<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)(1)
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
--------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
--------------------------------------
(Title of Class of Securities)
83083P100
-----------------------------------
(CUSIP Number)
IRA WHITE, ESQ. MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE, NEW YORK, NEW YORK 10178
(212) 309-6000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
MAY 26, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement on Schedule 13D)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box //.
Check the following box if a fee is being paid with the statement //. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement on Schedule 13D, including all exhibits,
should be filed with the Securities and Exchange Commission. See Rule 13d-1(a)
for other parties to whom copies are to be sent.
- --------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET NYC DISCOVERY FUND, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 94,152,524 SHARES OF COMMON STOCK(1)(2)(3)(4)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)(2)(3)(4)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 94,152,524 SHARES OF COMMON STOCK (1)(2)(3)(4)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)(2)(3)(4)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
94,152,524 SHARES OF COMMON STOCK (1)(2)(3)(4)
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
98.5 (1)(2)(3)(4)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Connecticut
Financial Developments, L.P. or Prospect Street NYC Co-Investment Fund,
L.P., with which Prospect Street NYC Discovery Fund, L.P. and Prospect
Street Discovery Fund, Inc. may be deemed to be acting as a group.
(2) Does not include any shares of Common Stock, par value $.001 per share
(the "Common Stock"), or Class A Common, par value $.001 per share (the
"Class A Common"), owned by Zalman Silber, former President of the Issuer,
with respect to which shares Prospect Street NYC Discovery Fund, L.P. was
granted a proxy with respect to certain matters and the holder (including
certain successors) is required to vote for certain matters. In addition,
Prospect Street NYC Discovery Fund, L.P. was granted a proxy by Mr.
Silber, good until March 15, 1999 to vote all shares of capital stock of
Mr. Silber with respect to all matters. As reported to Prospect Street
NYC Discovery Fund, L.P. by the Issuer, as of May 20, 1998, there were
960,000 shares of Class A Common owned by Zalman Silber and Mr. Silber
had no options or warrants to purchase securities of the Issuer.
(3) Does not include any shares of Common Stock or Class A Common owned by
Zalman Silber (including certain successors) which shares Prospect
Street NYC Discovery Fund, L.P. can cause to be sold under certain
conditions and which shares Prospect Street NYC Discovery Fund, L.P. can
acquire from Mr. Silber upon certain events.
(4) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Discovery Fund, L.P. by the Issuer on May 20, 1998,
that all 7,538,181 shares of Common Stock issuable to Prospect Street
NYC Discovery Fund, L.P. upon conversion of the Series A Convertible
Participating Preferred Stock, par value $.001 per share (the "Series A
Preferred Stock") are outstanding, and all 146,341 shares of Common Stock
issuable to Prospect Street NYC Discovery Fund, L.P. upon exercise of the
Warrants (as hereinafter defined) issued to it in connection with the
Credit Agreement (as hereinafter defined) are outstanding and that
86,467,912 shares of Common Stock issuable to Prospect Street NYC
Discovery Fund, L.P. upon exercise of the May Warrants (as hereinafter
defined) issued to Prospect Street NYC Discovery Fund, L.P. in connection
with the May Credit Agreement are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET DISCOVERY FUND, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 94,152,524 SHARES OF COMMON STOCK (1)(2)(3)(4)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)(2)(3)(4)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 94,152,524 SHARES OF COMMON STOCK (1)(2)(3)(4)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)(2)(3)(4)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
94,152,524 SHARES OF COMMON STOCK (1)(2)(3)(4)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
98.5 (1)(2)(3)(4)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Connecticut
Financial Developments, L.P. or Prospect Street NYC Co-Investment Fund,
L.P., with which Prospect Street NYC Discovery Fund, L.P. and Prospect
Street Discovery Fund, Inc. may be deemed to be acting as a group.
