;
(p) promptly notify the holders of the Registrable Securities
of the issuance of any stop order by the Commission or the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws, and use every
reasonable effort to obtain the lifting at the earliest possible time of any
stop order suspending the effectiveness of any Registration Statement or of any
such other order;
(q) at any time file or make any amendment to a Registration
Statement, or any amendment of or supplement to a Prospectus (including
amendments of the documents incorporated by reference into the Prospectus), of
which each seller of Registrable Securities or the managing underwriters shall
not have previously been advised and furnished a copy or to
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which the sellers of Registrable Securities, the managing underwriters, or
counsel for such sellers or for the underwriters shall reasonably object;
(r) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to sellers of Registrable
Securities and the underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters and selling holders, as the case
may be, in underwritten public offerings of substantially the same type;
(s) during the period when the Prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act;
(t) if any proposed registration statement refers to any
seller by name or otherwise as the holder of any securities of the Company then
(whether or not, in the sole judgment, exercised in good faith, of such seller,
such seller is or might be deemed to be a controlling person of the Company),
(i) the Company shall be required at the request of such seller to insert
therein language, in form and substance reasonably satisfactory to such seller,
the Company and the managing underwriters, to the effect that the holding by
such seller of such securities is not to be construed as a recommendation by
such seller of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such seller will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such seller by name or otherwise is not required by the
Securities Act, any similar Federal or state statute, or any rule or regulation
of any other regulatory body having jurisdiction over the offering, then in
force, the Company shall be required at the request of such seller to delete
the reference to such seller.
ARTICLE V
REGISTRATION EXPENSES
5.1 Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation, all registration and filing fees; fees and expenses of compliance
with securities or blue sky laws (including the fees and expenses of counsel in
connection with blue sky qualifications of the Registrable Securities);
printing expenses; messenger and delivery expenses; fees and disbursements of
counsel for the Company, one firm of counsel for the selling holders, and all
independent public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company; the Company's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties); the expense of
any annual audit or quarterly review; the expense of any liability insurance;
and the expenses and fees for listing the securities to be registered on each
securities exchange or national market
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system on which similar securities issued by the Company are then listed (all
of such expenses being herein called the "Registration Expenses") will be paid
for by the Company.
5.2 Sellers' Expenses. The Company shall have no obligation
to pay any underwriting discounts or commissions attributable to the sale of
Registered Securities, which expenses will be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered by each seller.
ARTICLE VI
UNDERWRITTEN OFFERINGS
6.1 Demand Underwritten Offerings. If requested by the
underwriters for any underwritten offerings of Registrable Securities pursuant
to a Demand Registration, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be satisfactory in
substance and form to a majority (by number of shares) of holders of
Registrable Securities on a Diluted Basis being offered and the underwriters,
and to contain such representations and warranties by the Company and such
other terms as are generally included in agreements of this type, including,
without limitation, indemnities customarily included in such agreements. The
holders of the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement. The holders of Registrable
Securities to be distributed by such underwriters may be parties to such
underwriting agreement and such holders may, at their option, require that any
or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. The Company shall
cooperate with any such holder of Registrable Securities in order to limit any
representations or warranties to, or agreements with, the Company or the
underwriters to be made by such holder only to those representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
6.2 Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Article II of this Agreement and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Article II of
this Agreement, arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder, subject to the limitations
set forth in Article II hereof, among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters, and may, at their option, require that any or all of the
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representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations or
warranties to, or agreements with, the Company or the underwriters to be made
by such holder only to those representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
holder of any Registrable Securities covered by any Registration Statement
referred to herein, its general partners, limited partners, officers,
directors, employees and agents, and each Person, if any, who controls such
holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the general partners, limited partners,
officers, directors, employees and agents of such controlling Person
(collectively, the "Controlling Person"), from and against any loss, claim,
damage, liability, reasonable attorneys' fees, cost or expense and reasonable
costs and expenses of investigating and defending any such claim and any action
in respect thereof (collectively, the "Damages") to which such holder, its
general partners, limited partners, officers, directors, employees and agents,
and any such Controlling Person may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof) arise
out of, or are based upon, any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus or any
preliminary Prospectus, or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made, except insofar as the same are based
upon information furnished in writing to the Company by a holder expressly for
use therein, and shall reimburse each holder, its general partners, limited
partners, officers, directors, employees and agents, and each such Controlling
Person for any legal and other expenses reasonably incurred by that holder, its
general partners, limited partners, officers, directors, employees and agents,
or any such Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; provided, however, that the
Company shall not be liable to any holder or other indemnitee to the extent
that any such Damages arise out of or are based upon an untrue statement or
omission made in any preliminary Prospectus if (i) such holder or other
indemnitee failed to send or deliver a copy of the final Prospectus with or
prior to the delivery of written confirmation of the sale by such holder to the
Person asserting the claim from which such Damages arise, and (ii) the final
Prospectus would have corrected such untrue
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statement or such omission. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such general partners, limited partners, officers, directors, agents, or
any Controlling Person and shall survive the transfer of such securities by
such holder.
7.2 Indemnification by Holders. In connection with any
Registration Statement in which a holder of Registrable Securities is
participating, each such selling holder agrees, as to itself, to indemnify and
hold harmless (in the same manner and to the same extent as set forth in
Section 7.1), to the extent permitted by law, the Company, its officers,
directors, employees and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the general partners, limited partners,
officers, directors, employees and agents of such controlling Person, with
respect to any statement or alleged statement in or omission or alleged
omission from such Registration Statement or Prospectus, or any amendment or
supplement thereto, or any preliminary Prospectus, if such statement or alleged
statement or omission or alleged omission was made about such holder in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such holder, specifically stating that it is for use
in the preparation of such Registration Statement or Prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Company or any of its directors, officers or controlling
Persons and shall survive the transfer of such securities by such holder. With
respect to each claim pursuant to this Section 7.2, each such holder's maximum
liability under this Section shall be limited to an amount equal to the net
proceeds actually received by such holder (after deducting any underwriting
discount and expenses) from the sale of Registrable Securities being sold
pursuant to such Registration Statement or Prospectus by such holder.
7.3 Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party hereunder of written notice of the commencement
of any action or proceeding involving a claim referred to in Section 7.1 or
Section 7.2 of this Agreement, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 7.1 or Section
7.2 of this Agreement except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel for
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all holders of Registrable Securities, selected by the Required Holders, or
(ii) more than one counsel for the Company, in each case in connection with any
one action or separate but similar or related actions. An indemnifying party
who is not entitled to, or elects not to, assume the defense of a claim will
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels. Notwithstanding anything to the contrary set forth herein,
and without limiting any of the rights set forth above, in any event any party
shall have the right to retain, at its own expense, counsel with respect to the
defense of a claim. The indemnifying party will not, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not
such indemnified party or any Person who controls such indemnified party is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim, action, suit or proceeding
and such settlement, compromise or consent involves only the payment of money
and such money is actually paid by the indemnifying party. Whether or not the
defense of any claim or action is assumed by the indemnifying party, such
indemnifying party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably withheld.
7.4 Indemnity in Underwriting Agreement. The Company and each
holder of Registrable Securities requesting registration shall provide for the
foregoing indemnity (with appropriate modifications) in any underwriting
agreement with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
7.5 Contribution. If the indemnification provided for in
Sections 7.1 and 7.2 of this Agreement are unavailable or insufficient to hold
harmless an indemnified party under such Sections, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in Section 7.1
or Section 7.2 of this Agreement in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as
well as any other relevant equitable considerations, including, without
limitation, the relative benefits received by each party from the offering of
the securities covered by such Registration Statement, the parties' relative
knowledge and access to
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information concerning the matter with respect to which the claim was asserted
and the opportunity to correct and prevent any statement or omission. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statements or omission. The parties hereto agree that it would not
be just and equitable if contributions pursuant to this Section 7.5 were to be
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
first sentence of this Section 7.5. The amount paid by an indemnified party as
a result of the losses, claims, damages or liabilities referred to in the first
sentence of this Section 7.5 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim (which shall be limited as
provided in Section 7.3 of this Agreement if the indemnifying party has assumed
the defense of any such action in accordance with the provisions thereof) which
is the subject of this Section 7.5. Promptly after receipt by an indemnified
party under this Section 7.5 of notice of the commencement of any action
against such party in respect of which a claim for contribution may be made
against an indemnifying party under this Section 7.5, such indemnified party
shall notify the indemnifying party in writing of the commencement thereof if
the notice specified in Section 7.3 of this Agreement has not been given with
respect to such action; provided, that the omission to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may otherwise have to any indemnified party under this Section 7.5,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. The Company and each holder of Registrable Securities
agrees with each other and the underwriters of the Registrable Securities, if
requested by such underwriters, that (i) the underwriters' portion of such
contribution shall not exceed the underwriting discount and (ii) that the
amount of such contribution shall not exceed an amount equal to the net
proceeds actually received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, liabilities,
claims, damages or expenses of the indemnified parties relate. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
7.6 Payment. The indemnification required by this Article VII
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
ARTICLE VIII
RULE 144
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable
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Securities without registration under the Securities Act within the limitation
of the exemption provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
ARTICLE IX
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements and consistent with the provisions of this Agreement.
ARTICLE X
DEFINITIONS
10.1 As used in this Agreement, the following defined terms shall have the
meanings set forth below:
"Bug Investors" means Bug, and each of its direct and
indirect transferees, so long as such Person shall be a holder of Registrable
Securities.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"Commission" means the U.S. Securities and Exchange
Commission.
"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, liquidation 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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"Diluted Basis" means with respect to the calculation of the
number of shares of Common Stock (i) all shares of Common Stock outstanding at
the time of determination, (ii) all shares of Common Stock issuable upon
conversion of the Preferred Stock, (iii) all shares of Common Stock issuable
upon conversion of the Warrants and (iv) any securities issued or issuable with
respect to the Common Stock referred to in clause (i), (ii) or (iii) in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute then in effect, and any reference to a
particular section thereof shall include a reference to the equivalent section,
if any, of any such similar Federal statute, and the rules and regulations
thereunder.
"Governmental or Regulatory Authority" has the meaning
ascribed to it in the Credit Agreement.
"NYCDF Investors" means NYCDF, and each of its direct and
indirect transferees, so long as such Person shall be a holder of Registrable
Securities.
"Permitted Transferees" shall have the meaning specified in
the Stockholders Agreement.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company, limited liability
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Preferred Stock" means the Series A Convertible
Participating Preferred Stock, par value $.001 per share, of the Company.
"Prospectus" means the prospectus included in any
Registration Statement (including without limitation, a prospectus that
disclosed information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the securities
covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Registrable Securities" means (i) any Common Stock issued or
issuable upon conversion of the Preferred Stock, (ii) any Common Stock issued
or issuable upon exercise of any Warrant, and (iii) any securities issued or
issuable with respect to the Common Stock referred to in clause (i) or clause
(ii) above in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities unless such
securities are held at
17
<PAGE>
such time by a holder of Registrable Securities when they have (x) been
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering them, (y) been transferred pursuant to
Rule 144 (or any similar rule then in force) under the Securities Act or (z)
been otherwise transferred and new certificates for them not bearing a
restrictive Securities Act legend have been delivered by the Company and can be
sold without complying with the registration requirements of the Securities
Act.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"Required Bug Investors" means, as of the date of any
determination thereof, (i) Bug, so long as it holds any Registrable Securities
representing at such time at least twenty percent (20%) (by number of shares)
of the Registrable Securities held by all CFD Investors on a Diluted Basis or
(ii) Bug Investors which hold Registrable Securities representing at such time
at least a majority (by number of shares) of the Registrable Securities held by
all Bug Investors on a Diluted Basis.
"Required Holders" means, as of the date of any determination
thereof, holders of Registrable Securities representing at such time at least a
majority (by number of shares) of all Registrable Securities on a Diluted
Basis.
"Required NYCDF Investors" means, as of the date of any
determination thereof, (i) CFD, so long as it holds any Registrable Securities
representing at such time at least twenty percent (20%) (by number of shares)
of the Registrable Securities held by all NYCDF Investors on a Diluted Basis or
(ii) NYCDF Investors which hold Registrable Securities representing at such
time at least a majority (by number of shares) of the Registrable Securities
held by all NYCDF Investors on a Diluted Basis.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute then in effect, and any reference to a
particular section thereof shall include a reference to a comparable section,
if any, of any such similar Federal statute, and the rules and regulations
thereunder.
"Warrant" means any Stock Purchase Warrant issued by the
Company pursuant to the Credit Agreement.
10.2 Unless otherwise stated, other defined terms used in
this Agreement shall have the meanings set forth in the Stockholders Agreement.
18
<PAGE>
10.3 The following defined terms, when used in this
Agreement, shall have the meaning ascribed to them in the corresponding
Sections of this Agreement listed below:
"Agreement" -- Preamble
"Bug" -- Preamble
"Company" -- Preamble
"Controlling Persons" -- Section 7.1
"Credit Agreement" -- Preamble
"Damages" -- Section 7.1
"Demand Registrations" -- Section 1.1
"Existing Registration Rights Agreement" -- Preamble
"Long-Form Registrations" -- Section 1.1
"NYCDF" -- Preamble
"Piggy-back Registration" -- Section 2.1
"Registration Expenses" -- Section 5.1
"Short-Form Registrations" -- Section 1.1
ARTICLE XI
MISCELLANEOUS
11.1 No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Securities
in this Agreement.
11.2 Certain Actions Affecting Registrable Securities. The
Company will not take any action, or fail to take any action which it may
properly take, with respect to its securities which would adversely affect the
ability of the holders of Registrable Securities to include Registrable
Securities in a registration undertaken pursuant to this Agreement or which, to
the extent within its control, would adversely affect the marketability of such
Registrable Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).
11.3 Deferral. Notwithstanding the provisions of Articles I
and II, the Company's obligations to file a Registration Statement, or cause
such Registration Statement to become and remain effective, shall be suspended
for a period not to exceed 90 consecutive days if there exists at the time
material non-public information relating to the Company that, in the reasonable
opinion of the Company's counsel, should not be disclosed.
19
<PAGE>
11.4 Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties
that the remedy at law, including monetary damages, for breach of any such
provision will be inadequate compensation for any loss and that any defense in
any action for specific performance that a remedy at law would be adequate is
waived.
11.5 Amendments and Waivers. Except as otherwise provided
herein, no modification amendment or waiver of any provision of this Agreement
will be effective against the Company or any holder of Registrable Securities,
unless such modification, amendment or waiver is approved in writing by the
Company and the Required holders. The failure of any party to enforce any of
the provisions of this Agreement will in no way be construed as a waiver of
such provisions and will not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its
terms.
11.6 Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
holders of Registrable Securities are also for the benefit of, and enforceable
by, any subsequent holder of Registrable Securities, except to the extent
reserved to or by the transferor in connection with any such transfer.
11.7 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by pre-paid first class mail, return receipt requested or mailed by
overnight courier to the parties at the following addresses or facsimile
numbers:
(i) If to NYCDF:
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, NY 10177
Facsimile No.: (212) 490-1566
Attn: Ronald D. Celmer
20
<PAGE>
with a copy to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
(ii) If to Bug, Inc.
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
c/o The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, NY 11201-3850
Attn: Thomas Riordan
(ii) If to the Company, to:
Skyline Multimedia Entertainment, Inc.
Empire State Building
350 Fifth Avenue
Suite 612
New York, NY 10118
Facsimile No.: (212)
Attn: Zalman D. Silber
with a copy to:
Rosenman & Colin
575 Madison Avenue
New York, New York 10022
Facsimile No.: (212) 940-8776
Attn: Neil Belloff, Esq.
(iii) If to a holder of Registrable Securities, to the
last address for such Person set forth in the
records of the Company.
All such notices, requests and other communications will (w) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (x) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, (y) if delivered by
mail in the manner described above to the address as provided in this Section,
21
<PAGE>
upon the earlier of the third Business Day following mailing or upon receipt
and (z) if delivered by overnight courier to the address as provided in this
Section, be deemed given on the earlier of the first Business Day following the
date sent by such overnight courier or upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
11.8 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.9 Gender. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as
though in the plural and words in the plural shall be construed as though in
the singular in all cases where they would so apply.
11.10 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future
Law, and if the rights or obligations of any party hereto under this Agreement
will not be materially and adversely affected thereby, (i) such provision will
be fully severable, (ii) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, (iii) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.
11.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
11.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date first written above.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By: __________________________
Name:
Title:
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund, Inc.,
General Partner
By: __________________________
Name:
Title:
Bank of New York, as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company
By: __________________________
Name:
Title:
23
<PAGE>
THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON DECEMBER 20,
1996, 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 ss.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
December 20, 1996 $1,500,000
New York, New York No. 1
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 Discovery 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>
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>
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>
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, NY 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 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.
4
<PAGE>
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>
<TABLE>
<S> <C>
- ----------------------------------------------------------- --------------------------------------------------------
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.
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
<PAGE>
THE SECURITY REPRESENTED BY THIS NOTE WAS ORIGINALLY ISSUED ON DECEMBER 20,
1996, 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 ss.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
December 20, 1996 $1,000,000
New York, New York No. 2
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 the Employees Retirement Plan of the
Brooklyn Union Gas Company 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>
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>
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>
Bank of New York, as Trustee for the
Employees Retirement Plan of the
Brooklyn Union Gas Company
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.
14
<PAGE>
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>
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>
<TABLE>
<S> <C>
- ----------------------------------------------------------- --------------------------------------------------------
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.
- ----------------------------------------------------------- --------------------------------------------------------
</TABLE>
<PAGE>
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: December 20, 1996 Certificate No. 4
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas Company or its
registered assigns (the "Registered Holder"), the right to purchase from the
Company 30,893 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
Subordinated Credit Agreement dated as of December 20, 1996, 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.
1
<PAGE>
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.
2
<PAGE>
(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>
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>
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>
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
6
<PAGE>
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
7
<PAGE>
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>
(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.
"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
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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."
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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
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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.
* * * * *
<PAGE>
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>
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>
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>
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: December 20, 1996 Certificate No. 3
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas Company or its
registered assigns (the "Registered Holder"), the right to purchase from the
Company 66,667 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
Subordinated Credit Agreement dated as of December 20, 1996, 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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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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(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
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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
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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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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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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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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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(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.
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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.
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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
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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.
* * * * *
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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>
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>
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>
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: December 20, 1996 Certificate No. 2
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Prospect Street NYC Discovery
Fund, L.P., a Delaware limited partnership, or its registered assigns (the
"Registered Holder"), the right to purchase from the Company 13,008 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 Subordinated Credit Agreement dated as
of December 20, 1996, 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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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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(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
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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
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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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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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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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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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(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.
"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
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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."
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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
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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.
* * * * *
<PAGE>
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>
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>
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
--------------------------------
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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: December 20, 1996 Certificate No. 1
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a Delaware
corporation (the "Company"), hereby grants to Prospect Street NYC Discovery
Fund, L.P., a Delaware limited partnership, or its registered assigns (the
"Registered Holder"), the right to purchase from the Company 133,333 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 Subordinated Credit Agreement dated as
of December 20, 1996, 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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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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(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
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<PAGE>
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
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<PAGE>
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>
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>
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
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<PAGE>
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange 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>
(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
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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.
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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.
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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
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.
* * * * *
<PAGE>
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>
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>
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>
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
Loan No.: 207-02
Loan Date: 12/23/96
Loan and Security Agreement entered into as of the 23rd day of December, 1996
(the "Agreement") by and between INDEPENDENT RESOURCES, INC. a New York
corporation with its principal offices at 43 West Street, Litchfield Connecticut
006759 ("Lender") and NEW YORK SKYLINE, INC. a New York State Corporation with
its principal office at 350 Fifth Avenue, New York, NY 10118 ("Borrower").
WHEREAS, Borrower desires to obtain a secured loan from Lender to finance
its acquisition of equipment (and/or to refinance existing equipment); and
WHEREAS, Lender is agreeable to making a secured loan to Borrower on the
terms and conditions contained in this Loan and Security Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the parties'
mutual agreements below set forth, Borrower and Lender agree as follows:
1. THE LOAN AND LOAN REPAYMENT. As requested by Borrower, Lender agrees to
lend to Borrower the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00) ("Loan"). Borrower agrees to repay the Loan in successive
installments (which installment payments are inclusive of interest) as set forth
in the following Schedule:
SCHEDULE
- --------------------------------------------------------------------------------
ADVANCE PAYMENT NUMBER OF INSTALLMENTS PERIODIC INSTALLMENT PAYMENT
(Exclusive of Advance Payment) AMOUNT PER PERIOD
AND PAYMENT PERIOD
- --------------------------------------------------------------------------------
$117,400.53 Forty-five (45) Monthly $39,133.50
Payments
- --------------------------------------------------------------------------------
Commencement Date: ______________ Security Deposit (if any): __________
Equipment Location (if other than above address of Borrower): __________________
Equipment Description: See Schedule "A" attached hereto and made a part hereof
Special Provisions (if any): ________________________________
The Advance Payment, if any, shall be due and payable upon execution of
this Agreement. The first periodic installment payment (after excluding the
Advance Payment, if any) shall be due on the first (1st) day of the month
following the advance of the Loan proceeds by Lender and Borrower authorizes
Lender to insert such date above as the Commencement Date. The remaining
periodic installment payments shall be due and payable on the same day of each
successive month (or quarter, if quarterly payments are provided for above).
However, the parties may select another Commencement date by noting the same in
the above Special Provisions section or by a separate writing signed by Lender
and Borrower in which case the first periodic installment payment shall be due
on such date. Unless otherwise specifically provided for in this Agreement, the
Loan may not be prepaid.
2. UNCONDITIONAL OBLIGATION TO PAY, LATE PAYMENTS, ETC. All payments due
hereunder shall be paid to Lender or its assigns without notice or demand and
without abatement, offset, defense or counterclaim, at Lender's principal office
shown above, or such other place as Lender or its assignee may designate in
writing to Borrower. Borrower's obligation to pay the installments and other
payments due hereunder shall be absolute and unconditional and shall not be
affected by reason of (i) any defect in, lack of fitness for use of, damage to,
loss of possession or use of or destruction of, all or any of the Equipment (as
defined below) securing borrower's obligations, (ii) the prohibition or other
restriction against Borrower's use of said Equipment or (iii) for any other
cause, it being the agreement of the parties that the Loan and any other amount
payable by Borrower hereunder shall continue to be payable in all events in the
manner and at the times provided in this Agreement.
The Loan shall become immediately due and payable in its entirety upon the
occurrence of any Event of Default (as defined below). If any periodic
installment payment or other payment is more than five (5) days late, Lender
may, at its election, and subject to prior exercise of its right of
acceleration, accept the payment in arrears and Borrower shall pay, as
liquidated damages, a late charge equal to two (2%) percent per month on each
defaulted payment from the due date thereof. In no event shall any amount
payable to Lender as interest, including any sum held by a Court of competent
jurisdiction to be "interest" under applicable law, exceed, with respect to any
period of time, the highest rate of interest permitted by applicable law. Any
amount received by lender determined to be in excess of the highest rate of
interest receivable by Lender, shall be refunded to Borrower.
3. SECURITY INTEREST. To secure payment when due (at maturity, by
acceleration or otherwise) of the Loan, any interim fundings against the Loan
and any additional or future advances, renewals, extensions and replacements
thereto and any and all other present and future obligations of Borrower to
Lender, whether direct or contingent or joint and several, Borrower hereby
conveys, assigns, and grants to lender a continuing security interest in and to
(i) the equipment described in the annexed Schedule A including all present and
future additions, attachments, replacements, accessions and accessories thereto
(the "Equipment"), and all substitutions and proceeds thereof including all
proceeds of insurance thereon, and (ii) all equipment, inventory, accounts,
receivables, goods and assets of any and every kind, including, but not limited
to, all items of intangible property, wherever located, now or hereafter
belonging to Borrower or in which Borrower has any interest, and all proceeds of
the foregoing including insurance proceeds; all of the above, collectively, the
"Collateral".
BORROWER GRANTS LENDER THE AUTHORITY TO FILE THIS AGREEMENT OR A CARBON,
PHOTOGRAPHIC OR OTHER REPRODUCTION THEREOF AS A FINANCING STATEMENT UNDER THE
UNIFORM COMMERCIAL CODE WITH RESPECT TO ALL SECURITY INTERESTS CREATED HEREBY.
4. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
BORROWER ACKNOWLEDGES THAT THE EQUIPMENT HAS BEEN OR WILL BE SELECTED AND
ACQUIRED SOLELY BY BORROWER AND THAT LENDER HAS NOT AND DOES NOT MAKE ANY
WARRANTY WITH RESPECT TO ITS CONDITION, MERCHANTABILITY, SUITABILITY, CAPACITY
OR FITNESS FOR ANY PARTICULAR PURPOSE.
5. REPRESENTATIONS AND WARRANTIES. Borrower warrants, represents and agrees
as follows (i) Borrower has full power and authority to execute, deliver and
perform its obligations under this Agreement; (ii) the execution and delivery of
this Agreement has been authorized by all requisite corporate (or partnership)
action; (iii) the execution, delivery and performance of this Agreement do not
and will not constitute a breach, default or violation of or under Borrower's
articles of incorporation, by laws (partnership agreement) or any other
agreement, law, order, lease, judgment or injunction to which it is a party or
may be bound; (iv) the Equipment is (or, on the Commencement Date, will be)
lawfully owned by Borrower, free and clear of all liens, encumbrances and
security interests and Borrower will warrant and defend title thereto against
all claims; (v) Borrower has not granted and will not grant to any one other
than Lender a security interest in the Equipment and no Financing Statement or
other instrument affecting the Equipment nor rights therein, bearing the
signature of, or otherwise authorized by, Borrower is on file in any public
office; (vi) the Equipment shall at all times remain personal property and be
retained in Borrower's possession at its principal address set forth above (or,
if so indicated, at the Equipment Location set forth above); (vii) the Equipment
shall be used for business purposes; and (viii) if the Equipment is attached to
real estate or if it is or may become subject to a prior interest in favor of a
party having any interest in the real estate, Borrower will, on Lender's demand,
furnish Lender with a writing by which any and all parties having such prior
interest waive or subordinate their rights and priorities to, or in favor of,
Lender's security interest provided herein.
6. INSURANCE. Borrower shall, at its sole cost and expense, procure and
maintain, so long as Borrower is indebted to Lender on the Loan or on any other
liability (i) insurance insuring the Equipment against all risks of physical
loss, theft, damage and destruction with extended coverage in an amount equal to
the greater of (a) the amount of the Loan or (b) the full replacement value
(new) of the Equipment with loss payable solely to Lender (and its assigns) and
Borrower as their interests may appear and (ii) personal injury liability and
property damage insurance with respect to the Equipment and the use thereof in
such amounts as may be reasonably acceptable to Lender, and naming Lender (and
its assigns) as additional insured. All insurers and coverages must be
reasonably satisfactory to Lender. Borrower shall deposit said policy or
policies or duplicates thereof or certificates of insurance with lender and said
policies shall provide satisfactory to Lender. Borrower shall deposit said
policy or policies or duplicates thereof or certificates of insurance with
Lender and said policies shall provide that the policies may not be canceled or
altered without at least thirty (30) days prior notice to Lender and that the
coverage shall not be invalidated against Lender because of any violation of any
condition or warranty contained in any policy or application therefor by
Borrower or by reason of any action or inaction of Borrower.
7. USE, REPAIRS, LOSS AND DAMAGE. Borrower agrees to maintain the Equipment
in good condition and repair and in accordance with the manufacturer's
instructions, manuals and warranties (if any), and the requirements of any
applicable insurance and any governmental authority having jurisdiction,
provided, however, that Borrower shall not make any changes or alterations in or
to the Equipment except as necessary for compliance with this section. Borrower
shall pay for all fuel, service, inspection, overhaul, replacements,
substitutions, materials and labor necessary or desirable for the proper use,
repair, operation and maintenance of the Equipment. All risks of loss, theft,
damage or destruction of the Equipment shall be borne by Borrower and Borrower
shall promptly notify Lender in writing of any such loss, theft, damage or
destruction. In the event of any damage to the Equipment (unless the same is
damaged beyond repair) Borrower shall, at its expense, place the same in good
repair, condition and working order. If the Equipment is determined by Lender to
be lost, stolen or damaged beyond repair, or should the Equipment be
confiscated, seized or the use and title thereof requisitioned to someone other
than Borrower, Borrower shall immediately pay to Lender, in addition to unpaid
periodic installment payments on the Loan, other unpaid sums due hereunder and
late charges then past due, an amount equal to the them remaining periodic
installment payments due on the Loan discounted to present value at the rate of
six (6%) percent per annum, less the net amount of the recovery, if any,
actually received by Lender from insurance on the Equipment.
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT CONTINUED ON REVERSE SIDE
- --------------------------------------------------------------------------------
Accepted at Lender's Office The undersigned signatory affirms that he/she has
at Litchfield, Connecticut read the terms and conditions printed above and on
the reverse side, that he/she is a duly authorized
officer, partner or proprietor of the Borrower,
and has authority to execute this Loan and
Security Agreement on its behalf.
- --------------------------------------------------------------------------------
LENDER: BORROWER:
INDEPENDENT RESOURCES, INC. NEW YORK SKYLINE, INC.
- --------------------------------------------------------------------------------
AUTHORIZED OFFICER: AUTHORIZED OFFICER, PARTNER OR PROPRIETOR:
BY: BY:
TITLE TITLE
- --------------------------------------------------------------------------------
(1)
<PAGE>
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT (CONTINUED)
8. TAXES AND OTHER CHARGES. Borrower agrees to pay promptly when due all
registration, title, license and other fees, assessments and sales, use, gross
receipts, ad valorum, property and any and all other taxes imposed by any State,
Federal, local or foreign government upon this Agreement or upon the ownership,
shipment, delivery, use or operation of the Equipment or any Collateral or upon
or measured by any payments due hereunder (other than taxes on or measured
solely by the net income of Lender) and any fines, penalties and interest
thereon.
9. BORROWER'S ADDITIONAL COVENANTS. Borrower hereby agrees and covenants as
follows: (i) except for the security interest granted hereby, Borrower shall
keep the Equipment free and clear of any security interest, lien or encumbrance
and shall not sell, lease, assign (by operation of law or otherwise), exchange
or otherwise dispose of any of the Equipment, (ii) at the request of the Lender,
Borrower shall execute one or more Financing Statements and continuation
statements pursuant to the Uniform Commercial code to establish and maintain its
security interest in the Collateral, in form satisfactory to Lender, and will
pay any filing fees and/or costs with respect thereto and for lien searches;
(iii) Borrower authorizes Lender to file one or more Financing Statements
covering the Collateral without Borrower's signature thereto; (iv) Borrower will
immediately notify Lender in writing of any change in its place(s) of business
or the adoption or change of any trade name or fictitious business names and
will execute any additional Financing Statements as Lender may request to
perfect and maintain its security interest, but such notice shall not be deemed
an authorization to move the Collateral without the prior written consent of
Lender; (vi) Borrower will allow Lender and its representatives free access to
the Collateral at all times during normal business hours, for purposes of
inspection and repair and, following an Event of Default, lender shall have the
right to demonstrate and show the Collateral to others and (vii) Borrower will
furnish to Lender (and will cause any guarantor of Borrower's obligations
hereunder to furnish to Lender) (a) its unaudited quarterly Financial Statements
within thirty (30) days after the end of its first three quarters in each fiscal
year, (b) its certified Financial Statement prepared by an independent certified
public accountant within ninety (90) days after the close of its fiscal year
which shall be prepared in accordance with generally accepted accounting
principles and (c) all other financial information and reports that Lender may
from time to time reasonably request, including income tax returns of Borrower
and any guarantor of Borrower's obligations hereunder.
10. BORROWER'S FAILURE TO PAY TAXES, INSURANCE, ETC. Should Borrower fail
to make any payment or do any act as herein provided (including, but not limited
to, payment of taxes or for insurance), Lender shall have the right, but not the
obligation, and without releasing Borrower from any obligation hereunder, to
make or do the same, and to pay any sum due in connection therewith or to
contest or compromise any encumbrance, charge or lien and in exercising any such
rights, incur any liability and expend whatever amounts in its absolute
discretion it may deem necessary therefor. All sums so incurred or expended by
Lender shall be payable by Borrower on demand with interest at the rate of two
(2%) percent per month.
11. CROSS COLLATERALIZATION. Without in any way limited the provisions of
Section 3, as additional collateral security for the Borrowers' obligations
hereunder, Borrower grants to Lender a further security interest in all
machinery, equipment, goods and other collateral covered by any other Loan and
Security Agreement, note and security agreement, other agreement or lease
(collectively the "other agreements") between Borrower and Lender whether such
other agreements are now in existence or hereafter come into existence and
Borrower assigns to Lender as security for its obligations hereunder, all of its
rights, title and interest in and to any surplus money to which Borrower may be
entitled upon the sale of the machinery, equipment, goods and other collateral
covered by such other agreements. Anything above to the contrary
notwithstanding, the benefit of the foregoing cross collateralization shall
apply for the benefit of Lender and its assignee holding this Agreement only to
the extent that Lender or such assignee is also the holder of such other
agreements or one or more of them.
12. INDEMNITY. Borrower assumes liability for and agrees to indemnify,
defend, protect, save and keep harmless Lender from and against costs, expenses
and disbursements, including court costs and legal expenses, of whatever kind
and nature, imposed on, incurred by or asserted against Lender (whether or not
also indemnified against by any other person) in any way relating to or arising
out of this Agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment by
Borrower, including, without limitation, any claim alleging latent and other
defects, whether or not discoverable by Lender or Borrower, and any other claim
arising out of strict liability in tort, whether or not in either instance
relating to an event occurring while Borrower remains obligated under this
Agreement, and any claim for patent, trademark or copyright infringement. Each
party agrees to give the other notice of any claim or liability hereby
indemnified against promptly following learning thereof. The fact that a claim
for which Lender is entitled to indemnity under this Section is asserted after
the termination of this Agreement shall not release Borrower form its indemnity
obligations and this covenant of indemnity shall survive the termination of this
Agreement.
13. DEFAULT. The occurrence of any one of the following shall constitute an
Event of Default hereunder: (i) Borrower fails to pay any periodic installment
payment or other amount due hereunder on or before the fifth (5th) day following
the date when the same becomes due and payable; (ii) Borrower removes, sells,
transfers, encumbers, or parts with possession of the Equipment or any items
thereof or attempts to do any of the foregoing; (iii) Borrower fails to maintain
in force the required insurance on the Equipment in compliance herewith or fails
to provide loss payable protection to lender in form satisfactory to Lender;
(iv) any representation or warranty made by Borrower herein or in any other
agreement between the parties or in any statement given to Lender shall be
materially untrue; (v) Borrower shall fail to observe or perform any of the
obligations required to be observed or performed by Borrower hereunder, or other
obligation or indebtedness of Borrower to Lender otherwise owing or due by
Borrower to Lender in any other agreement now or hereafter executed between the
parties hereto, and such failure shall continue uncured for twenty (20) days
after written notice thereof to Borrower; (vi) Borrower shall (a) fail to pay
any indebtedness for borrowed money (other than the Loan) of the Borrower, or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), or (b) fail to perform
or observe any term, covenant, or condition on its part to be performed or
observed under any agreement or instrument relating to such indebtedness, or if
any such indebtedness shall be declared to be due or payable or required to be
prepaid (other than by a regularly scheduled required prepayment) prior to the
stated maturity thereof; (vii) if Borrower leases the premises where the
Equipment is located, a breach of such lease by Borrower and the commencement of
an action by the landlord to evict Borrower or to repossess the premises; (viii)
if Borrower sells, leases or disposes of any of its assets except in the
ordinary course of its business and except for the disposition of any obsolete
or retired property not useful to Borrower; (ix) Borrower ceases doing business
as a going concern, makes an assignment for the benefit of creditors, admits in
writing its inability to pay its debts as they become due, files a voluntary
petition in bankruptcy, is adjudicated a bankrupt or an insolvent, files a
petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed, or if within sixty (60) days after the appointment without Borrower's
acquiescence of any trustee, custodian, receiver or liquidator of it or of all
or any substantial part of its assets and properties, such appointment shall not
be vacated; (xi) Borrower sells all or substantially all of its assets or
consolidates with or merges into any other entity or Borrower's stockholders or
partners sell all or substantially all of their stock or partnership interests;
or (xii) the death of a guarantor of Borrower's obligations hereunder or the
dissolution or filing of a petition in bankruptcy by or against a guarantor of
Borrower's obligations hereunder.
14. REMEDIES. Upon the occurrence of any Event of Default, Lender shall
have the right to recover from Borrower, as liquidated damages for loss of a
bargain and not as a penalty, a sum equal to the aggregate of the following: (a)
all unpaid periodic installment payments and other sums due under this Agreement
to the date of default plus late charges, if any, (b) the present value (using a
6% per year discount rate ) of all remaining periodic installment payments due
under this Agreement and (c) interest at the rate of two percent (2%) per month
on the total of (a) plus (b) from the date of default. In addition, Lender shall
have the right to recover from Borrower any expenses paid or incurred by Lender
in connection with the enforcement of its rights under this Agreement and the
repossession, holding, repair, preparing for sale and subsequent sale, lease or
other disposition of the Collateral including attorneys fees and legal expenses
(collectively "Repossession Expenses"). BORROWER AND LENDER WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON THIS AGREEMENT.