(2) Does not include any shares of Common Stock, par value $.001 per share
(the "Common Stock"), or Class A Common, par value $.001 per share (the
"Class A Common"), owned by Zalman Silber, former President of the Issuer,
with respect to which shares Prospect Street NYC Discovery Fund, L.P. was
granted a proxy with respect to certain matters and the holder (including
certain successors) is required to vote for certain matters. In addition,
Prospect Street NYC Discovery Fund, L.P. was granted a proxy by Mr.
Silber, good until March 15, 1999 to vote all shares of capital stock of
Mr. Silber with respect to all matters. As reported to Prospect Street
NYC Discovery Fund, L.P. by the Issuer, as of May 20, 1998, there were
960,000 shares of Class A Common owned by Zalman Silber and Mr. Silber
had no options or warrants to purchase securities of the Issuer.
(3) Does not include any shares of Common Stock or Class A Common owned by
Zalman Silber (including certain successors) which shares Prospect
Street NYC Discovery Fund, L.P. can cause to be sold under certain
conditions and which shares Prospect Street NYC Discovery Fund, L.P.
can acquire from Mr. Silber upon certain events.
(4) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Discovery Fund, L.P. by the Issuer on May 20, 1998,
that all 7,538,181 shares of Common Stock issuable to Prospect Street
NYC Discovery Fund, L.P. upon conversion of the Series A Convertible
Participating Preferred Stock, par value $.001 per share (the "Series A
Preferred Stock") are outstanding, and all 146,341 shares of Common Stock
issuable to Prospect Street NYC Discovery Fund, L.P. upon exercise of the
Warrants (as hereinafter defined) issued to it in connection with the
Credit Agreement (as hereinafter defined) are outstanding and that
86,467,912 shares of Common Stock issuable to Prospect Street NYC
Discovery Fund, L.P. upon exercise of the May Warrants (as hereinafter
defined) issued to Prospect Street NYC Discovery Fund, L.P. in connection
with the May Credit Agreement are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CONNECTICUT FINANCIAL DEVELOPMENTS, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 66,600 SHARES OF COMMON STOCK (1)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 66,600 SHARES OF COMMON STOCK (1)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
66,600 SHARES OF COMMON STOCK (1)(2)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.80(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Prospect Street NYC Co-Investment Fund, L.P., with
which Connecticut Financial Developments, L.P. and Prospect Street
Connecticut Capital, Inc. may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Connecticut Financial Developments, L.P. by the Issuer on May 20, 1998.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET CONNECTICUT CAPITAL, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 66,600 SHARES OF COMMON STOCK (1)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 66,600 SHARES OF COMMON STOCK (1)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
66,600 SHARES OF COMMON STOCK(1)(2)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.80(1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Prospect Street NYC Co-Investment Fund, L.P., with
which Prospect Street Connecticut Capital, Inc. and Connecticut Financial
Developments, L.P. may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Connecticut Financial Developments, L.P. by the Issuer on May 20, 1998.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET NYC CO-INVESTMENT FUND, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 43,902 SHARES OF COMMON STOCK (1)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 43,902 SHARES OF COMMON STOCK (1)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
43,902 SHARES OF COMMON STOCK (1)(2)
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.07 (1)(2)
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Connecticut Financial Developments, L.P., with
which Prospect Street NYC Co-Investment Fund, L.P. and Prospect Street
Co-Investment Fund, LLC may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Co-Investment Fund, L.P. by the Issuer on May 20, 1998
and that all 43,902 shares of Common Stock issuable to Prospect Street NYC
Co-Investment Fund, L.P. upon exercise of the Warrants (as hereinafter
defined) issued to it in connection with the Credit Agreement (as
hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
CUSIP NO. 83083P 100
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PROSPECT STREET CO-INVESTMENT FUND, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or (e) / /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 43,902 SHARES OF COMMON STOCK (1)
SHARES ------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0 SHARES OF COMMON STOCK (1)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 43,902 SHARES OF COMMON STOCK (1)
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0 SHARES OF COMMON STOCK (1)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
43,902 SHARES OF COMMON STOCK (1)(2)
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.07 (1)(2)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
00
- --------------------------------------------------------------------------------
- --------
(1) Does not include any securities of the Issuer owned by Prospect Street NYC
Discovery Fund, L.P. or Connecticut Financial Developments, L.P., with
which Prospect Street NYC Co-Investment Fund, L.P. and Prospect Street
Co-Investment Fund, LLC may be deemed to be acting as a group.