The Lender shall have all the rights and remedies of a Secured Party under
the Uniform Commercial Code and all other rights and remedies available to
creditors at law or in equity. Lender is hereby authorized and empowered, with
the aid and assistance of any person or persons, to enter any premises where the
Collateral or any part thereof is, or may be, placed, and to assemble and/or
remove same and/or to render it unusable and sell and dispose of such Collateral
at one or more public or private sales upon at least seven (7) days' written
notice to Borrower of such sale. The proceeds of each such sale shall be applied
by the Lender toward the payment of the repossession Expenses, the liquidated
damages specified above and other indebtedness secured hereby. Should the
proceeds of any such sale be insufficient to fully pay all the items above
mentioned Borrower hereby covenants and agrees to pay any deficiency to the
Lender. If Lender employs counsel for the purpose of effecting collection of any
monies due hereunder (whether or not Lender has retaken the Collateral or any
part thereof) or for the purpose of recovering the Collateral, or for the
purpose of protecting Lender's interest because of any default of Borrower,
Borrower agrees to pay reasonable attorney's fees. The Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by lender which is reasonably convenient to both parties. All
rights and remedies hereunder are cumulative and not exclusive and a waiver by
lender of any breach by Borrower in the terms, covenants, and conditions hereof
shall not constitute a waiver of future breaches or cumulative and not exclusive
and a waiver by Lender of any breach by Borrower of the terms, covenants, and
conditions hereof shall not constitute a waiver of future breaches or defaults;
and no failure or delay on the part of Lender in exercising any of its options,
powers, rights or remedies, or partial or single exercise thereof, shall
constitute a waiver thereof.
If any court of competent jurisdiction determines that any provision of
this Section 14 is invalid or unenforceable in any jurisdiction, in whole or in
part, such determination, as to such jurisdiction, shall not prohibit Lender
from enforcing its rights and establishing its damages sustained as the result
of any breach of this Agreement in accordance with the laws of such
jurisdiction.
15. ASSIGNMENT. Lender may assign or otherwise transfer this Agreement and
any and all of Lender's right, title and interest hereunder and in the
Collateral including the right to receive all amounts payable hereunder or grant
participations therein without Borrower's consent. In the event of such
assignment, the right of the assignee to receive all amounts payable hereunder
as well as any other right of the assignee shall not be subject to any defense,
set-off or counterclaim which Borrower may have against Lender although any
claim Borrower may have against Lender shall be preserved and may be separately
pursued against Lender. Upon Lender giving notice to Borrower of any such
assignment, Borrower shall promptly acknowledge its obligations hereunder to
such assignee, and shall comply with the written directions or demands of such
assignee and shall make all payments due hereunder as such assignee may direct
in writing. Following any such assignment the term "Lender" shall be deemed to
include or refer to lender's assignees, but no such assignee shall be deemed to
assume any obligation or duty imposed upon Lender hereunder and Borrower shall
look only to Lender for performance thereof. As used in this Section 15,
"assign" shall be deemed to include a pledge, sale of, or grant of a mortgage
on, or a security interest in, any of the Collateral or this Agreement by lender
and the term "assignee" shall be deemed to refer to the recipient of such
pledge, sale, mortgage or security interest. This Agreement and Borrower's
rights and obligations herein shall not be transferable or assignable by
Borrower without the Lender's express prior written consent and any such
purported assignment by Borrower without such consent shall be null and void.
16. GENERAL PROVISIONS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT. This Agreement may not be changed, modified or
discharged on behalf of Lender, in whole or part, and no right of Lender may be
waived except by a writing signed by a duly authorized officer of Lender. The
Lender is authorized and empowered to date this Agreement and the Schedule(s)
thereto and to fill in blank spaces in accordance with the terms of the
transaction, including, but not limited to inserting serial numbers and
equipment descriptions in Schedule A and the assignment of an account number.
Notices hereunder shall be in writing and shall be deemed given when personally
delivered or when sent by facsimile to a party's facsimile number or three days
after having been mailed to the other party at the address specified above or
such new address as to which a party may advise the other. Forbearance or
indulgence by Lender in any regard shall not constitute a waiver of the covenant
or condition to be performed by Borrower to which the same may apply. The
section captions are for convenience and are not a part of the Agreement. This
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and permitted assigns of the parties. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. THIS AGREEMENT AND ANY OTHER WRITTEN AGREEMENTS EXECUTED
SIMULTANEOUSLY HEREWITH SUPERSEDE ANY PRIOR PROPOSAL LETTERS, COMMITMENT LETTERS
OR NEGOTIATIONS AND THERE ARE NO ORAL COVENANTS OR AGREEMENTS. This Agreement
shall not be binding on Lender until accepted and executed on behalf of Lender
at its Lithcfield Connecticut office.
(2)
<PAGE>
LOAN AND SECURITY AGREEMENT
SCHEDULE A
The following description of property supplements, and is part of, the Loan and
Security Agreement dated December 23, 1996, and numbered 207-02, between the
undersigned Borrower and Independent Resources, Inc. and may be attached to said
Loan and Security Agreement and any related UCC Financing Statements, Acceptance
or Delivery Certificate or other document describing the property.
Engineering Room:
1 Hewlett Packard - Oscilloscope, MDL# 1220A
1 Lot of Misc., Shop Room Equipment, C/O: Various Office Furniture, Hand
Tools, Power Tools, Small Air Compressor, Multimeter, Etc.
1 COMPAQ - Personal Computer, MDL# Presario 433, w/ Monitor, Keyboard, and
Mouse
1 Cheney - Vertical Platform Lift, MDL# VPL Series 2000, 20' Height, Assoc.
Equipment
Gift Shop:
1 Intercon-X Virtual Reality System, w/ (2) Pods, "Cyberbase SU2000", w/
Insert Card Reader, Goggles, Attached, Assoc. Equipment
1 Lot Of - Gift Shop Cabinets, Racks, Wall and Freestanding Type, Etc.
1 Lot Of - Food Court Equipment, C/O: (1) Beveragaire - Cooler, (1) Ice
Cream Freezer, Top Opening, (1) Cotton Candy Machine, (1) Popcorn Machine,
(1) Beveragaire - Refrigerator, Under-The-Counter Type, (1) Soft Pretzel
Warmer, (2) Hot Dog Warmers, (1) Cash Register, w/ Verifone - Printer, Mod.
9000U, (1) Beveragaire - Cooler, (1) Coinmaster - Counter, Type "Elite",
(1) Coffee Maker, (1) Pepsi Cola - Dispenser Unit
Office:
1 Xerox - Copier MDL# 5320, w/ Cabinet Base
1 Realistic - Amplifier, MDL# MPA-95
1 AT&T - Telephone System, MDL# Partner Plus, w/ (2) 400E Expansion
Modules, (1) Partner - Mail VS R1 Module, (1) Processor Module, Mod. 206E,
Assoc. Handsets, and Equipment
page 1 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
Office Continued:
1 Chair, Wood, Upholstered, Swivel Base
1 Print Stand, Metal, 3 Tier, Laminate Finish
1 Desk, Metal, Single Pedestal, 2 Drawer, Laminate Finish
1 Hewlett Packard - Laser Printer, MDL# LASERJET 4P
1 Hewlett Packard - Fax Machine, MDL# FAX 900
1 Amano - Time Clock, MDL# MJR7000, Digital, w/ Card Rack
1 Motorolla - Charge Unit, 6-Bay, w/ (8) Motorolla - Hand Sets, Mod. Radius
CP-300
1 Credenza, Wood, 8' 2 Drawer, Sliding Door
1 Panasonic - Microwave Oven
1 Chair, Chrome, Upholstered, Swivel Base
2 Locker Sections, Metal, U-Shaped, Multiple Door
5 Locker Sections, Metal, Cube Type, 6 Door
1 Picnic Table, Metal, Wood
1 Partition Section, Metal
1 Marking Board, White
2 Chairs, Wood, Upholstered, Swivel Base
1 Desk, Laminate Finish, Woodgrain Formica Top, Left Angle Return
1 Compaq - Personal Computer, MDL# PRESARIO 433, w/ Monitor and Keyboard
1 Secretarial Chair, Metal, Upholstered, Swivel Base
1 Marking Board, White
1 File Cabinet, Metal, 4 Drawer
1 Lateral File Cabinet, Metal, 5 Drawer
1 Desk, Metal, Double Pedestal
1 Chair, Wood, Upholstered, Swivel Base
page 2 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
Office Continued:
1 Desk, Wood, Single Pedestal, 2 Drawer
1 Desk, Wood, 4 Drawer
1 Compaq - Personal Computer, MDL# DESKPRO 590, w/ Maxtex - Color Monitor,
Keyboard, and Mouse
1 Hewlett Packard - Laser Printer, MDL# LASERJET 5L
1 Trademark - Personal Computer, 3.5" Floppy Disk Drive, Trademark - Color
Monitor, Keyboard and Mouse
1 File Cabinet, Metal, 5 Drawer
2 Secretarial Chairs, Metal, Upholstered, Swivel Base
1 Chair, Wood, Wraparound Type
1 JVC - Personal CD Player, Stereo Cassette
1 Stool, Metal, Upholstered, Swivel Base
1 Fire Extinguisher, Class ABC
1 Gateway - Personal Computer, MDL# P5-100, Series 2000, w/ Crystal Scan -
Color Monitor, 15" Mouse and Keyboard
1 Hewlett Packard - Printer, MDL# DESKJET 660CSE
1 Ticketing System, C/O: (2) Hewlett Packard - Personal Computers, Type
VECTRA VE, Mod. 4/66, w/ 3.5" Floppy Disk Drive, (1) Compaq Personal
Computer, Mod. Prosigna 300, w/ Hewlett Packard - Tape Drive, Mod. 6000,
(1) Personal Computer, 486, (1) Compaq Personal Computer, Mod. DESKPRO 500,
w/ 3.5" Floppy Disk Drive, (1) Kenitec - 486 Personal Computer, (3) MAC -
Color Monitors, (1) HUB, (3) Practical Periferals - Modems, Mod. PC144MT,
(2) Keyboards, w/(1) Cart Stand, (1) APC - UPS Unit, Mod. 1400 (w/ Above
Ticketing System)
1 JVC - Color Television, 20". W/ JVC - 4-Head VCR, w/ Stand
1 Security System, w/ (4) Cameras, (1) Provideo - Black and White Monitor,
Mod. VM1201B, (1) Toshiba 24-Hour Security Recorder, (1) Quandra Split 660B
1 Lot Of Various, Office Furniture, C/O: Desks, Chairs, Conference Tables,
Lateral File Cabinets, Computer Stands, Etc.
page 3 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
Simulator Room:
2 SIMEX - Motion Simulator Systems, C/O: (1) MOOG Motion Base, Mod.
170E101, SN. #003, #004, Approx. 15' x 25' Platform, Electrical Mechanics,
Four Degrees Of Motion, With Forty Individual Buckets Seats, E/W Seat Belts
And Pneumatic Activated Lap Bar Restraint, (1) Westrex Interactive - Elec.
Projection System, #MMM35, With Xenon - Lamphouse, With Power Supply And
Controls, 30 Frame Per Second SPPD, High Speed Rewind, Four Reels, Lenses,
Assoc. Equipment w/ (1) Audio Surround System, With (1) Protone SS Audio
Processor, #SD-1000, (4) Rand - Equalizers, Mod. ME-60, (1) Apogee - Stereo
Processor, Mod. P-3000, With (1) P-3RV, (1) P-3PV, (1) P-2PV, (7) Crown -
AMP Units, Mod #800 "Com-Tech", (2) Pioneer - Laser Disc Players, Mod.
LDV-8000, (12) Apogee - Speakers, Assoc. Equipment (1) System Control Unit,
Microprocessor Based, Assoc. Equipment w/ (1) Projection Screen, Approx.
20' x 20', Motion Control Computers, Power Supplies, Assoc. Equipment (w/
Above Motion Simulator Systems)
1 Skyline Multimedia Film, "NY Skyride", w/ Audio CD's Etc., 8-12 Minute,
Compatible w/ Simulation Ride
Staging Area:
1 Table, Metal, Folding Legs
2 Benches, Metal, Folding Legs
1 Lot Of Various, Crowd Control Posts, And Ropes
2 Display Booths, E/W (1) JVC - Color Monitor, 20", And (1) Hitachi - VCR,
Mod. M281
1 JVC - Color Monitor, 27"
1 Display Booth, w/ JVC - 27" Color Monitor, w/ Hitachi - VCR
1 JVC - Audio System, C/): CD Automatic Changer, Mod. XL-MC302, Double
Cassette Deck, Mod. TD-W118, w/ Audio Video Control Receiver, Mod. RX-718V,
w/ CD Automatic Changer, 100-Disk Capacity, w/ (2) SX-SW9 Satellite
Subwoofer Speaker Systems
1 JVC - Keost System, CD Drive, Liquid Color Monitor, w/ Built-In Speaker
and Printer
1 JVC - Projection Television, MDL# NV-55BH6, 55"
1 Miko - Keost, w/ JVC - Liquid Color Monitor, Built-In Speaker
4 JVC - Color Monitors, 27", "Super Command"
2 Fans, Electric, Pedestal Type
page 4 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
Staging Area (Continued):
1 Lot Of Various, Misc. Decorations, C/O: Traffic Light, Walk Signs, Street
Lamp, Statue Of Liberty, Car Panel Display, Misc. Signs, Posters, Etc.
2 Fire Extinguishers, Class ABC
1 Pioneer - Laser Disk Players, MDL# LD-4000
1 JVC - Distribution Amplifier, MDL# JX-S700, AV Selector
2 JVC - Audio Video Control, MDL# RX-817V, Receivers
1 JVC - CD Automatic Changer, MDL# XL-M417
1 JVC - 100 Disc Changer, (Spare)
1 Radio Shack - PA System, MDL# MPA-46, 35 Watt, w/ Microphone, (2) Optimus
- Speakers
10 JVC - Color Monitors, 15"
9 JVC - Color Monitors, 27"
4 JVC - Color Monitors, 20"
1 Fan, Electric, Pedestal Type
1 Strand Lighting, Floor Light Controller, MDL# CD80PACK, w/ Merlin - Light
Pattern Controller, Mod. 088
1 Lot Of Various - Floor Scrubbers, Cleaners, Etc.
18 JVC - Color Monitors, 20"
3 JVC - Laser Disc Players, MDL# LDV-8000
4 JVC - Distribution Amplifiers
12 JBL - Speakers
1 Hot Dog Wagon, Portable
Ticket Area:
2 Compaq - Personal Computers, MDL# DESKPRO 590, w/ Monitor, Keyboard, w/
Cash Drawer And Boca - Ticket Printers
1 File Cabinet, Metal, 5 Drawer
page 5 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
Ticket Area (Continued):
1 Desk, Single Pedestal, Single Drawer
1 NKL - Safe, Digital
1 Coin Counter
1 Microwave, White
3 Stools, Metal
1 Verifone - Card Checker, MDL# RTRANZ330 w/ Verifone - Printer, Mod. 250
COMPLETE WITH ANY AND ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS,
IMPROVEMENTS, MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL
PROCEEDS INCLUDING INSURANCE PROCEEDS THERETO AND THEREFROM.
ALL GOODS, MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES, COMPLETE WITH ANY AND
ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS, IMPROVEMENTS,
MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL PROCEEDS INCLUDING
INSURANCE AND PRODUCTS THEREOF AND THEREFROM.
ALL ACCOUNTS, ACCOUNTS RECEIVABLE, CONTRACT RIGHTS, INSTRUMENTS, GENERAL
INTANGIBLES, AND CHATTEL PAPER AND ALL PROCEEDS THEREOF AND THEREFROM.
ALL INVENTORY AND ANY OTHER GOODS, MERCHANDISE OR OTHER PERSONAL PROPERTY HELD
BY DEBTOR FOR SALE OR LEASE AND ALL RAW MATERIALS, WORK OR GOODS IN PROCESS OR
MATERIALS OR SUPPLIES OF EVERY NATURE USED, CONSUMED OR TO BE CONSUMED IN
DEBTOR'S BUSINESS, AND ALL PROCEEDS, INCLUDING INSURANCE PROCEEDS AND PRODUCTS
OF ANY OF THE FOREGOING.
NEW YORK SKYLINE, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
page 6 of 6 Borrower Initial: _____
Lender Initial: _____
<PAGE>
PAYMENT ADJUSTMENT RIDER
RIDER TO LOAN AND SECURITY AGREEMENT #207-02 DATED DECEMBER 23, 1996 (THE
"AGREEMENT") BETWEEN NEW YORK SKYLINE, INC. AS BORROWER (THE "OBLIGOR") AND
INDEPENDENT RESOURCES, INC. AS LENDER ("I.R.")
1. Purpose. This Rider sets forth the terms of adjustment to the payments set
forth in the Agreement.
2. Definition. The following terms shall have the following meanings herein:
(a) "Adjustment Date" shall mean the date I.R. disburses the proceeds of the
Agreement.
(b) "Final T-Note Average" shall mean the average of the yields on U.S.
Treasury Notes maturing in four (4) years as published by the Dow Jones
Telerate Access Service, Page 19901, for the close of business on each
business day of the two full calendar weeks immediately preceding the
week containing the Adjustment Date.
(c) "Preliminary Payments" shall mean the payments set forth in the
Agreement, consisting of $117,400.53 due upon execution followed by
forty-five (45) consecutive monthly payments commencing 30 days after the
Adjustment Date consisting of $39,133.50.
(d) "Preliminary T-Note Average" shall mean 6.10%.
3. Adjustment of Payments. The Preliminary Payments were calculated based on a
spread over the Preliminary T-Note Average. If the Adjustment Date occurs
after December 31, 1996 and the Final T-Note Average exceeds the Preliminary
T-Note Average, then the Preliminary payments shall be revised. For each
increase of one (1) basis point (i.e., 1/100 of 1%) in the Final T-Note
Average above the Preliminary T-Note Average, the Preliminary Payments shall
be revised as follows:
o The $117,400.53 payment due upon execution shall remain unchanged.
o Each of the forty-five (45) payments in the amount of $39,133.50 shall
increase by $5.80.
Immediately after the determination of the revised payments due under the
Agreement, Obligor shall, at the request of I.R., execute an acknowledgment
reflecting the revised payment schedule and, if requested by I.R., a Replacement
Agreement containing the agreed to payments, but the failure of I.R. to make
such a request or the failure of Obligor to execute the acknowledgment or
Replacement Agreement shall in no way diminish Obligor's obligations hereunder.
4. I.R.'s Requirements. The commencement of the Agreement is subject to
satisfaction of all documentation and credit requirements of I.R. If such
requirements are not satisfied by the Adjustment Date, then at I.R.'s option,
the Adjustment Date shall be the date when such requirements are satisfied.
The calculation of the Agreement payments under this Rider will supersede any
prior proposal or quotation.
IN WITNESS WHEREOF, the parties have executed this Rider simultaneously with the
Agreement.
NEW YORK SKYLINE, INC. INDEPENDENT RESOURCES, INC.
By: _______________________________ By: _____________________________________
Its: ______________________________ Its: ____________________________________
<PAGE>
RIDER TO LOAN AND SECURITY AGREEMENT DATED DECEMBER 23, 1996 AND
NUMBERED 207-02 (THE "AGREEMENT") BETWEEN NEW YORK SKYLINE, INC.
AS BORROWER AND INDEPENDENT RESOURCES, INC. AS LENDER
The Agreement is hereby amended as follows:
1. Paragraph 1. delete the last sentence and replace with the following:
"Unless otherwise specifically provided for in this Agreement or in side
letters hereto, the Loan may not be prepaid."
2. Paragraph 2. Line 9 amend "five (5) days" to "ten (10) days".
3. Paragraph 2. Line 10 amend "two (2%) percent" to "one and one half (1.5%)
percent".
4. Paragraph 9. Line 10 amend "thirty (30) days" to "forty-five (45) days".
5. This space left blank intentionally.
6. Paragraph 13. Line 2 amend "fifth (5th) day" to "tenth (10th) day".
7. Paragraph 13. Line 3 after the words "...any of the foregoing" insert the
following: "except for spare parts relating to maintenance...".
8. Paragraph 13. Line 8 after the words "....borrowed money" insert the
following: "over $250,000.00..."
9. Paragraph 13. Line 12 after the words "...repossess the premises" insert the
following: "provided such action is successful against borrower..."
10. Paragraph 13. Line 18 after the words "...or merges into any other entity"
insert the following: "except mergers in which Borrower is the survivor and
which do not materially, adversely affect the financial condition of the
Borrower...".
11. Paragraph 14. Line 4, after the words "...from the date of default" insert
the following: "until payment of all accounts due under A and B...".
12. Paragraph 14. Insert as the final sentence: "Lender shall release any and
all security interest upon full payment of any amounts due Lender from
Borrower."
13. Paragraph 15. Line 1 after the words "...this Agreement" insert the
following: ", except to a direct competitor of Borrower...".
14. Paragraph 15. At the end of paragraph insert the following: ", provided,
however, that no assignment of Lender's rights in this Agreement shall be
permitted unless Lender's assign expressly undertakes to be bound by the
terms and obligations by the Security Deposit Rider to this Agreement
between Lender and Borrower of even date."
NEW YORK SKYLINE, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
<PAGE>
RIDER TO LOAN AND SECURITY AGREEMENT #207-02
DATED 12/23/96, (THE "AGREEMENT"),
BETWEEN INDEPENDENT RESOURCES, INC. ("I.R.") AND
NEW YORK SKYLINE, INC. ("OBLIGOR")
The above mentioned Agreement is hereby amended to add the following:
1. Obligor agrees that so long as the Agreement remains outstanding and unpaid,
Obligor shall:
Maintain at all times a ratio of Operating Cash Flow to Debt Service of at
least 1.2 to 1.0. For purposes of this Agreement, the term "Operating Cash
Flow" shall mean, for any period of determination, an amount equal to
Borrower's earnings before provision for interest expense, taxes,
depreciation and amortization for each period less all dividends,
distributions and other intercompany transfers of any kind made by
Borrower to its parent corporation, Skyline Multimedia Entertainment,
Inc., during such period; and the term "Debt Service" shall mean, for any
period of determination, the sum of (i) interest expense, (ii) current
maturity of long term debt, and (iii) the current portion of expenditures
of Borrower for fixed assets which are required to be capitalized by
Borrower pursuant to generally accepted accounting principles. Each of the
foregoing financial terms shall be interpreted and calculated in
accordance with generally accepted accounting principles consistently
applied.
2. Obligor shall deliver to I.R. a compliance certificate for each fiscal year
and quarter during the term of the Agreement executed by the Obligor's chief
financial officer stating the results of Obligor's operations for such year
in terms of the financial covenants set forth in this paragraph 1 and whether
such financial covenants have been complied with. The compliance certificate
shall be delivered within the period of time allowed under the Agreement for
the Obligor to deliver its financial statements for such year and quarter.
3. Obligor shall inform I.R., in writing, of any change in any business related
structure of the company or its affiliates within thirty (30) days of change.
4. Except as expressly provided herein, all accounting terms used herein shall
be interpreted in accordance with generally accepted accounting principles in
effect from time to time.
5. It shall be an additional Event of Default under the Agreement if Obligor
fails to maintain any of the above financial covenants.
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT A FAILURE BY I.R. TO INSIST ON STRICT
COMPLIANCE WITH ANY PROVISION OF THIS RIDER IN ANY FISCAL YEAR SHALL NOT
CONSTITUTE A WAIVER OF OBLIGOR'S OBLIGATION TO COMPLY WITH SUCH PROVISION IN ANY
SUBSEQUENT YEAR.
IN WITNESS WHEREOF, the parties have executed this Rider simultaneously with the
Agreement.
NEW YORK SKYLINE, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
<PAGE>
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
Loan No.: 207-03
Loan Date: 12/03/96
Loan and Security Agreement entered into as of the 3rd day of December, 1996
(the "Agreement") by and between INDEPENDENT RESOURCES, INC. a New York
corporation with its principal offices at 43 West Street, Litchfield Connecticut
006759 ("Lender") and SKYLINE VIRTUAL REALITY, INC. a Delaware Corporation with
its principal office at 1457 Broadway, New York, NY 10036 ("Borrower").
WHEREAS, Borrower desires to obtain a secured loan from Lender to finance
its acquisition of equipment (and/or to refinance existing equipment); and
WHEREAS, Lender is agreeable to making a secured loan to Borrower on the
terms and conditions contained in this Loan and Security Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the parties'
mutual agreements below set forth, Borrower and Lender agree as follows:
1. THE LOAN AND LOAN REPAYMENT. As requested by Borrower, Lender agrees to
lend to Borrower the sum of Three Hundred Thousand Three and xx/100 Dollars
($303,000.00) ("Loan"). Borrower agrees to repay the Loan in successive
installments (which installment payments are inclusive of interest) as set forth
in the following Schedule:
SCHEDULE
- --------------------------------------------------------------------------------
ADVANCE PAYMENT NUMBER OF INSTALLMENTS PERIODIC INSTALLMENT PAYMENT
(Exclusive of Advance Payment) AMOUNT PER PERIOD
AND PAYMENT PERIOD
- --------------------------------------------------------------------------------
Forty-five (45) Monthly Payments $8,561.62
- --------------------------------------------------------------------------------
Commencement Date: _______________ Security Deposit (if any): _______________
Equipment Location (if other than above address of Borrower): __________________
Equipment Description: See Schedule "A" attached hereto and made a part hereof
Special Provisions (if any): ________________________________
The Advance Payment, if any, shall be due and payable upon execution of
this Agreement. The first periodic installment payment (after excluding the
Advance Payment, if any) shall be due on the first (1st) day of the month
following the advance of the Loan proceeds by Lender and Borrower authorizes
Lender to insert such date above as the Commencement Date. The remaining
periodic installment payments shall be due and payable on the same day of each
successive month (or quarter, if quarterly payments are provided for above).
However, the parties may select another Commencement date by noting the same in
the above Special Provisions section or by a separate writing signed by Lender
and Borrower in which case the first periodic installment payment shall be due
on such date. Unless otherwise specifically provided for in this Agreement, the
Loan may not be prepaid.
2. UNCONDITIONAL OBLIGATION TO PAY, LATE PAYMENTS, ETC. All payments due
hereunder shall be paid to Lender or its assigns without notice or demand and
without abatement, offset, defense or counterclaim, at Lender's principal office
shown above, or such other place as Lender or its assignee may designate in
writing to Borrower. Borrower's obligation to pay the installments and other
payments due hereunder shall be absolute and unconditional and shall not be
affected by reason of (i) any defect in, lack of fitness for use of, damage to,
loss of possession or use of or destruction of, all or any of the Equipment (as
defined below) securing borrower's obligations, (ii) the prohibition or other
restriction against Borrower's use of said Equipment or (iii) for any other
cause, it being the agreement of the parties that the Loan and any other amount
payable by Borrower hereunder shall continue to be payable in all events in the
manner and at the times provided in this Agreement.
The Loan shall become immediately due and payable in its entirety upon the
occurrence of any Event of Default (as defined below). If any periodic
installment payment or other payment is more than five (5) days late, Lender
may, at its election, and subject to prior exercise of its right of
acceleration, accept the payment in arrears and Borrower shall pay, as
liquidated damages, a late charge equal to two (2%) percent per month on each
defaulted payment from the due date thereof. In no event shall any amount
payable to Lender as interest, including any sum held by a Court of competent
jurisdiction to be "interest" under applicable law, exceed, with respect to any
period of time, the highest rate of interest permitted by applicable law. Any
amount received by lender determined to be in excess of the highest rate of
interest receivable by Lender, shall be refunded to Borrower.
3. SECURITY INTEREST. To secure payment when due (at maturity, by
acceleration or otherwise) of the Loan, any interim fundings against the Loan
and any additional or future advances, renewals, extensions and replacements
thereto and any and all other present and future obligations of Borrower to
Lender, whether direct or contingent or joint and several, Borrower hereby
conveys, assigns, and grants to lender a continuing security interest in and to
(i) the equipment described in the annexed Schedule A including all present and
future additions, attachments, replacements, accessions and accessories thereto
(the "Equipment"), and all substitutions and proceeds thereof including all
proceeds of insurance thereon, and (ii) all equipment, inventory, accounts,
receivables, goods and assets of any and every kind, including, but not limited
to, all items of intangible property, wherever located, now or hereafter
belonging to Borrower or in which Borrower has any interest, and all proceeds of
the foregoing including insurance proceeds; all of the above, collectively, the
"Collateral".
BORROWER GRANTS LENDER THE AUTHORITY TO FILE THIS AGREEMENT OR A CARBON,
PHOTOGRAPHIC OR OTHER REPRODUCTION THEREOF AS A FINANCING STATEMENT UNDER THE
UNIFORM COMMERCIAL CODE WITH RESPECT TO ALL SECURITY INTERESTS CREATED HEREBY.
4. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
BORROWER ACKNOWLEDGES THAT THE EQUIPMENT HAS BEEN OR WILL BE SELECTED AND
ACQUIRED SOLELY BY BORROWER AND THAT LENDER HAS NOT AND DOES NOT MAKE ANY
WARRANTY WITH RESPECT TO ITS CONDITION, MERCHANTABILITY, SUITABILITY, CAPACITY
OR FITNESS FOR ANY PARTICULAR PURPOSE.
5. REPRESENTATIONS AND WARRANTIES. Borrower warrants, represents and agrees
as follows (i) Borrower has full power and authority to execute, deliver and
perform its obligations under this Agreement; (ii) the execution and delivery of
this Agreement has been authorized by all requisite corporate (or partnership)
action; (iii) the execution, delivery and performance of this Agreement do not
and will not constitute a breach, default or violation of or under Borrower's
articles of incorporation, by laws (partnership agreement) or any other
agreement, law, order, lease, judgment or injunction to which it is a party or
may be bound; (iv) the Equipment is (or, on the Commencement Date, will be)
lawfully owned by Borrower, free and clear of all liens, encumbrances and
security interests and Borrower will warrant and defend title thereto against
all claims; (v) Borrower has not granted and will not grant to any one other
than Lender a security interest in the Equipment and no Financing Statement or
other instrument affecting the Equipment nor rights therein, bearing the
signature of, or otherwise authorized by, Borrower is on file in any public
office; (vi) the Equipment shall at all times remain personal property and be
retained in Borrower's possession at its principal address set forth above (or,
if so indicated, at the Equipment Location set forth above); (vii) the Equipment
shall be used for business purposes; and (viii) if the Equipment is attached to
real estate or if it is or may become subject to a prior interest in favor of a
party having any interest in the real estate, Borrower will, on Lender's demand,
furnish Lender with a writing by which any and all parties having such prior
interest waive or subordinate their rights and priorities to, or in favor of,
Lender's security interest provided herein.
6. INSURANCE. Borrower shall, at its sole cost and expense, procure and
maintain, so long as Borrower is indebted to Lender on the Loan or on any other
liability (i) insurance insuring the Equipment against all risks of physical
loss, theft, damage and destruction with extended coverage in an amount equal to
the greater of (a) the amount of the Loan or (b) the full replacement value
(new) of the Equipment with loss payable solely to Lender (and its assigns) and
Borrower as their interests may appear and (ii) personal injury liability and
property damage insurance with respect to the Equipment and the use thereof in
such amounts as may be reasonably acceptable to Lender, and naming Lender (and
its assigns) as additional insured. All insurers and coverages must be
reasonably satisfactory to Lender. Borrower shall deposit said policy or
policies or duplicates thereof or certificates of insurance with lender and said
policies shall provide satisfactory to Lender. Borrower shall deposit said
policy or policies or duplicates thereof or certificates of insurance with
Lender and said policies shall provide that the policies may not be canceled or
altered without at least thirty (30) days prior notice to Lender and that the
coverage shall not be invalidated against Lender because of any violation of any
condition or warranty contained in any policy or application therefor by
Borrower or by reason of any action or inaction of Borrower.
7. USE, REPAIRS, LOSS AND DAMAGE. Borrower agrees to maintain the Equipment
in good condition and repair and in accordance with the manufacturer's
instructions, manuals and warranties (if any), and the requirements of any
applicable insurance and any governmental authority having jurisdiction,
provided, however, that Borrower shall not make any changes or alterations in or
to the Equipment except as necessary for compliance with this section. Borrower
shall pay for all fuel, service, inspection, overhaul, replacements,
substitutions, materials and labor necessary or desirable for the proper use,
repair, operation and maintenance of the Equipment. All risks of loss, theft,
damage or destruction of the Equipment shall be borne by Borrower and Borrower
shall promptly notify Lender in writing of any such loss, theft, damage or
destruction. In the event of any damage to the Equipment (unless the same is
damaged beyond repair) Borrower shall, at its expense, place the same in good
repair, condition and working order. If the Equipment is determined by Lender to
be lost, stolen or damaged beyond repair, or should the Equipment be
confiscated, seized or the use and title thereof requisitioned to someone other
than Borrower, Borrower shall immediately pay to Lender, in addition to unpaid
periodic installment payments on the Loan, other unpaid sums due hereunder and
late charges then past due, an amount equal to the them remaining periodic
installment payments due on the Loan discounted to present value at the rate of
six (6%) percent per annum, less the net amount of the recovery, if any,
actually received by Lender from insurance on the Equipment.
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT CONTINUED ON REVERSE SIDE
- --------------------------------------------------------------------------------
Accepted at Lender's Office The undersigned signatory affirms that he/she has
at Litchfield, Connecticut read the terms and conditions printed above and on
the reverse side, that he/she is a duly authorized
officer, partner or proprietor of the Borrower,
and has authority to execute this Loan and
Security Agreement on its behalf.
- --------------------------------------------------------------------------------
LENDER: BORROWER:
INDEPENDENT RESOURCES, INC. SKYLINE VIRTUAL REALITY, INC.
- --------------------------------------------------------------------------------
AUTHORIZED OFFICER: AUTHORIZED OFFICER, PARTNER OR PROPRIETOR:
BY: BY:
TITLE TITLE
- --------------------------------------------------------------------------------
(1)
<PAGE>
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT (CONTINUED)
8. TAXES AND OTHER CHARGES. Borrower agrees to pay promptly when due all
registration, title, license and other fees, assessments and sales, use, gross
receipts, ad valorum, property and any and all other taxes imposed by any State,
Federal, local or foreign government upon this Agreement or upon the ownership,
shipment, delivery, use or operation of the Equipment or any Collateral or upon
or measured by any payments due hereunder (other than taxes on or measured
solely by the net income of Lender) and any fines, penalties and interest
thereon.
9. BORROWER'S ADDITIONAL COVENANTS. Borrower hereby agrees and covenants as
follows: (i) except for the security interest granted hereby, Borrower shall
keep the Equipment free and clear of any security interest, lien or encumbrance
and shall not sell, lease, assign (by operation of law or otherwise), exchange
or otherwise dispose of any of the Equipment, (ii) at the request of the Lender,
Borrower shall execute one or more Financing Statements and continuation
statements pursuant to the Uniform Commercial code to establish and maintain its
security interest in the Collateral, in form satisfactory to Lender, and will
pay any filing fees and/or costs with respect thereto and for lien searches;
(iii) Borrower authorizes Lender to file one or more Financing Statements
covering the Collateral without Borrower's signature thereto; (iv) Borrower will
immediately notify Lender in writing of any change in its place(s) of business
or the adoption or change of any trade name or fictitious business names and
will execute any additional Financing Statements as Lender may request to
perfect and maintain its security interest, but such notice shall not be deemed
an authorization to move the Collateral without the prior written consent of
Lender; (vi) Borrower will allow Lender and its representatives free access to
the Collateral at all times during normal business hours, for purposes of
inspection and repair and, following an Event of Default, lender shall have the
right to demonstrate and show the Collateral to others and (vii) Borrower will
furnish to Lender (and will cause any guarantor of Borrower's obligations
hereunder to furnish to Lender) (a) its unaudited quarterly Financial Statements
within thirty (30) days after the end of its first three quarters in each fiscal
year, (b) its certified Financial Statement prepared by an independent certified
public accountant within ninety (90) days after the close of its fiscal year
which shall be prepared in accordance with generally accepted accounting
principles and (c) all other financial information and reports that Lender may
from time to time reasonably request, including income tax returns of Borrower
and any guarantor of Borrower's obligations hereunder.
10. BORROWER'S FAILURE TO PAY TAXES, INSURANCE, ETC. Should Borrower fail
to make any payment or do any act as herein provided (including, but not limited
to, payment of taxes or for insurance), Lender shall have the right, but not the
obligation, and without releasing Borrower from any obligation hereunder, to
make or do the same, and to pay any sum due in connection therewith or to
contest or compromise any encumbrance, charge or lien and in exercising any such
rights, incur any liability and expend whatever amounts in its absolute
discretion it may deem necessary therefor. All sums so incurred or expended by
Lender shall be payable by Borrower on demand with interest at the rate of two
(2%) percent per month.
11. CROSS COLLATERALIZATION. Without in any way limited the provisions of
Section 3, as additional collateral security for the Borrowers' obligations
hereunder, Borrower grants to Lender a further security interest in all
machinery, equipment, goods and other collateral covered by any other Loan and
Security Agreement, note and security agreement, other agreement or lease
(collectively the "other agreements") between Borrower and Lender whether such
other agreements are now in existence or hereafter come into existence and
Borrower assigns to Lender as security for its obligations hereunder, all of its
rights, title and interest in and to any surplus money to which Borrower may be
entitled upon the sale of the machinery, equipment, goods and other collateral
covered by such other agreements. Anything above to the contrary
notwithstanding, the benefit of the foregoing cross collateralization shall
apply for the benefit of Lender and its assignee holding this Agreement only to
the extent that Lender or such assignee is also the holder of such other
agreements or one or more of them.