(2) Assumes 1,385,500 shares of Common Stock outstanding, as reported to
Prospect Street NYC Co-Investment Fund, L.P. by the Issuer on May 20, 1998
and that all 43,902 shares of Common Stock issuable to Prospect Street NYC
Co-Investment Fund, L.P. upon exercise of the Warrants (as hereinafter
defined) issued to it in connection with the Credit Agreement (as
hereinafter defined) are outstanding.
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
This Amendment No. 7 (the "Seventh Amendment") to the Statement
on Schedule 13D originally filed on July 17, 1995, as amended by Amendment No. 1
thereto filed on November 8, 1996, Amendment No. 2 thereto filed on November 20,
1996, Amendment No. 3 thereto filed on December 4, 1996, Amendment No. 4 thereto
filed on December 24, 1996, Amendment No. 5 thereto filed on March 6, 1997 and
Amendment No. 6 thereto filed on May 7, 1997 (such Statement, as so amended, the
"Original Statement" and the Original Statement together with the Seventh
Amendment, the "Statement") relates to the Common Stock, par value $0.001 per
share ("Common Stock"), of Skyline Multimedia Entertainment, Inc., a New York
corporation ("Skyline"), and amends and restates Items 2, 5 and 6 and amends
Items 3 and 4 of the Original Statement. Capitalized terms used and not defined
herein shall have the meaning ascribed to them in the Original Statement.
Item 2. Identity and Background.
(a) This Seventh Amendment is being filed by each of the
following persons pursuant to Rule 13d-1(k) promulgated by the Securities and
Exchange Commission (the "Commission") pursuant to Section 13 of the Securities
Exchange Act of 1934 (the "Act"): (i) Prospect Street NYC Discovery Fund, L.P.,
a Delaware limited partnership (the "Investor"), (ii) Prospect Street Discovery
Fund, Inc., a Delaware corporation (the "General Partner"), and sole general
partner of the Investor, (iii) Connecticut Financial Developments, L.P., a
Delaware limited partnership ("CFD"), (iv) Prospect Street Connecticut Capital,
Inc., a Delaware corporation ("CFDGP") and sole general partner of CFD, (v)
Prospect Street NYC Co-Investment Fund, L.P., a Delaware limited partnership
("Prospect II"), and (vi) Prospect Street Co-Investment Fund, LLC, a Delaware
limited liability company ("Prospect II GP") and the sole general partner of
Prospect II (collectively, the "Reporting Persons").
Attached as Schedule A is information concerning each executive
officer and director of each of the Reporting Persons; each person controlling
each of the Reporting Persons; and each executive officer and director of any
corporation or other person ultimately in control of each of the Reporting
Persons. Schedule A is incorporated into and made a part of this Statement on
Schedule 13D.
(b) The address of the principal business and principal office of
each of the Reporting Persons and the business address of each person named on
Schedule A is 250 Park Avenue, New York, New York 10177.
(c) The Investor's principal business is operating a Small
Business Investment Company under the Small Business Investment Act of 1958, as
amended. The General Partner is the general partner of the Investor and the
General Partner's sole function is to act as the general partner of the
Investor. CFD's principal business is operating a private venture capital
partnership. CFDGP is the general partner of CFD and CFDGP's sole function is to
act as the general partner of CFD. Prospect II's principal business is operating
a private venture capital partnership. Prospect II GP is the general partner of
Prospect II and Prospect II GP's sole function is to act as the general partner
of Prospect II. The principal occupation or employment of each person named on
Schedule A and the name and address of any corporation or other organization in
which such business is conducted is set forth on Schedule A. The principal
business of any such corporation or other organization is set forth in this
paragraph (c).