12. INDEMNITY. Borrower assumes liability for and agrees to indemnify,
defend, protect, save and keep harmless Lender from and against costs, expenses
and disbursements, including court costs and legal expenses, of whatever kind
and nature, imposed on, incurred by or asserted against Lender (whether or not
also indemnified against by any other person) in any way relating to or arising
out of this Agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment by
Borrower, including, without limitation, any claim alleging latent and other
defects, whether or not discoverable by Lender or Borrower, and any other claim
arising out of strict liability in tort, whether or not in either instance
relating to an event occurring while Borrower remains obligated under this
Agreement, and any claim for patent, trademark or copyright infringement. Each
party agrees to give the other notice of any claim or liability hereby
indemnified against promptly following learning thereof. The fact that a claim
for which Lender is entitled to indemnity under this Section is asserted after
the termination of this Agreement shall not release Borrower form its indemnity
obligations and this covenant of indemnity shall survive the termination of this
Agreement.
13. DEFAULT. The occurrence of any one of the following shall constitute an
Event of Default hereunder: (i) Borrower fails to pay any periodic installment
payment or other amount due hereunder on or before the fifth (5th) day following
the date when the same becomes due and payable; (ii) Borrower removes, sells,
transfers, encumbers, or parts with possession of the Equipment or any items
thereof or attempts to do any of the foregoing; (iii) Borrower fails to maintain
in force the required insurance on the Equipment in compliance herewith or fails
to provide loss payable protection to lender in form satisfactory to Lender;
(iv) any representation or warranty made by Borrower herein or in any other
agreement between the parties or in any statement given to Lender shall be
materially untrue; (v) Borrower shall fail to observe or perform any of the
obligations required to be observed or performed by Borrower hereunder, or other
obligation or indebtedness of Borrower to Lender otherwise owing or due by
Borrower to Lender in any other agreement now or hereafter executed between the
parties hereto, and such failure shall continue uncured for twenty (20) days
after written notice thereof to Borrower; (vi) Borrower shall (a) fail to pay
any indebtedness for borrowed money (other than the Loan) of the Borrower, or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), or (b) fail to perform
or observe any term, covenant, or condition on its part to be performed or
observed under any agreement or instrument relating to such indebtedness, or if
any such indebtedness shall be declared to be due or payable or required to be
prepaid (other than by a regularly scheduled required prepayment) prior to the
stated maturity thereof; (vii) if Borrower leases the premises where the
Equipment is located, a breach of such lease by Borrower and the commencement of
an action by the landlord to evict Borrower or to repossess the premises; (viii)
if Borrower sells, leases or disposes of any of its assets except in the
ordinary course of its business and except for the disposition of any obsolete
or retired property not useful to Borrower; (ix) Borrower ceases doing business
as a going concern, makes an assignment for the benefit of creditors, admits in
writing its inability to pay its debts as they become due, files a voluntary
petition in bankruptcy, is adjudicated a bankrupt or an insolvent, files a
petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed, or if within sixty (60) days after the appointment without Borrower's
acquiescence of any trustee, custodian, receiver or liquidator of it or of all
or any substantial part of its assets and properties, such appointment shall not
be vacated; (xi) Borrower sells all or substantially all of its assets or
consolidates with or merges into any other entity or Borrower's stockholders or
partners sell all or substantially all of their stock or partnership interests;
or (xii) the death of a guarantor of Borrower's obligations hereunder or the
dissolution or filing of a petition in bankruptcy by or against a guarantor of
Borrower's obligations hereunder.
14. REMEDIES. Upon the occurrence of any Event of Default, Lender shall
have the right to recover from Borrower, as liquidated damages for loss of a
bargain and not as a penalty, a sum equal to the aggregate of the following: (a)
all unpaid periodic installment payments and other sums due under this Agreement
to the date of default plus late charges, if any, (b) the present value (using a
6% per year discount rate ) of all remaining periodic installment payments due
under this Agreement and (c) interest at the rate of two percent (2%) per month
on the total of (a) plus (b) from the date of default. In addition, Lender shall
have the right to recover from Borrower any expenses paid or incurred by Lender
in connection with the enforcement of its rights under this Agreement and the
repossession, holding, repair, preparing for sale and subsequent sale, lease or
other disposition of the Collateral including attorneys fees and legal expenses
(collectively "Repossession Expenses"). BORROWER AND LENDER WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON THIS AGREEMENT.
The Lender shall have all the rights and remedies of a Secured Party under
the Uniform Commercial Code and all other rights and remedies available to
creditors at law or in equity. Lender is hereby authorized and empowered, with
the aid and assistance of any person or persons, to enter any premises where the
Collateral or any part thereof is, or may be, placed, and to assemble and/or
remove same and/or to render it unusable and sell and dispose of such Collateral
at one or more public or private sales upon at least seven (7) days' written
notice to Borrower of such sale. The proceeds of each such sale shall be applied
by the Lender toward the payment of the repossession Expenses, the liquidated
damages specified above and other indebtedness secured hereby. Should the
proceeds of any such sale be insufficient to fully pay all the items above
mentioned Borrower hereby covenants and agrees to pay any deficiency to the
Lender. If Lender employs counsel for the purpose of effecting collection of any
monies due hereunder (whether or not Lender has retaken the Collateral or any
part thereof) or for the purpose of recovering the Collateral, or for the
purpose of protecting Lender's interest because of any default of Borrower,
Borrower agrees to pay reasonable attorney's fees. The Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by lender which is reasonably convenient to both parties. All
rights and remedies hereunder are cumulative and not exclusive and a waiver by
lender of any breach by Borrower in the terms, covenants, and conditions hereof
shall not constitute a waiver of future breaches or cumulative and not exclusive
and a waiver by Lender of any breach by Borrower of the terms, covenants, and
conditions hereof shall not constitute a waiver of future breaches or defaults;
and no failure or delay on the part of Lender in exercising any of its options,
powers, rights or remedies, or partial or single exercise thereof, shall
constitute a waiver thereof.
If any court of competent jurisdiction determines that any provision of
this Section 14 is invalid or unenforceable in any jurisdiction, in whole or in
part, such determination, as to such jurisdiction, shall not prohibit Lender
from enforcing its rights and establishing its damages sustained as the result
of any breach of this Agreement in accordance with the laws of such
jurisdiction.
15. ASSIGNMENT. Lender may assign or otherwise transfer this Agreement and
any and all of Lender's right, title and interest hereunder and in the
Collateral including the right to receive all amounts payable hereunder or grant
participations therein without Borrower's consent. In the event of such
assignment, the right of the assignee to receive all amounts payable hereunder
as well as any other right of the assignee shall not be subject to any defense,
set-off or counterclaim which Borrower may have against Lender although any
claim Borrower may have against Lender shall be preserved and may be separately
pursued against Lender. Upon Lender giving notice to Borrower of any such
assignment, Borrower shall promptly acknowledge its obligations hereunder to
such assignee, and shall comply with the written directions or demands of such
assignee and shall make all payments due hereunder as such assignee may direct
in writing. Following any such assignment the term "Lender" shall be deemed to
include or refer to lender's assignees, but no such assignee shall be deemed to
assume any obligation or duty imposed upon Lender hereunder and Borrower shall
look only to Lender for performance thereof. As used in this Section 15,
"assign" shall be deemed to include a pledge, sale of, or grant of a mortgage
on, or a security interest in, any of the Collateral or this Agreement by lender
and the term "assignee" shall be deemed to refer to the recipient of such
pledge, sale, mortgage or security interest. This Agreement and Borrower's
rights and obligations herein shall not be transferable or assignable by
Borrower without the Lender's express prior written consent and any such
purported assignment by Borrower without such consent shall be null and void.
16. GENERAL PROVISIONS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT. This Agreement may not be changed, modified or
discharged on behalf of Lender, in whole or part, and no right of Lender may be
waived except by a writing signed by a duly authorized officer of Lender. The
Lender is authorized and empowered to date this Agreement and the Schedule(s)
thereto and to fill in blank spaces in accordance with the terms of the
transaction, including, but not limited to inserting serial numbers and
equipment descriptions in Schedule A and the assignment of an account number.
Notices hereunder shall be in writing and shall be deemed given when personally
delivered or when sent by facsimile to a party's facsimile number or three days
after having been mailed to the other party at the address specified above or
such new address as to which a party may advise the other. Forbearance or
indulgence by Lender in any regard shall not constitute a waiver of the covenant
or condition to be performed by Borrower to which the same may apply. The
section captions are for convenience and are not a part of the Agreement. This
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and permitted assigns of the parties. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. THIS AGREEMENT AND ANY OTHER WRITTEN AGREEMENTS EXECUTED
SIMULTANEOUSLY HEREWITH SUPERSEDE ANY PRIOR PROPOSAL LETTERS, COMMITMENT LETTERS
OR NEGOTIATIONS AND THERE ARE NO ORAL COVENANTS OR AGREEMENTS. This Agreement
shall not be binding on Lender until accepted and executed on behalf of Lender
at its Lithcfield Connecticut office.
(2)
<PAGE>
LOAN AND SECURITY AGREEMENT
SCHEDULE A
The following description of property supplements, and is part of, the Loan and
Security Agreement dated December 3, 1996, and numbered 207-03, between the
undersigned Borrower and Independent Resources, Inc. and may be attached to said
Loan and Security Agreement and any related UCC Financing Statements, Acceptance
or Delivery Certificate or other document describing the property.
Thirty-eight (38) HP Vectra VL4 with Multimedia Monitors, with 2 MEG VRAM;
3com Network Cards; SB 16 Internet Ready; 24 Meg RAM, S/N
Five (5) HP Vectra VL4/100 with Monitors, S/N
One (1) HP NetServer LC with PCI and Rackmount Kit, S/N
One (1) 3Com Linkbuilder 48 Port Network Hub, S/N
One (1) HP 850C Color DeskJet
One (1) HP 6P Laser Printer
Ten (10) x8 Speed External CD-Rom, S/N
Six (6) Basic Back Shelves
One (1) APC UPS Rackmount, S/N
One (1) HP 14" VGA Color Monitor for Server, S/N
Two (2) Epson Receipt Printers TM 300D-1, S/N
8,000 feet Category 5 four pair Plenum
One (1) Cat-5 48 Port Batch Panel
Twenty (20) Dual Insert CT4 Workstation Faceplates
Twenty (20) Category 5 Double Couplers
Twenty (20) Surface Mount Box/Wall Fastener
One (1) Hangers and hardware/rack mount wire & rack mount manger
Eighty (80) Level 5 Patch Cords
50 feet of 2" EMT pipes with brackets
One (1) 2" pipes/greenfield pipes/termination boxes
One (1) 4'0" x 5'0" aluminum plate panel with a Plexiglass cover
Thirteen (13) Citizen Model #M938-1-A LCD Monitors mounted in an "X", S/N
One (1) 4'0" x 5'0" aluminim panel with a Plexiglass cover
Twenty-five (25) Citizen Model #M938-1-A LCD Monitors mounted in an "S"
Logo, each with an angled wall mount bracket, S/N
page 1 of 3 Borrower Initial: ____
Lender Initial: ____
<PAGE>
Two (2) 4'0" x 9'0" aluminum panels with wall mount brackets that have a
23'0" x 3'0" light box for graphics and a 2'0" x 3'0" Plexiglass cover with
a stand off for graphics (graphics nor included)
Polypropylene perforated sheets that extend into the themed area as ceiling
One (1) 4'0" x 9'0" aluminum plate panel with wall mount brackets that have
a 2'0" x 3'0" light box and a 2'0" x 3'0" Plexiglass cover with a stand off
for graphics (graphics not included)
One (1) Photo realistic reproduction of a Carson Valley, NV scene on three
(3) vinyl panels sized: 18'0" x 8'0"; 10'0" x 8'0"; 7'0" x 8'0"
Split Rail Fence and column
Eight (8) Fiberglassed foam rock reliefs mounted on flats
Fifteen (15) scenically treated wall flats
Two (2) Scenically treated 73% Awntex panels, 6'0" x 9'0" to complete
overall environment in front of window walls
Eight (8) 4'0" x 8'0" hardcovered flats scenically treated
Eighteen (18) 4'0" x 4'0" grinder finished perforated metal panels mounted
on black powder coated 1" x 1" steel frames
One (1) 1" x 1" square aluminum tube with a housing overhead for monitor
unit
One (1) grinder finished perforated steel header with aluminum frame and
laser cut sponsor logo
Seven (7) overhead panels of milk perforated polyproylene panels framed in
aluminum tube suspended by link chain attached to ceiling anchors
One (1) 29'6" x 4" x 6" aluminum light trough (3-circuit chase) with square
D control case
Four (4) 2' x 8' Plexiglas panels
Four (4) 4' x 8' Plexiglas panels
One (1) rear return wall covered for "overhead safety" for first floor
below
12'6" W x 2'0" D mezzanine floor overhang with additional three feet (3'0")
of mezzanine floor space depth and counter for racking of control equipment
to be integrated in truss described separately.
Approx. 35' W 16' D x 42" H structure stage with two stairs, one upstage
center lift and one (1) ADA access lift
Thirteen (13) game stations
One (1) Aluminum perforated metal facia on front face and painted luan on
side faces.
Floor: I-Bar Grating or 3/4" seven ply plywood decking with LonCoin II.
#183 on plywood decking and upstage lift "behind contestant game stations
only."
Two (2) ADA access lifts: one in front of the stairway at stage right and
one centered upstage game station
Overhead: "Undulating" curved path approximately 4'0" wide of milk colored
perforated polypropelene panels framed in "rolled radius" aluminum tube.
Mounted with link chain to anchors installed in the ceiling
Virtual Glider
page 2 of 3 Borrower Initial: ____
Lender Initial: ____
<PAGE>
COMPLETE WITH ANY AND ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS,
IMPROVEMENTS, MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL
PROCEEDS INCLUDING INSURANCE PROCEEDS THERETO AND THEREFROM.
ALL GOODS, MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES, COMPLETE WITH ANY AND
ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS, IMPROVEMENTS,
MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL PROCEEDS INCLUDING
INSURANCE PROCEEDS AND PRODUCTS THEREOF AND THEREFROM.
ALL ACCOUNTS, ACCOUNTS RECEIVABLE, CONTRACT RIGHTS, INSTRUMENTS, GENERAL
INTANGIBLES AND CHATTEL PAPER AND ALL PROCEEDS THEREOF AND THEREFROM.
ALL INVENTORY AND ANY OTHER GOODS, MERCHANDISE OR OTHER PERSONAL PROPERTY HELD
BY DEBTOR FOR SALE OR LEASE AND ALL RAW MATERIALS, WORK OR GOODS IN PROCESS OR
MATERIALS OR SUPPLIES OF EVERY NATURE USED, CONSUMED OR TO BE CONNSUMED IN
DEBTOR'S BUSINESS, AND ALL PROCEEDS, INCLUDING INSURANCE PROCEEDS, INCLUDING
INSURANCE PROCEEDS AND PRODUCTS OF ANY OF THE FOREGOING.
SKYLINE VIRTUAL REALITY, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
page 3 of 3 Borrower Initial: ____
Lender Initial: ____
<PAGE>
PAYMENT ADJUSTMENT RIDER
RIDER TO LOAN AND SECURITY AGREEMENT DATED DECEMBER 3, 1996 AND NUMBERED 207-03
(THE "AGREEMENT") BETWEEN NEW YORK SKYLINE, INC. AS BORROWER (THE "OBLIGOR") AND
INDEPENDENT RESOURCES, INC. AS LENDER ("I.R.")
1. Purpose. This Rider sets forth the terms of adjustment to the payments set
forth in the Agreement.
2. Definition. The following terms shall have the following meanings herein:
(a) "Adjustment Date" shall mean the date I.R. disburses the proceeds of the
Agreement. "Final T-Note Average" shall mean the average of the yields on
U.S. Treasury Notes maturing in four (4) years as published by the Dow
Jones Telerate Access Service, Page 19901, for the close of business on
each business day of the two full calendar weeks immediately preceding
the week containing the Adjustment Date.
(b) "Preliminary Payments" shall mean the payments set forth in the
Agreement, consisting of $99,940.50 due upon execution followed by
forty-six (45) consecutive monthly payments commencing 30 days after the
Adjustment Date consisting of $33,313.50.
(d) "Preliminary T-Note Average" shall mean 6.50%
3. Adjustment of Payments. The Preliminary Payments were calculated based on a
spread over the Preliminary T-Note Average. If the Adjustment Date occurs
after December 3, 1996 and the Final T-Note Average exceeds the Preliminary
T-Note Average, then the Preliminary payments shall be revised. For each
increase of one (1) basis point (i.e., 1/100 of 1%) in the Final T-Note
Average above the Preliminary T-Note Average, the Preliminary Payments shall
be revised as follows:
o The $99,940.50 payment due upon execution shall remain unchanged.
o Each of the forty-five (45) payments in the amount of $33,313.50 shall
increase by $5.85
Immediately after the determination of the revised payments due under the
Agreement, Obligor shall, at the request of I.R., execute an acknowledgment
reflecting the revised payment schedule and, if requested by I.R., a Replacement
Agreement containing the agreed to payments, but the failure of I.R. to make
such a request or the failure of Obligor to execute the acknowledgment or
Replacement Agreement shall in no way diminish Obligor's obligations hereunder.
4. I.R.'s Requirements. The commencement of the Agreement is subject to
satisfaction of all documentation and credit requirements of I.R. If such
requirements are not satisfied by the Adjustment Date, then at I.R.'s option,
the Adjustment Date shall be the date when such requirements are satisfied.
The calculation of the Agreement payments under this Rider will supersede any
prior proposal or quotation.
IN WITNESS WHEREOF, the parties have executed this Rider simultaneously with the
Agreement.
NEW YORK SKYLINE, INC. INDEPENDENT RESOURCES, INC.
By: _______________________________ By: _____________________________________
Its: ______________________________ Its: ____________________________________
<PAGE>
RIDER TO LOAN AND SECURITY AGREEMENT DATED DECEMBER 3, 1996 AND
NUMBERED 207-03 (THE "AGREEMENT") BETWEEN
SKYLINE VIRTUAL REALITY, INC. AS BORROWER AND
INDEPENDENT RESOURCES, INC. AS LENDER
The Agreement is hereby amended as follows:
1.
2. Paragraph 1. delete the last sentence and replace with the following:
"Unless otherwise specifically provided for in this Agreement or in side
letters hereto, the Loan may not be prepaid."
3. Paragraph 2. Line 9 amend "five (5) days" to "ten (10) days".
4. Paragraph 2. Line 10 amend "two (2%) percent" to "one and one half (1.5%)
percent".
5. Paragraph 9. Line 10 amend "thirty (30) days" to "forty-five (45) days".
6. Paragraph 9. Penultimate line, delete "any guarantor of Borrower's
obligation hereunder".
7. Paragraph 13. Line 2 amend "fifth (5th) day" to "tenth (10th) day".
8. Paragraph 13. Line 3 after the words "...any of the foregoing" insert the
following: "except for spare parts relating to maintenance...".
9. Paragraph 13. Line 8 after the words "....borrowed money" insert the
following: "over $250,000.00..."
10. Paragraph 13. Line 12 after the words "...repossess the premises" insert the
following: "provided such action is successful against borrower..."
11. Paragraph 13. Line 18 after the words "...or merges into any other entity"
insert the following: "except mergers in which Borrower is the survivor and
which do not materially, adversely affect the financial condition of the
Borrower...".
12. Paragraph 14. Line 4, after the words "...from the date of default" insert
the following: "until payment of all accounts due under A and B...".
13. Paragraph 14. Insert as the final sentence: "Lender shall release any and
all security interest upon full payment of any amounts due Lender from
Borrower."
14. Paragraph 15. Line 1 after the words "...this Agreement" insert the
following: ", except to a direct competitor of Borrower...".
15. Paragraph 15. At the end of paragraph insert the following: ", provided,
however, that no assignment of Lender's rights in this Agreement shall be
permitted unless Lender's assign expressly undertakes to be bound by the
terms and obligations by the Security Deposit Rider to this Agreement
between Lender and Borrower of even date."
SKYLINE VIRTUAL REALITY, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
<PAGE>
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
Loan No.: 207-04
Loan Date: 12/04/96
Loan and Security Agreement entered into as of the 4th day of December, 1996
(the "Agreement") by and between INDEPENDENT RESOURCES, INC. a New York
corporation with its principal offices at 43 West Street, Litchfield Connecticut
006759 ("Lender") and SKYLINE VIRTUAL REALITY, INC. a Delaware Corporation with
its principal office at 1457 Broadway, New York, NY 10036 ("Borrower").
WHEREAS, Borrower desires to obtain a secured loan from Lender to finance
its acquisition of equipment (and/or to refinance existing equipment); and
WHEREAS, Lender is agreeable to making a secured loan to Borrower on the
terms and conditions contained in this Loan and Security Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the parties'
mutual agreements below set forth, Borrower and Lender agree as follows:
1. THE LOAN AND LOAN REPAYMENT. As requested by Borrower, Lender agrees to
lend to Borrower the sum of One Million Twenty-four Thousand Twenty and xx/100
Dollars ($1,024,020.00) ("Loan"). Borrower agrees to repay the Loan in
successive installments (which installment payments are inclusive of interest)
as set forth in the following Schedule:
SCHEDULE
- --------------------------------------------------------------------------------
ADVANCE PAYMENT NUMBER OF INSTALLMENTS PERIODIC INSTALLMENT PAYMENT
(Exclusive of Advance Payment) AMOUNT PER PERIOD
AND PAYMENT PERIOD
- --------------------------------------------------------------------------------
Forty-five (45) Monthly Payments $25,663.71
- -------------------------------------------------------------------------
Commencement Date: ____________ Security Deposit (if any): $495,000.00
Equipment Location (if other than above address of Borrower): _________________
Equipment Description: See Schedule "A" attached hereto and made a part hereof
Special Provisions (if any): ________________________________
The Advance Payment, if any, shall be due and payable upon execution of
this Agreement. The first periodic installment payment (after excluding the
Advance Payment, if any) shall be due on the first (1st) day of the month
following the advance of the Loan proceeds by Lender and Borrower authorizes
Lender to insert such date above as the Commencement Date. The remaining
periodic installment payments shall be due and payable on the same day of each
successive month (or quarter, if quarterly payments are provided for above).
However, the parties may select another Commencement date by noting the same in
the above Special Provisions section or by a separate writing signed by Lender
and Borrower in which case the first periodic installment payment shall be due
on such date. Unless otherwise specifically provided for in this Agreement, the
Loan may not be prepaid.
2. UNCONDITIONAL OBLIGATION TO PAY, LATE PAYMENTS, ETC. All payments due
hereunder shall be paid to Lender or its assigns without notice or demand and
without abatement, offset, defense or counterclaim, at Lender's principal office
shown above, or such other place as Lender or its assignee may designate in
writing to Borrower. Borrower's obligation to pay the installments and other
payments due hereunder shall be absolute and unconditional and shall not be
affected by reason of (i) any defect in, lack of fitness for use of, damage to,
loss of possession or use of or destruction of, all or any of the Equipment (as
defined below) securing borrower's obligations, (ii) the prohibition or other
restriction against Borrower's use of said Equipment or (iii) for any other
cause, it being the agreement of the parties that the Loan and any other amount
payable by Borrower hereunder shall continue to be payable in all events in the
manner and at the times provided in this Agreement.
The Loan shall become immediately due and payable in its entirety upon the
occurrence of any Event of Default (as defined below). If any periodic
installment payment or other payment is more than five (5) days late, Lender
may, at its election, and subject to prior exercise of its right of
acceleration, accept the payment in arrears and Borrower shall pay, as
liquidated damages, a late charge equal to two (2%) percent per month on each
defaulted payment from the due date thereof. In no event shall any amount
payable to Lender as interest, including any sum held by a Court of competent
jurisdiction to be "interest" under applicable law, exceed, with respect to any
period of time, the highest rate of interest permitted by applicable law. Any
amount received by lender determined to be in excess of the highest rate of
interest receivable by Lender, shall be refunded to Borrower.
3. SECURITY INTEREST. To secure payment when due (at maturity, by
acceleration or otherwise) of the Loan, any interim fundings against the Loan
and any additional or future advances, renewals, extensions and replacements
thereto and any and all other present and future obligations of Borrower to
Lender, whether direct or contingent or joint and several, Borrower hereby
conveys, assigns, and grants to lender a continuing security interest in and to
(i) the equipment described in the annexed Schedule A including all present and
future additions, attachments, replacements, accessions and accessories thereto
(the "Equipment"), and all substitutions and proceeds thereof including all
proceeds of insurance thereon, and (ii) all equipment, inventory, accounts,
receivables, goods and assets of any and every kind, including, but not limited
to, all items of intangible property, wherever located, now or hereafter
belonging to Borrower or in which Borrower has any interest, and all proceeds of
the foregoing including insurance proceeds; all of the above, collectively, the
"Collateral".
BORROWER GRANTS LENDER THE AUTHORITY TO FILE THIS AGREEMENT OR A CARBON,
PHOTOGRAPHIC OR OTHER REPRODUCTION THEREOF AS A FINANCING STATEMENT UNDER THE
UNIFORM COMMERCIAL CODE WITH RESPECT TO ALL SECURITY INTERESTS CREATED HEREBY.
4. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
BORROWER ACKNOWLEDGES THAT THE EQUIPMENT HAS BEEN OR WILL BE SELECTED AND
ACQUIRED SOLELY BY BORROWER AND THAT LENDER HAS NOT AND DOES NOT MAKE ANY
WARRANTY WITH RESPECT TO ITS CONDITION, MERCHANTABILITY, SUITABILITY, CAPACITY
OR FITNESS FOR ANY PARTICULAR PURPOSE.
5. REPRESENTATIONS AND WARRANTIES. Borrower warrants, represents and agrees
as follows (i) Borrower has full power and authority to execute, deliver and
perform its obligations under this Agreement; (ii) the execution and delivery of
this Agreement has been authorized by all requisite corporate (or partnership)
action; (iii) the execution, delivery and performance of this Agreement do not
and will not constitute a breach, default or violation of or under Borrower's
articles of incorporation, by laws (partnership agreement) or any other
agreement, law, order, lease, judgment or injunction to which it is a party or
may be bound; (iv) the Equipment is (or, on the Commencement Date, will be)
lawfully owned by Borrower, free and clear of all liens, encumbrances and
security interests and Borrower will warrant and defend title thereto against
all claims; (v) Borrower has not granted and will not grant to any one other
than Lender a security interest in the Equipment and no Financing Statement or
other instrument affecting the Equipment nor rights therein, bearing the
signature of, or otherwise authorized by, Borrower is on file in any public
office; (vi) the Equipment shall at all times remain personal property and be
retained in Borrower's possession at its principal address set forth above (or,
if so indicated, at the Equipment Location set forth above); (vii) the Equipment
shall be used for business purposes; and (viii) if the Equipment is attached to
real estate or if it is or may become subject to a prior interest in favor of a
party having any interest in the real estate, Borrower will, on Lender's demand,
furnish Lender with a writing by which any and all parties having such prior
interest waive or subordinate their rights and priorities to, or in favor of,
Lender's security interest provided herein.
6. INSURANCE. Borrower shall, at its sole cost and expense, procure and
maintain, so long as Borrower is indebted to Lender on the Loan or on any other
liability (i) insurance insuring the Equipment against all risks of physical
loss, theft, damage and destruction with extended coverage in an amount equal to
the greater of (a) the amount of the Loan or (b) the full replacement value
(new) of the Equipment with loss payable solely to Lender (and its assigns) and
Borrower as their interests may appear and (ii) personal injury liability and
property damage insurance with respect to the Equipment and the use thereof in
such amounts as may be reasonably acceptable to Lender, and naming Lender (and
its assigns) as additional insured. All insurers and coverages must be
reasonably satisfactory to Lender. Borrower shall deposit said policy or
policies or duplicates thereof or certificates of insurance with lender and said
policies shall provide satisfactory to Lender. Borrower shall deposit said
policy or policies or duplicates thereof or certificates of insurance with
Lender and said policies shall provide that the policies may not be canceled or
altered without at least thirty (30) days prior notice to Lender and that the
coverage shall not be invalidated against Lender because of any violation of any
condition or warranty contained in any policy or application therefor by
Borrower or by reason of any action or inaction of Borrower.
7. USE, REPAIRS, LOSS AND DAMAGE. Borrower agrees to maintain the Equipment
in good condition and repair and in accordance with the manufacturer's
instructions, manuals and warranties (if any), and the requirements of any
applicable insurance and any governmental authority having jurisdiction,
provided, however, that Borrower shall not make any changes or alterations in or
to the Equipment except as necessary for compliance with this section. Borrower
shall pay for all fuel, service, inspection, overhaul, replacements,
substitutions, materials and labor necessary or desirable for the proper use,
repair, operation and maintenance of the Equipment. All risks of loss, theft,
damage or destruction of the Equipment shall be borne by Borrower and Borrower
shall promptly notify Lender in writing of any such loss, theft, damage or
destruction. In the event of any damage to the Equipment (unless the same is
damaged beyond repair) Borrower shall, at its expense, place the same in good
repair, condition and working order. If the Equipment is determined by Lender to
be lost, stolen or damaged beyond repair, or should the Equipment be
confiscated, seized or the use and title thereof requisitioned to someone other
than Borrower, Borrower shall immediately pay to Lender, in addition to unpaid
periodic installment payments on the Loan, other unpaid sums due hereunder and
late charges then past due, an amount equal to the them remaining periodic
installment payments due on the Loan discounted to present value at the rate of
six (6%) percent per annum, less the net amount of the recovery, if any,
actually received by Lender from insurance on the Equipment.
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT CONTINUED ON REVERSE SIDE
- --------------------------------------------------------------------------------
Accepted at Lender's Office The undersigned signatory affirms that he/she has
at Litchfield, Connecticut read the terms and conditions printed above and on
the reverse side, that he/she is a duly authorized
officer, partner or proprietor of the Borrower,
and has authority to execute this Loan and
Security Agreement on its behalf.
- --------------------------------------------------------------------------------
LENDER: BORROWER:
INDEPENDENT RESOURCES, INC. SKYLINE VIRTUAL REALITY, INC.
- --------------------------------------------------------------------------------
AUTHORIZED OFFICER: AUTHORIZED OFFICER, PARTNER OR PROPRIETOR:
BY: BY:
TITLE TITLE
- -------------------------------------------------------------------------
(1)
<PAGE>
TERMS AND CONDITIONS OF LOAN AND SECURITY AGREEMENT (CONTINUED)
8. TAXES AND OTHER CHARGES. Borrower agrees to pay promptly when due all
registration, title, license and other fees, assessments and sales, use, gross
receipts, ad valorum, property and any and all other taxes imposed by any State,
Federal, local or foreign government upon this Agreement or upon the ownership,
shipment, delivery, use or operation of the Equipment or any Collateral or upon
or measured by any payments due hereunder (other than taxes on or measured
solely by the net income of Lender) and any fines, penalties and interest
thereon.
9. BORROWER'S ADDITIONAL COVENANTS. Borrower hereby agrees and covenants as
follows: (i) except for the security interest granted hereby, Borrower shall
keep the Equipment free and clear of any security interest, lien or encumbrance
and shall not sell, lease, assign (by operation of law or otherwise), exchange
or otherwise dispose of any of the Equipment, (ii) at the request of the Lender,
Borrower shall execute one or more Financing Statements and continuation
statements pursuant to the Uniform Commercial code to establish and maintain its
security interest in the Collateral, in form satisfactory to Lender, and will
pay any filing fees and/or costs with respect thereto and for lien searches;
(iii) Borrower authorizes Lender to file one or more Financing Statements
covering the Collateral without Borrower's signature thereto; (iv) Borrower will
immediately notify Lender in writing of any change in its place(s) of business
or the adoption or change of any trade name or fictitious business names and
will execute any additional Financing Statements as Lender may request to
perfect and maintain its security interest, but such notice shall not be deemed
an authorization to move the Collateral without the prior written consent of
Lender; (vi) Borrower will allow Lender and its representatives free access to
the Collateral at all times during normal business hours, for purposes of
inspection and repair and, following an Event of Default, lender shall have the
right to demonstrate and show the Collateral to others and (vii) Borrower will
furnish to Lender (and will cause any guarantor of Borrower's obligations
hereunder to furnish to Lender) (a) its unaudited quarterly Financial Statements
within thirty (30) days after the end of its first three quarters in each fiscal
year, (b) its certified Financial Statement prepared by an independent certified
public accountant within ninety (90) days after the close of its fiscal year
which shall be prepared in accordance with generally accepted accounting
principles and (c) all other financial information and reports that Lender may
from time to time reasonably request, including income tax returns of Borrower
and any guarantor of Borrower's obligations hereunder.
10. BORROWER'S FAILURE TO PAY TAXES, INSURANCE, ETC. Should Borrower fail
to make any payment or do any act as herein provided (including, but not limited
to, payment of taxes or for insurance), Lender shall have the right, but not the
obligation, and without releasing Borrower from any obligation hereunder, to
make or do the same, and to pay any sum due in connection therewith or to
contest or compromise any encumbrance, charge or lien and in exercising any such
rights, incur any liability and expend whatever amounts in its absolute
discretion it may deem necessary therefor. All sums so incurred or expended by
Lender shall be payable by Borrower on demand with interest at the rate of two
(2%) percent per month.
11. CROSS COLLATERALIZATION. Without in any way limited the provisions of
Section 3, as additional collateral security for the Borrowers' obligations
hereunder, Borrower grants to Lender a further security interest in all
machinery, equipment, goods and other collateral covered by any other Loan and
Security Agreement, note and security agreement, other agreement or lease
(collectively the "other agreements") between Borrower and Lender whether such
other agreements are now in existence or hereafter come into existence and
Borrower assigns to Lender as security for its obligations hereunder, all of its
rights, title and interest in and to any surplus money to which Borrower may be
entitled upon the sale of the machinery, equipment, goods and other collateral
covered by such other agreements. Anything above to the contrary
notwithstanding, the benefit of the foregoing cross collateralization shall
apply for the benefit of Lender and its assignee holding this Agreement only to
the extent that Lender or such assignee is also the holder of such other
agreements or one or more of them.
12. INDEMNITY. Borrower assumes liability for and agrees to indemnify,
defend, protect, save and keep harmless Lender from and against costs, expenses
and disbursements, including court costs and legal expenses, of whatever kind
and nature, imposed on, incurred by or asserted against Lender (whether or not
also indemnified against by any other person) in any way relating to or arising
out of this Agreement or the manufacture, financing, ownership, delivery,
possession, use, operation, condition or disposition of the Equipment by
Borrower, including, without limitation, any claim alleging latent and other
defects, whether or not discoverable by Lender or Borrower, and any other claim
arising out of strict liability in tort, whether or not in either instance
relating to an event occurring while Borrower remains obligated under this
Agreement, and any claim for patent, trademark or copyright infringement. Each
party agrees to give the other notice of any claim or liability hereby
indemnified against promptly following learning thereof. The fact that a claim
for which Lender is entitled to indemnity under this Section is asserted after
the termination of this Agreement shall not release Borrower form its indemnity
obligations and this covenant of indemnity shall survive the termination of this
Agreement.
13. DEFAULT. The occurrence of any one of the following shall constitute an
Event of Default hereunder: (i) Borrower fails to pay any periodic installment
payment or other amount due hereunder on or before the fifth (5th) day following
the date when the same becomes due and payable; (ii) Borrower removes, sells,
transfers, encumbers, or parts with possession of the Equipment or any items
thereof or attempts to do any of the foregoing; (iii) Borrower fails to maintain
in force the required insurance on the Equipment in compliance herewith or fails
to provide loss payable protection to lender in form satisfactory to Lender;
(iv) any representation or warranty made by Borrower herein or in any other
agreement between the parties or in any statement given to Lender shall be
materially untrue; (v) Borrower shall fail to observe or perform any of the
obligations required to be observed or performed by Borrower hereunder, or other
obligation or indebtedness of Borrower to Lender otherwise owing or due by
Borrower to Lender in any other agreement now or hereafter executed between the
parties hereto, and such failure shall continue uncured for twenty (20) days
after written notice thereof to Borrower; (vi) Borrower shall (a) fail to pay
any indebtedness for borrowed money (other than the Loan) of the Borrower, or
any interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), or (b) fail to perform
or observe any term, covenant, or condition on its part to be performed or
observed under any agreement or instrument relating to such indebtedness, or if
any such indebtedness shall be declared to be due or payable or required to be
prepaid (other than by a regularly scheduled required prepayment) prior to the
stated maturity thereof; (vii) if Borrower leases the premises where the
Equipment is located, a breach of such lease by Borrower and the commencement of
an action by the landlord to evict Borrower or to repossess the premises; (viii)
if Borrower sells, leases or disposes of any of its assets except in the
ordinary course of its business and except for the disposition of any obsolete
or retired property not useful to Borrower; (ix) Borrower ceases doing business
as a going concern, makes an assignment for the benefit of creditors, admits in
writing its inability to pay its debts as they become due, files a voluntary
petition in bankruptcy, is adjudicated a bankrupt or an insolvent, files a
petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceedings shall not have been
dismissed, or if within sixty (60) days after the appointment without Borrower's
acquiescence of any trustee, custodian, receiver or liquidator of it or of all
or any substantial part of its assets and properties, such appointment shall not
be vacated; (xi) Borrower sells all or substantially all of its assets or
consolidates with or merges into any other entity or Borrower's stockholders or
partners sell all or substantially all of their stock or partnership interests;
or (xii) the death of a guarantor of Borrower's obligations hereunder or the
dissolution or filing of a petition in bankruptcy by or against a guarantor of
Borrower's obligations hereunder.