(d) During the last five years none of the Reporting Persons nor
any of their respective executive officers or controlling persons or the persons
identified on Schedule A have been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or state securities laws or finding any violation with
respect to such laws, except that, on August 25, 1995, the Commission entered an
order in Administrative Proceeding File No. 3-8557 finding, among other things,
that Mr. Joseph Cote caused violations of Section 17(a) of the Act and Rule
17a-3 thereunder and ordering that Mr. Cote cease and desist from causing any
violation and any future violation of Section 17(a) of the Act and Rule 17a-3
thereunder.
(e) All persons named in Schedule A to this statement are
citizens of the United States.
<PAGE> 9
Item 3. Source and Amount of Funds or Other Consideration.
Prospect Street NYC Discovery Fund, L.P. (the "Investor")
entered into that certain Senior Credit Agreement dated as of May 20, 1998 (the
"May Credit Agreement") by and among Skyline and each of its wholly-owned
subsidiaries (together, the "Co-Borrowers"), the Bank of New York, as Trustee
for the Employees Retirement Plan of Keyspan Energy Corp. ("Keyspan") and the
Investor, pursuant to which each of the Investor and Keyspan received Senior
Secured Promissory Notes (the "May Notes") issued to it by the Co-Borrowers in
the aggregate principal amount of $935,000 ($435,000 to the Investor) and a
Warrants to be issued to it by Skyline upon the earlier to occur of (x) the
prepayment of all or any portion of any May Note and (y) June 15, 1998 (the "May
Warrants") to purchase shares of Common Stock upon the occurrence or failure to
occur of certain events. In addition, on June 30, 1997 the Investor loaned to
Skyline $500,000 payable on demand at an interest rate of 14% per annum. The
funds used were obtained from the working capital of the Investor. In addition,
on April 23 and 25, 1997, June 19 and 20, 1997 and July 2 and 8, 1997, CFD
purchased an aggregate of 13,900 shares of Common Stock for a total
consideration of $49,216.33 (including brokerage fees and expenses). The funds
used to purchase such securities were obtained from the working capital of CFD.
Item 4. Purposes of Transactions.
On May 20, 1998 Skyline and its subsidiaries entered into the
May Credit Agreement with Keyspan and the Investor (the Investor together with
Keyspan, the "Institutional Investors") relating to the financing of an
aggregate of $935,000, of which $435,000 was funded by the Investor (the
"Financing") in exchange for the issuance to the Institutional Investors of the
May Notes and May Warrants, when issued. The May Notes mature on July 15, 1998
(the "Maturity Date"), accrue interest at a per annum rate equal to 14% and are
secured by (with certain exceptions) all the assets of Skyline and its
subsidiaries. The May Notes and the obligations under the May Credit Agreement
and May Warrants are also collateralized by a pledge of the stock of the
subsidiaries of Skyline. In connection with the May Credit Agreement, Keyspan
also received the right to appoint two members of Skyline's Board of Directors.
Further, as a result of the pending issuance of the May Warrants, Skyline has
determined that the conversion rate of the Series A Preferred Stock (the
"Preferred Stock") held by the Investor will be adjusted from a conversion
rate of one share of Common Stock for each share of Preferred Stock to a
conversion rate of 6.91 shares of common stock for each share of Preferred
Stock.