14. REMEDIES. Upon the occurrence of any Event of Default, Lender shall
have the right to recover from Borrower, as liquidated damages for loss of a
bargain and not as a penalty, a sum equal to the aggregate of the following: (a)
all unpaid periodic installment payments and other sums due under this Agreement
to the date of default plus late charges, if any, (b) the present value (using a
6% per year discount rate ) of all remaining periodic installment payments due
under this Agreement and (c) interest at the rate of two percent (2%) per month
on the total of (a) plus (b) from the date of default. In addition, Lender shall
have the right to recover from Borrower any expenses paid or incurred by Lender
in connection with the enforcement of its rights under this Agreement and the
repossession, holding, repair, preparing for sale and subsequent sale, lease or
other disposition of the Collateral including attorneys fees and legal expenses
(collectively "Repossession Expenses"). BORROWER AND LENDER WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON THIS AGREEMENT.
The Lender shall have all the rights and remedies of a Secured Party under
the Uniform Commercial Code and all other rights and remedies available to
creditors at law or in equity. Lender is hereby authorized and empowered, with
the aid and assistance of any person or persons, to enter any premises where the
Collateral or any part thereof is, or may be, placed, and to assemble and/or
remove same and/or to render it unusable and sell and dispose of such Collateral
at one or more public or private sales upon at least seven (7) days' written
notice to Borrower of such sale. The proceeds of each such sale shall be applied
by the Lender toward the payment of the repossession Expenses, the liquidated
damages specified above and other indebtedness secured hereby. Should the
proceeds of any such sale be insufficient to fully pay all the items above
mentioned Borrower hereby covenants and agrees to pay any deficiency to the
Lender. If Lender employs counsel for the purpose of effecting collection of any
monies due hereunder (whether or not Lender has retaken the Collateral or any
part thereof) or for the purpose of recovering the Collateral, or for the
purpose of protecting Lender's interest because of any default of Borrower,
Borrower agrees to pay reasonable attorney's fees. The Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by lender which is reasonably convenient to both parties. All
rights and remedies hereunder are cumulative and not exclusive and a waiver by
lender of any breach by Borrower in the terms, covenants, and conditions hereof
shall not constitute a waiver of future breaches or cumulative and not exclusive
and a waiver by Lender of any breach by Borrower of the terms, covenants, and
conditions hereof shall not constitute a waiver of future breaches or defaults;
and no failure or delay on the part of Lender in exercising any of its options,
powers, rights or remedies, or partial or single exercise thereof, shall
constitute a waiver thereof.
If any court of competent jurisdiction determines that any provision of
this Section 14 is invalid or unenforceable in any jurisdiction, in whole or in
part, such determination, as to such jurisdiction, shall not prohibit Lender
from enforcing its rights and establishing its damages sustained as the result
of any breach of this Agreement in accordance with the laws of such
jurisdiction.
15. ASSIGNMENT. Lender may assign or otherwise transfer this Agreement and
any and all of Lender's right, title and interest hereunder and in the
Collateral including the right to receive all amounts payable hereunder or grant
participations therein without Borrower's consent. In the event of such
assignment, the right of the assignee to receive all amounts payable hereunder
as well as any other right of the assignee shall not be subject to any defense,
set-off or counterclaim which Borrower may have against Lender although any
claim Borrower may have against Lender shall be preserved and may be separately
pursued against Lender. Upon Lender giving notice to Borrower of any such
assignment, Borrower shall promptly acknowledge its obligations hereunder to
such assignee, and shall comply with the written directions or demands of such
assignee and shall make all payments due hereunder as such assignee may direct
in writing. Following any such assignment the term "Lender" shall be deemed to
include or refer to lender's assignees, but no such assignee shall be deemed to
assume any obligation or duty imposed upon Lender hereunder and Borrower shall
look only to Lender for performance thereof. As used in this Section 15,
"assign" shall be deemed to include a pledge, sale of, or grant of a mortgage
on, or a security interest in, any of the Collateral or this Agreement by lender
and the term "assignee" shall be deemed to refer to the recipient of such
pledge, sale, mortgage or security interest. This Agreement and Borrower's
rights and obligations herein shall not be transferable or assignable by
Borrower without the Lender's express prior written consent and any such
purported assignment by Borrower without such consent shall be null and void.
16. GENERAL PROVISIONS. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT. This Agreement may not be changed, modified or
discharged on behalf of Lender, in whole or part, and no right of Lender may be
waived except by a writing signed by a duly authorized officer of Lender. The
Lender is authorized and empowered to date this Agreement and the Schedule(s)
thereto and to fill in blank spaces in accordance with the terms of the
transaction, including, but not limited to inserting serial numbers and
equipment descriptions in Schedule A and the assignment of an account number.
Notices hereunder shall be in writing and shall be deemed given when personally
delivered or when sent by facsimile to a party's facsimile number or three days
after having been mailed to the other party at the address specified above or
such new address as to which a party may advise the other. Forbearance or
indulgence by Lender in any regard shall not constitute a waiver of the covenant
or condition to be performed by Borrower to which the same may apply. The
section captions are for convenience and are not a part of the Agreement. This
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and permitted assigns of the parties. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. THIS AGREEMENT AND ANY OTHER WRITTEN AGREEMENTS EXECUTED
SIMULTANEOUSLY HEREWITH SUPERSEDE ANY PRIOR PROPOSAL LETTERS, COMMITMENT LETTERS
OR NEGOTIATIONS AND THERE ARE NO ORAL COVENANTS OR AGREEMENTS. This Agreement
shall not be binding on Lender until accepted and executed on behalf of Lender
at its Lithcfield Connecticut office.
(2)
<PAGE>
LOAN AND SECURITY AGREEMENT
SCHEDULE A
The following description of property supplements, and is part of, the Loan and
Security Agreement dated December 4, 1996, and numbered 207-04, between the
undersigned Borrower and Independent Resources, Inc. and may be attached to said
Loan and Security Agreement and any related UCC Financing Statements, Acceptance
or Delivery Certificate or other document describing the property.
Two (2) Full Swing Golf, Inc. Golf Simulators, complete with all
attachments:
Two (2) Control Panels
Four (4) LABTEC ACS-150 Speakers
Two (2) Canon BJC-210, S/N ECY40731; ECY29140
Two (2) Sony Projectors, Model #VPH 1252Q
Two (2) Power Stations, Model MAX5000
Two (2) Computers, S/N 032338; 032278
Two (2) Mice, S/N 06752043; 06752001
One (1) Virtuality 2000SU Duo Pro, including:
Zone Hunter Experience
Two (2) 25" Spectator Monitors, S/N
One (1) Operator Communication Link
One (1) Keyboard
One (1) Monochrome Monitor
Two (2) Pods, S/N SU0964; SU0974 with two (2) Visettes (headsets) and
two (2) joysticks attached
One (1) Virtuality 2000SU Duo, including:
One (1) Zone Hunter Experience (2 CD's)
Two (2) 25" Spectator Monitors, S/N
One (1) Operator Communication Link
One (1) Keyboard
One (1) Monochrome Monitor
Two (2) Pods, S/N SU0673; SU0683 with two (2) Visettes (headsets) and
two (2) joysticks attached
Two (2) Winchester Total Recoil Systems, including:
Trap Master and Quickshot Carnival Experiences (2 CD's)
Two (2) Pac-Man VR Experiences (2 CD's)
One (1) Keyboard
One (1) Monochrome Monitor, S/N
Two (2) Pods, S/N TR1612; TR1613 with two (2) Visettes (headsets) and
two (2) Winchester Shotgun Replicas attached
Two (2) JVC Monitors, Model #AV27720, S/N 14117798; 14117794
One (1) CPU, S/N VP0404
One (1) Ferris Productions Experience System Virtual Reality Unit, S/N
06170
One (1) Magball System with four Andromeda Platforms, complete with all
attachments:
One (1) Control Center, S/N
page 1 of 5 Borrower Initial: ____
Lender Initial: ____
<PAGE>
Four (4) Pods, S/N
One (1) MS Mouse, S/N 00484157
One (1) Hitachi VCR Model #VT-FX600C, S/N 60624145
One (1) Monitor, Model #DCM1588VE, S/N 1588
Four (4) Zenith TV SY2551S, S/N 622-36390475; 622-36390477;
622-36390436; 622-36390417
One (1) Intercard, Inc. Debit Card System, S/N
One (1) Linear Technologies Millenium Phone System, complete with all
attachments:
Sixty-nine (69) Debit Card Reader, Video Game
Sixty-nine (69) Interface Cable
Sixty-nine (69) Door Panels, game
Two (2) Mini-Till
Five (5) Teller, revalue only, credit card capable
One (1) Command Card Set
One (1) each Software: Data Collection; Configuration, Player Tracking
One (1) network Consolidator
100,000 Custom Cards, 10 mil, 3 color frt/0 back
One (1) Leer Walk-in Cooler w/ Standard Weight Shelving, Model #LSC090AJ,
S/N D9630135
One (1) Leer Walk-in Freezer w/ Standard Weight Shelving, Model #LSF094BJ,
S/N D96J01926
One (1) Scotsman Icemaker #AC-25 Flavor Beverage Dispenser, S/N
One (1) Waring Glass Washer #BGW205, S/N MC5730
One (3) Waring Bar Blender #700S, S/N
One (1) Jackson #UP24BF Undercounter Dishwasher, Model 288A, S/N 9624E
Two (2) Flashbake Oven Model #FB5 000-3, S/N 5850; 5848
One (1) 4' x 10' Cornell Aluminum Fir Shutter, Model #PFL-1F-22 GP 22, S/N
One (1) Auto Fry, Model #MT1-10, S/N 5342-A
One (1) Nacho Cheese Warmer, Model #5587, S/N BV4-00130
One (1) Dogeroo Hot Dog Machine, Model #8002, S/N 11843
One (1) Table Food Warmer, Model #W3-V, S/N 9603-109704
One (1) Soda Machine, Model #CB1522-AKS, S/N 29503K05132
One (1) Expresso Coffee Machine, Model #CNTF5-35, S/N 6064B
Two (2) Coffee Grinders, Model #LPG, S/N LPG 0001594
One (1) Cup Coffee Machine, Model #95-22-2, S/N 106045
One (1) Industrial Hot Plate, S/N
One (1) 2 Wheel Popcorn Cart
One (1) Gmedal Antique Popper
One (1) Misc Kitchen Utensils and Cookware
One (1) Condensing Unit
Two (2) 1HP Water Cooled Condensing Units
One (1) 3HP Water Cooled Condensing units
One (1) 12'0" Back Bar Refrigerator including misc refrigeration components
& handle
Complete Audio/Video System:
One (1) Auto Patch 4YDM 1224V1 12 x 24 Video Matrix (Expandable to 16 X
32),S/N
One (1) Auto Patch 4YDM 1208A1 Audio Matrix (Expandable to 15 x 32), S/N
One (1) Auto Patch 4YDM CPLL Control Panel, S/N
One (1) IBM Personal Computer - Matrix Control, S/N
One (1) IBM Personal Computer Software Program "Winrout" 4TSM SFWI, S/N
page 2 of 5 Borrower Initial: ____
Lender Initial: ____
<PAGE>
Thirty-two (32) DOTRONIX DSV-27 W 27" High Resolution, Black, Cube Style,
Color Videowall Monitors, S/N
Two (2) DELCOM Platinum Videowall Processor For 4X4 Videowall
Thirty-two 932) Custom Videowall Computer Cables
Thirty-four (34) ZENITH SY2551S 25" High Resolution, Black, Cube-Style,
Color TV/Monitors, S/N
Nine (9) SONY KV-20S20 20" High Resolution, Gray, Cube-Style, Color
TV/Monitors, S/N
Seventeen (17) ZENITH SY 1324S 13" High Resolution, Black, Cube Style,
Color TV/Monitors, S/N
Nine (9) AIM 1 x 4 Video Distribution Amplifiers, S/N
Two (2) MITSUBISHI VS-6047 60" Projection TV's, S/N
Two (2) AUDIO AUTHORITY 1 x 16 VDA Model 500 & 580 Power Supplies, S/N
Thirty-four (34) LUCASEY ACM-1420 Black, Tilt & Swivel TV Mounts
Two (2) LUCASEY ACM-1420 Black, Tilt & Swivel TV Mounts, S/N
One (1) LUCASEY MR60-ACM5 60" TV Ring Mount, S/N
One (1) SONY SVO-9600 Industrial Grade HiFi S-VHS VCR's with Auto-Rewind,
Auto-Play Features, S/N
One (1) PIONEER CLDV-2600 Industrial Grade Laser Disc Player w/
Auto-Repeat, S/N
One (1) VIDEOTRONICS Digital Video Mixer w/ Built-in TBC, S/N
Ten (10) Focus Enhancement PC Micro Presenters (RF Scan Converters), S/N
One (1) VIDEO MESSENGER Character Generator & Sequencer S/N
Two (2) MITSUBISHI 13101 13" High Resolution, Black, Cube Style, Color TV's
w/ Video in Triple Monitors/ Cameras Ques, S/N
One (1) DIRECT TV Satellite Dish w/ Receiver - SAS-AD1, S/N
One (1) DIRECT TV Receiver - SAT-A1, S/N
One (1) SONY DCR-VX 700 Digital Video Cassette Camcorder, S/N
One (1) VICON Video Quad Box, S/N
Seven (7) VICON Color Cameras, Lens, Pan/Tilt, S/N
One (1) VICON Camera Control Unit, S/N
One (1) VICON Digital Controller, S/N
One (1) TOA P-916 Industrial Grade Power Amplifier, S/N
One (1) TOA U-01R Auxiliary Input Module, S/N
One (1) RANE MA65 Multi-Channel Amplifier, S/N
Six (6) TOA M-900MKII Industrial Grade Pre-Amplifiers, S/N
page 3 of 5 Borrower Initial: ____
Lender Initial: ____
<PAGE>
Six (6) TOA U-11R Auxiliary Input Modules, S/N
Forty-two (42) PINNACLE AC-500 PRO Industrial Grade, 5.25", 2-Way, 70 Volt
Loudspeakers, Black, S/N
Forty-two (42) OMNIMOUNT 50RST 3/8"-16 Speaker Mounts
Two (2) Band Jacks (Stage Area-Sports Bar), S/N
Six (6) INFINITY BU-2 12", 100 Watt, Black, Cube-Style Powered Sub-Woofers
w/ Mounting Hardware, S/N
Six (6) QUAM 8C10CO/C70/W Coaxial, Flush Mount Ceiling Speakers w/
Transformers and Grills, S/N
Six (6) QUAM SSB-2 Ceiling Tile Bridges One (1) JBL EON Music Mix w/ Mixer
and 15" Powered, 2-Way Speakers, S/N
Two (2) Ultimate Speaker Stands
Two (2) SHURE SM58 Microphones, S/N
Two (2) ATLAS SOUNDOLIER BBE TL-34 Microphone Stands
One (1) DENON DN-2000F Dual Compact Disc Player, S/N
One (1) SONY DTC-60ES DAT Recorder/Player, S/N
One (1) RANE M-P24 Audio Mixer, S/N
Two (2) SHURE SC/24/58 Wireless Mic System, S/N
One (1) SHURE SM58CC Microphone w/ Gooseneck, S/N
Three (3) MIDDLE ATLANTIC ERK-44-20 Equipment Racks
One (1) Power Strips, Panels and Shelves for (3) Racks
10,000 Feet of 18/2 Heavy-Duty Speaker Cable (Non-Plenum)
10,000 Feet of RG-59U Video Coax Cable (Non-Plenum)
Eleven (11) 2000 watt Studio Fresnels with barndoor, lamps, safety cable,
clamp, color frame and connector, S/N
Sixteen (16) ETC Sources 4 Par Cans with lamps, safety cable, clamp, color
frame, lens kit and connector, S/N
Six (6) Short Nose Par Cans with lamp, floor base, color frame and
connector, S/N
Four (4) IPS 3 x 2.4kw Dimmer bars with clamps, S/N
Four (4) IPS 6 x 1.2kw Dimmer bars with clamps, S/N
Two (2) IPS 6 x 2.4kw Dimmer packs, S/N
One (1) Cyberlight All Litho fixtures with lamp, S/N
Sixteen (16) Intellibeam HX700 with lamp, S/N
Thirty-six (36) Trackspot Fixtures with lamp (High tech computerized moving
light), S/N
page 4 of 5 Borrower Initial: ____
Lender Initial: ____
<PAGE>
Twelve (12) Colorpro Fixtures with lamp (High tech computerized moving
light), S/N
One (1) Whole Hog Computer Control for lighting system, S/N
One (1) DF-50 Misting machine, S/N
One (1) Lot of necessary control, DMX and power cables
COMPLETE WITH ANY AND ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS,
IMPROVEMENTS, MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL
PROCEEDS INCLUDING INSURANCE PROCEEDS THERETO AND THEREFROM.
ALL GOODS, MACHINERY, EQUIPMENT, FURNITURE AND FIXTURES, COMPLETE WITH ANY AND
ALL ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS, IMPROVEMENTS,
MODIFICATIONS AND SUBSTITUTIONS THERETO AND THEREFOR AND ALL PROCEEDS INCLUDING
INSURANCE PROCEEDS AND PRODUCTS THEREOF AND THEREFROM.
ALL ACCOUNTS, ACCOUNTS RECEIVABLE, CONTRACT RIGHTS, INSTRUMENTS, GENERAL
INTANGIBLES AND CHATTEL PAPER AND ALL PROCEEDS THEREOF AND THEREFROM.
ALL INVENTORY AND ANY OTHER GOODS, MERCHANDISE OR OTHER PERSONAL PROPERTY HELD
BY DEBTOR FOR SALE OR LEASE AND ALL RAW MATERIALS, WORK OR GOODS IN PROCESS OR
MATERIALS OR SUPPLIES OF EVERY NATURE USED, CONSUMED OR TO BE CONNSUMED IN
DEBTOR'S BUSINESS, AND ALL PROCEEDS, INCLUDING INSURANCE PROCEEDS, INCLUDING
INSURANCE PROCEEDS AND PRODUCTS OF ANY OF THE FOREGOING.
SKYLINE VIRTUAL REALITY, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
page 5 of 5 Borrower Initial: ____
Lender Initial: ____
<PAGE>
RIDER TO LOAN AND SECURITY AGREEMENT DATED DECEMBER 4, 1996 AND
NUMBERED 207-04 (THE "AGREEMENT") BETWEEN
SKYLINE VIRTUAL REALITY, INC. AS BORROWER AND
INDEPENDENT RESOURCES, INC. AS LENDER
The Agreement is hereby amended as follows:
1. Paragraph 1. delete the last sentence and replace with the following:
"Unless otherwise specifically provided for in this Agreement or in side
letters hereto, the Loan may not be prepaid."
2. Paragraph 2. Line 9 amend "five (5) days" to "ten (10) days".
3. Paragraph 2. Line 10 amend "two (2%) percent" to "one and one half (1.5%)
percent".
4. Paragraph 9. Line 10 amend "thirty (30) days" to "forty-five (45) days".
5. Paragraph 9. Penultimate line, delete "any guarantor of Borrower's
obligation hereunder".
6. Paragraph 13. Line 2 amend "fifth (5th) day" to "tenth (10th) day".
7. Paragraph 13. Line 3 after the words "...any of the foregoing" insert the
following: "except for spare parts relating to maintenance...".
8. Paragraph 13. Line 8 after the words "....borrowed money" insert the
following: "over $250,000.00..."
9. Paragraph 13. Line 12 after the words "...repossess the premises" insert the
following: "provided such action is successful against borrower..."
10. Paragraph 13. Line 18 after the words "...or merges into any other entity"
insert the following: "except mergers in which Borrower is the survivor and
which do not materially, adversely affect the financial condition of the
Borrower...".
11. Paragraph 14. Line 4, after the words "...from the date of default" insert
the following: "until payment of all accounts due under A and B...".
12. Paragraph 14. Insert as the final sentence: "Lender shall release any and
all security interest upon full payment of any amounts due Lender from
Borrower."
13. Paragraph 15. Line 1 after the words "...this Agreement" insert the
following: ", except to a direct competitor of Borrower...".
14. Paragraph 15. At the end of paragraph insert the following: ", provided,
however, that no assignment of Lender's rights in this Agreement shall be
permitted unless Lender's assign expressly undertakes to be bound by the
terms and obligations by the Security Deposit Rider to this Agreement
between Lender and Borrower of even date."
SKYLINE VIRTUAL REALITY, INC. INDEPENDENT RESOURCES, INC.
BY: _______________________________ BY: _____________________________________
ITS: ______________________________ ITS: ____________________________________
<PAGE>
INDIVIDUAL GUARANTY
1. To induce Independent Resources, Inc. (herein called "I.R.") to accept and
enter into a Loan and Security Agreement dated December 23, 1996 and numbered
207-02 (herein collectively called the "Agreements") with New York Skyline,
Inc. (herein called the "Obligor"), the undersigned:
(a) Unconditionally and irrevocably guarantees to I.R. the prompt
payment in full of all indebtedness and obligations of every kind
and nature now and hereafter owing by the Obligor to I.R. under
the Agreements as well as any other obligations and indebtedness
which the Obligor now owes or may hereafter incur to I.R. under
any other agreements or by reason of any financial accommodation
including, without limitation, leases of personal property and/or
notes and security agreements between I.R. and the Obligor
whether now existing or made after the date hereof, whether or
not presently contemplated;
(b) Unconditionally and irrevocably guarantees to I.R. the prompt,
full and faithful performance and discharge by the Obligor of
each and every term, condition, agreement, and warranty to be
performed by the Obligor under the Agreements or any
modifications or amendments thereof or under any other documents
or instruments evidencing any other financial accommodation
between I.R. and the Obligor; and
(c) Unconditionally and irrevocably agrees to reimburse I.R. for all
expenses, costs and reasonable attorney's fees incurred by it in
enforcing any of its rights and remedies against the Obligor
and/or the undersigned or any other person or concern liable
thereon.
2. The undersigned agrees to pay all of the foregoing amounts and perform all of
the foregoing obligations notwithstanding that any part or all of the
Agreements or any other agreements or financial accommodation shall be void
or voidable or unenforceable as against the Obligor or any of the Obligor's
creditors, including a trustee in bankruptcy or receiver of Obligor, by
reason of any fact or circumstance, including, without limitation, failure of
any person to file any document or to take any other action to make any of
the Agreements or any financial accommodation enforceable in accordance with
their respective terms. The liability of the undersigned shall be an absolute
and primary obligation of payment and I.R. shall not be required to first (i)
proceed against the Obligor; (ii) proceed against or exhaust any security
held from the Obligor or any guarantor; or (iii) pursue any other remedies it
may have, including remedies against other guarantors.
3. The undersigned waives notice of acceptance hereof, and of all notices and
demands of any kind to which the undersigned may be entitled, including,
without limitation, demands of payment and notices of nonpayment, default,
protest and dishonor to the undersigned or the Obligor or to the makers or
endorsers of any notes or other instruments for which the undersigned may be
liable hereunder. The undersigned further waives notice of and hereby
consents to any agreement or arrangement for payment, extension,
subordination, moratoria, composition, discharge or release of the whole or
any part of the Obligor's obligations under the Agreements or any other
agreement or financial accommodation, the release of other guarantors or the
compromise of their obligations and the change in location or release of any
equipment or collateral or the taking of a security interest in any
additional or substituted equipment or collateral; and none of the same shall
in any way impair the undersigned's liability hereunder. I.R. shall be under
no obligation to insure, protect or otherwise preserve the equipment or any
other collateral which may secure any indebtedness guaranteed hereunder.
4. All sums at any time to the undersigned's credit and any of the undersigned's
property at any time in I.R.'s possession may be held by I.R. as security for
all of undersigned's obligations hereunder.
5. This Guaranty will continue to be effective or will be reinstated, as the
case may be, if at any time any payment made to I.R. is rescinded or must be
returned upon the insolvency, bankruptcy, or reorganization of the Obligor,
or otherwise, as if such payment had not been made. The undersigned expressly
waives any and all rights of subrogation, reimbursement, indemnity,
exoneration or any other claim which the undersigned may now or hereafter
have against the Obligor for the obligations guaranteed hereunder or against
or with respect to the property of the Obligor arising from the existence or
performance of this Guaranty.
6. This guaranty shall not be discharged or otherwise affected by the death,
incompetence or insolvency of the undersigned and shall be binding on the
undersigned's heirs, executors and administrators.
7. This guaranty is a continuing guaranty and shall continue in full force and
effect until terminated by the actual receipt by I.R. or its assignee of
written notice of termination from the undersigned. Such termination shall be
applicable only to transactions having their inception thereafter, and rights
and obligations arising out of transactions having their inception prior to
receipt of such termination shall not be affected.
8. The undersigned waives all right to a trial by jury in any action or
proceeding based hereon. This guaranty is assignable by I.R., in whole or
part, and may be subsequently further assigned by such assignees, all without
notice to the undersigned. Any assignee of I.R. and all subsequent assignees
shall have all of the rights of I.R. hereunder and may enforce this guaranty
with the same force and effect as if such guaranty were given to such
assignee in the first instance. The invalidity, illegality or
unenforceability of any provision of this guaranty shall not affect the
validity, legality or enforceability of any of its other provisions. Legal
rights and obligations hereunder shall be determined in accordance with the
laws of the State of Connecticut.
9. Anything in this guaranty to the contrary notwithstanding, the liability of
this guaranty shall be limited to $750,000.00 upon the occurrence of an Event
of Default plus the costs and expenses incurred by I.R. in enforcing this
guaranty pursuant to the Paragraph 1(c) above.
Executed this _____ day of ____________________, 1996.
__________________________
Zalman Silber
______________________________ 1259 56th Street
WITNESS Brooklyn, NY 11219
S.S. ####-##-####
<PAGE>
INDIVIDUAL GUARANTY
1. To induce Independent Resources, Inc. (herein called "I.R.") to accept and
enter into a Loan and Security Agreement dated December 3, 1996 and numbered
207-03 (herein collectively called the "Agreements") with Skyline Virtual
Reality, Inc. (herein called the "Obligor"), the undersigned:
(a) Unconditionally and irrevocably guarantees to I.R. the prompt
payment in full of all indebtedness and obligations of every kind
and nature now and hereafter owing by the Obligor to I.R. under
the Agreements as well as any other obligations and indebtedness
which the Obligor now owes or may hereafter incur to I.R. under
any other agreements or by reason of any financial accommodation
including, without limitation, leases of personal property and/or
notes and security agreements between I.R. and the Obligor
whether now existing or made after the date hereof, whether or
not presently contemplated;
(b) Unconditionally and irrevocably guarantees to I.R. the prompt,
full and faithful performance and discharge by the Obligor of
each and every term, condition, agreement, and warranty to be
performed by the Obligor under the Agreements or any
modifications or amendments thereof or under any other documents
or instruments evidencing any other financial accommodation
between I.R. and the Obligor; and
(c) Unconditionally and irrevocably agrees to reimburse I.R. for all
expenses, costs and reasonable attorney's fees incurred by it in
enforcing any of its rights and remedies against the Obligor
and/or the undersigned or any other person or concern liable
thereon.
2. The undersigned agrees to pay all of the foregoing amounts and perform all of
the foregoing obligations notwithstanding that any part or all of the
Agreements or any other agreements or financial accommodation shall be void
or voidable or unenforceable as against the Obligor or any of the Obligor's
creditors, including a trustee in bankruptcy or receiver of Obligor, by
reason of any fact or circumstance, including, without limitation, failure of
any person to file any document or to take any other action to make any of
the Agreements or any financial accommodation enforceable in accordance with
their respective terms. The liability of the undersigned shall be an absolute
and primary obligation of payment and I.R. shall not be required to first (i)
proceed against the Obligor; (ii) proceed against or exhaust any security
held from the Obligor or any guarantor; or (iii) pursue any other remedies it
may have, including remedies against other guarantors.
3. The undersigned waives notice of acceptance hereof, and of all notices and
demands of any kind to which the undersigned may be entitled, including,
without limitation, demands of payment and notices of nonpayment, default,
protest and dishonor to the undersigned or the Obligor or to the makers or
endorsers of any notes or other instruments for which the undersigned may be
liable hereunder. The undersigned further waives notice of and hereby
consents to any agreement or arrangement for payment, extension,
subordination, moratoria, composition, discharge or release of the whole or
any part of the Obligor's obligations under the Agreements or any other
agreement or financial accommodation, the release of other guarantors or the
compromise of their obligations and the change in location or release of any
equipment or collateral or the taking of a security interest in any
additional or substituted equipment or collateral; and none of the same shall
in any way impair the undersigned's liability hereunder. I.R. shall be under
no obligation to insure, protect or otherwise preserve the equipment or any
other collateral which may secure any indebtedness guaranteed hereunder.
4. All sums at any time to the undersigned's credit and any of the undersigned's
property at any time in I.R.'s possession may be held by I.R. as security for
all of undersigned's obligations hereunder.
5. This Guaranty will continue to be effective or will be reinstated, as the
case may be, if at any time any payment made to I.R. is rescinded or must be
returned upon the insolvency, bankruptcy, or reorganization of the Obligor,
or otherwise, as if such payment had not been made. The undersigned expressly
waives any and all rights of subrogation, reimbursement, indemnity,
exoneration or any other claim which the undersigned may now or hereafter
have against the Obligor for the obligations guaranteed hereunder or against
or with respect to the property of the Obligor arising from the existence or
performance of this Guaranty.
6. This guaranty shall not be discharged or otherwise affected by the death,
incompetence or insolvency of the undersigned and shall be binding on the
undersigned's heirs, executors and administrators.
7. This guaranty is a continuing guaranty and shall continue in full force and
effect until terminated by the actual receipt by I.R. or its assignee of
written notice of termination from the undersigned. Such termination shall be
applicable only to transactions having their inception thereafter, and rights
and obligations arising out of transactions having their inception prior to
receipt of such termination shall not be affected.
8. The undersigned waives all right to a trial by jury in any action or
proceeding based hereon. This guaranty is assignable by I.R., in whole or
part, and may be subsequently further assigned by such assignees, all without
notice to the undersigned. Any assignee of I.R. and all subsequent assignees
shall have all of the rights of I.R. hereunder and may enforce this guaranty
with the same force and effect as if such guaranty were given to such
assignee in the first instance. The invalidity, illegality or
unenforceability of any provision of this guaranty shall not affect the
validity, legality or enforceability of any of its other provisions. Legal
rights and obligations hereunder shall be determined in accordance with the
laws of the State of Connecticut.
9. Anything in this guaranty to the contrary notwithstanding, the liability of
this guaranty shall be limited to $250,000.00 upon the occurrence of an Event
of Default plus the costs and expenses incurred by I.R. in enforcing this
guaranty pursuant to the Paragraph 1(c) above.
Executed this _____ day of ____________________, 1996.
__________________________
Zalman Silber
______________________________ 1259 56th Street
WITNESS Brooklyn, NY 11219
S.S. ####-##-####
<PAGE>
INDIVIDUAL GUARANTY
1. To induce Independent Resources, Inc. (herein called "I.R.") to accept and
enter into a Loan and Security Agreement dated December 4, 1996 and numbered
207-04 (herein collectively called the "Agreements") with Skyline Virtual
Reality, Inc. (herein called the "Obligor"), the undersigned:
(a) Unconditionally and irrevocably guarantees to I.R. the prompt
payment in full of all indebtedness and obligations of every kind
and nature now and hereafter owing by the Obligor to I.R. under
the Agreements as well as any other obligations and indebtedness
which the Obligor now owes or may hereafter incur to I.R. under
any other agreements or by reason of any financial accommodation
including, without limitation, leases of personal property and/or
notes and security agreements between I.R. and the Obligor
whether now existing or made after the date hereof, whether or
not presently contemplated;
(b) Unconditionally and irrevocably guarantees to I.R. the prompt,
full and faithful performance and discharge by the Obligor of
each and every term, condition, agreement, and warranty to be
performed by the Obligor under the Agreements or any
modifications or amendments thereof or under any other documents
or instruments evidencing any other financial accommodation
between I.R. and the Obligor; and
(c) Unconditionally and irrevocably agrees to reimburse I.R. for all
expenses, costs and reasonable attorney's fees incurred by it in
enforcing any of its rights and remedies against the Obligor
and/or the undersigned or any other person or concern liable
thereon.
2. The undersigned agrees to pay all of the foregoing amounts and perform all of
the foregoing obligations notwithstanding that any part or all of the
Agreements or any other agreements or financial accommodation shall be void
or voidable or unenforceable as against the Obligor or any of the Obligor's
creditors, including a trustee in bankruptcy or receiver of Obligor, by
reason of any fact or circumstance, including, without limitation, failure of
any person to file any document or to take any other action to make any of
the Agreements or any financial accommodation enforceable in accordance with
their respective terms. The liability of the undersigned shall be an absolute
and primary obligation of payment and I.R. shall not be required to first (i)
proceed against the Obligor; (ii) proceed against or exhaust any security
held from the Obligor or any guarantor; or (iii) pursue any other remedies it
may have, including remedies against other guarantors.
3. The undersigned waives notice of acceptance hereof, and of all notices and
demands of any kind to which the undersigned may be entitled, including,
without limitation, demands of payment and notices of nonpayment, default,
protest and dishonor to the undersigned or the Obligor or to the makers or
endorsers of any notes or other instruments for which the undersigned may be
liable hereunder. The undersigned further waives notice of and hereby
consents to any agreement or arrangement for payment, extension,
subordination, moratoria, composition, discharge or release of the whole or
any part of the Obligor's obligations under the Agreements or any other
agreement or financial accommodation, the release of other guarantors or the
compromise of their obligations and the change in location or release of any
equipment or collateral or the taking of a security interest in any
additional or substituted equipment or collateral; and none of the same shall
in any way impair the undersigned's liability hereunder. I.R. shall be under
no obligation to insure, protect or otherwise preserve the equipment or any
other collateral which may secure any indebtedness guaranteed hereunder.
4. All sums at any time to the undersigned's credit and any of the undersigned's
property at any time in I.R.'s possession may be held by I.R. as security for
all of undersigned's obligations hereunder.
5. This Guaranty will continue to be effective or will be reinstated, as the
case may be, if at any time any payment made to I.R. is rescinded or must be
returned upon the insolvency, bankruptcy, or reorganization of the Obligor,
or otherwise, as if such payment had not been made. The undersigned expressly
waives any and all rights of subrogation, reimbursement, indemnity,
exoneration or any other claim which the undersigned may now or hereafter
have against the Obligor for the obligations guaranteed hereunder or against
or with respect to the property of the Obligor arising from the existence or
performance of this Guaranty.
6. This guaranty shall not be discharged or otherwise affected by the death,
incompetence or insolvency of the undersigned and shall be binding on the
undersigned's heirs, executors and administrators.
7. This guaranty is a continuing guaranty and shall continue in full force and
effect until terminated by the actual receipt by I.R. or its assignee of
written notice of termination from the undersigned. Such termination shall be
applicable only to transactions having their inception thereafter, and rights
and obligations arising out of transactions having their inception prior to
receipt of such termination shall not be affected.
8. The undersigned waives all right to a trial by jury in any action or
proceeding based hereon. This guaranty is assignable by I.R., in whole or
part, and may be subsequently further assigned by such assignees, all without
notice to the undersigned. Any assignee of I.R. and all subsequent assignees
shall have all of the rights of I.R. hereunder and may enforce this guaranty
with the same force and effect as if such guaranty were given to such
assignee in the first instance. The invalidity, illegality or
unenforceability of any provision of this guaranty shall not affect the
validity, legality or enforceability of any of its other provisions. Legal
rights and obligations hereunder shall be determined in accordance with the
laws of the State of Connecticut.
9. Anything in this guaranty to the contrary notwithstanding, the liability of
this guaranty shall be limited to $250,000.00 upon the occurrence of an Event
of Default plus the costs and expenses incurred by I.R. in enforcing this
guaranty pursuant to the Paragraph 1(c) above.
Executed this _____ day of ____________________, 199_.
__________________________
Zalman Silber
______________________________ 1259 56th Street
WITNESS Brooklyn, NY 11219
S.S. ####-##-####
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,194,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 199,000
<CURRENT-ASSETS> 3,083,000
<PP&E> 12,094,000
<DEPRECIATION> 1,014,000
<TOTAL-ASSETS> 16,238,000
<CURRENT-LIABILITIES> 3,265,000
<BONDS> 0
0
1,000
<COMMON> 3,000
<OTHER-SE> 7,520,000
<TOTAL-LIABILITY-AND-EQUITY> 16,238,000
<SALES> 1,392,000
<TOTAL-REVENUES> 1,749,000
<CGS> 97,000
<TOTAL-COSTS> 2,398,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,000
<INCOME-PRETAX> (721,000)
<INCOME-TAX> (209,000)
<INCOME-CONTINUING> (512,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (512,000)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0.000
</TABLE>