In the event Skyline receives additional gross proceeds of at
least $3 million in an equity financing (an "Equity Financing") on or prior to
the Maturity Date, each $1.00 of principal amount of the May Notes may, at the
option of the holder, convert into $1.25 of the securities issued in such
Equity Financing. In the event the entire principal amount of the May Notes
(plus all accrued and unpaid interest thereon) is repaid prior to the Maturity
Date, then the May Warrants will be exercisable for an aggregate of 64% (after
issuance) of the fully diluted Common Stock of Skyline on the date of such
issuance at an exercise price of $0.375 per share (in which event the
conversion rate of the Preferred Stock will be readjusted to 4.80 shares of
Common Stock for each share of Preferred Stock). In the event the entire
principal amount of the May Notes has not been repaid (plus all accrued and
unpaid interest thereon) or converted (pursuant to the terms of the May Notes)
prior to the Maturity Date, then the May Warrants will be exercisable for an
aggregate of approximately 94% (after issuance) of the fully diluted Common
Stock of Skyline on the date of such issuance at an exercise price of $0.375
per share (approximately 173 million shares in the aggregate, of which
approximately 86.5 million would become issuable pursuant to the May Warrant
issued to the Investor). Upon consummation of an Equity Financing and repayment
or conversion of the entire principal amount of the May Notes (plus all accrued
and unpaid interest thereon) before the Maturity Date, the May Warrants will be
canceled and of no further force or effect (and the conversion rate of the
Preferred Stock would be readjusted back to one share of Common Stock for each
share of Preferred Stock). The May Warrants have a cashless exercise procedure.
Skyline has reported to the Investor that Skyline believes that the $935,000
cash infusion will enable it to resolve its short-term cash management problems
while attempting to raise necessary additional financing. Skyline has reported
to the Investor that Skyline is currently exploring ways in which to attempt to
consummate an Equity Financing, including possibly conducting a rights
offering. However, no assurances can be made that Skyline will be successful.
Skyline has reported to the Investor that if Skyline is unable to raise
additional capital in the near term, there will likely be a material adverse
effect on Skyline, possibly resulting in curtailment of certain operations.
Skyline has reported to the Investor that Skyline is in the
process of applying to the Nasdaq Stock Market, Inc. (the "Nasdaq") to obtain a
waiver of the shareholder approval requirement under Nasdaq rules relating to
the possible issuance of 20% or more of the outstanding common stock of Skyline
as a result of the possible exercise of May Warrants to be issued in connection
with the Financing. In the event such waiver is not granted by Nasdaq,
Skyline's securities may be delisted from the Nasdaq Small Cap Market. Skyline
has also informed the Investor that as a result of failure to comply with the
Nasdaq maintenance criteria of a minimum bid price of $1.00 for Skyline's
Common Stock, Skyline's Common Stock may de delisted from the Nasdaq Small Cap
Market. Skyline expects to receive further instructions from Nasdaq on June 1,
1998. However, according to Nasdaq, failure to comply with these minimum bid
criteria by June 11, 1998 is likely to result in a delisting.
<PAGE> 10
In connection with the Financing, Zalman Silber, President and
Chief Executive Officer, agreed to relinquish all positions in Skyline held by
him and to deliver to Skyline for cancellation all of his options and warrants
in Skyline in exchange for the forgiveness of amounts previously agreed to be
refunded by Mr. Silber to Skyline in the amount of $750,000 and payment by
Skyline to Mr. Silber of $206,250 and to transfer to the Investor all of his
960,000 shares of Class A Common Stock (670,000 shares of which will likely be
forfeited to Skyline on June 30, 1998 pursuant to existing escrow arrangements)
in consideration for an aggregate of $100 and the financing by the Investor.
Skyline and Mr. Silber also exchanged general releases. Mr. Silber has granted
an irrevocable proxy with respect to the vote of such Class A Common Stock to
the Investor until the remaining 290,000 shares of Class A Common Stock, which
are currently pledged as collateral in connection with a loan, can be
transferred upon release of the pledge. Mr. Silber has also agreed not to
compete with Skyline in New York City for a period of ten years. The Investor
has been informed that Steven Schwartz, Skyline's Chief Financial Officer, will
assume a portion of the responsibilities of the Office of the Chief Executive
Officer on an interim basis and has been designated as the Executive Director
of Operations and Finance and that Skyline is in the process of hiring an
Executive Director of Marketing and Business Development, who will also assume
a portion of the responsibilities of the Office of the Chief Executive. Mr.
Silber will retain the title of Chairman of Skyline's Advisory Board. On or
about March 13, 1998, the Investor, as holder of the Series A Preferred Stock,
designated Thomas Riordan to replace Ronald D. Celmer on Skyline's Board of
Directors. Mr. Celmar is no longer affiliated with the Reporting Persons.
Item 5. Interest in Securities of the Issuer.
(a) The aggregate number of shares of Common Stock beneficially
owned by the Investor and the General Partner as of May 20, 1998 is 94,152,524
shares (up to 7,538,181 of which shares the Investor has a right to acquire
upon conversion of the Series A Preferred Stock, 146,341 of which the Investor
has a right to acquire upon exercise of the Warrants and up to 10,800,000 of
which the Investor has the right to acquire upon exercise of the May Warrants
upon the occurrence or failure to occur of certain events described previously),
or approximately 98.5 percent of the Common Stock, in each case, not including
the shares of Common Stock or Class A Common, or other securities owned by
Zalman Silber, former President of Skyline, with respect to which shares the
Investor was granted a proxy with respect to certain matters and the holder
(including certain successors) is required to vote for certain matters and not
including any securities owned by Connecticut Financial Developments, L.P. or
Prospect Street NYC Co-Investment Fund, L.P., with which the Investor may be
deemed to be acting as a group. In addition, the Investor was granted a proxy by
Mr. Silber good until March 15, 1999 to vote all shares of capital stock of Mr.
Silber with respect to all matters and such shares are not included in the
aggregate number of shares of Common Stock beneficially owned by the Investor.
As reported to the Reporting Persons by Skyline, as of May 20, 1998, there were
960,000 shares of Class A Common owned by Zalman Silber and Mr. Silber had no
options or warrants to purchase securities of the Issuer. The aggregate number
of shares of Common Stock beneficially owned by CFD and CFDGP as of May 20, 1998
is 66,600, or approximately 4.80 percent of the Common Stock, in each case, not
including any securities owned by Prospect Street NYC Discovery Fund, L.P. or
Prospect Street NYC Co-Investment Fund, L.P., with which CFD may be deemed to be
acting as a group. The aggregate number of shares of Common Stock beneficially
owned by Prospect II and Prospect II GP as of May 20, 1998 is 43,902, or
approximately 3.07 percent of the Common Stock, in each case, not including any
securities owned by Prospect Street NYC Discovery Fund, L.P. or Connecticut
Financial Developments, L.P., with which Prospect II may be deemed to be acting
as a group. As disclosed in Skyline's proxy statement for its annual meeting of
shareholders held on November 26, 1997, non-employee directors automatically
receive stock options to purchase 5,000 shares of Common Stock on their election
or reelection to the board of directors of Skyline. To date, Messr. Barry, a
director of Skyline, was granted options to purchase 15,000 shares of Common
Stock (which shares are not included in the beneficial ownership reported by the
Investor, the General Partner, CFD, CFDGP, Prospect II or Prospect II GP). The
Reporting Persons may be deemed to be acting as a group with respect to
securities of Skyline.
(b) The responses of the Reporting Persons to Items (7) through
(11) of the portions of pages 2 through 7 hereto which relate to shares of
Common Stock beneficially owned are herein incorporated by reference.
(c) Information concerning the transactions in Common Stock by
CFD on April 23 and 25, 1997, June 19 and 20, 1997 and July 2 and 8, 1997 is set
forth on Annex A. Other than as reported in this Statement, none of the
Reporting Persons nor, to the best of their knowledge, any of the persons named
in Schedule A hereto has effected a transaction in shares of Common Stock during
the past 60 days.
(d) No person other than the Reporting Persons has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of the securities to which this Statement relates.
<PAGE> 11
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
the Securities of the Issuer.
Except as set forth in this Statement, to the best knowledge of
the Reporting Persons, no contracts, arrangements, understandings or
relationships (legal or otherwise) exist among the Reporting Persons and the
persons listed on Schedule A hereto or between such persons and any other person
with respect to any securities of Skyline, including but not limited to transfer
or voting of any such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, divisions of profits or
loss, or the giving or withholding of proxies.
<PAGE> 12
SIGNATURE
After reasonable inquiry and to the best of the knowledge and
belief of each of the undersigned, each of the undersigned certifies that the
information set forth in this Seventh Amendment with respect to the undersigned
is true, complete and correct and each of the undersigned agrees that this
Seventh Amendment may be filed jointly.
Dated: May 22, 1998
Prospect Street NYC Discovery Fund, L.P.
By: Prospect Street Discovery Fund, Inc.,
Its General Partner
By: /s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
Prospect Street Discovery Fund, Inc.
By: /s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
Connecticut Financial Developments, L.P.
By: Prospect Street Connecticut Capital, Inc.,
Its General Partner
By: /s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
Prospect Street Connecticut Capital, Inc.
By: /s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
<PAGE> 13
Prospect Street NYC Co-Investment Fund, L.P.
By: Prospect Street Co-Investment Fund, LLC
Its General Partner
By: /s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
Prospect Street Co-Investment Fund, LLC
By:
/s/ John F. Barry
-------------------------------
Name: John F. Barry
Title: President
<PAGE> 14
SCHEDULE A
PROSPECT STREET DISCOVERY FUND, INC.
250 PARK AVENUE
NEW YORK, NEW YORK 10177
DIRECTORS
RICHARD E. OMOHUNDRO, JR., C.P.A.
JOHN F. BARRY III, ESQ.
<TABLE>
<CAPTION>
OFFICERS TITLE
- -------- -----
<S> <C>
JOHN F. BARRY III, ESQ. EXECUTIVE VICE PRESIDENT
PRESTON I. CARNES VICE PRESIDENT
JOHN A. FRABOTTA VICE PRESIDENT
KEVIN F. LITTLEJOHN, C.P.A., M.S.T. VICE PRESIDENT
Richard E. Omohundro, Jr., C.P.A. Chief Executive Officer
</TABLE>
ALL OF THE ABOVE OFFICERS ARE APPOINTED TO THEIR RESPECTIVE OFFICES SUBJECT TO
ANY NECESSARY APPROVAL BY THE SMALL BUSINESS ADMINISTRATION.
PROSPECT STREET CONNECTICUT CAPITAL, INC.
250 PARK AVENUE
NEW YORK, NEW YORK 10177
DIRECTORS
RICHARD E. OMOHUNDRO, JR., C.P.A.
JOHN F. BARRY III, ESQ.
<TABLE>
<CAPTION>
OFFICERS TITLE
- -------- -----
<S> <C>
JOHN F. BARRY III, ESQ. EXECUTIVE VICE PRESIDENT
PRESTON I. CARNES VICE PRESIDENT
JOHN A. FRABOTTA VICE PRESIDENT
KEVIN F. LITTLEJOHN, C.P.A., M.S.T. VICE PRESIDENT
RICHARD E. OMOHUNDRO, JR., C.P.A. CO-PRESIDENT
JOSEPH COTE CO-PRESIDENT
</TABLE>
<PAGE> 15
PROSPECT STREET CO-INVESTMENT FUND, LLC
250 PARK AVENUE
NEW YORK, NEW YORK 10177
MANAGERS
RICHARD E. OMOHUNDRO, JR., C.P.A.
JOHN F. BARRY III, ESQ.
<TABLE>
<CAPTION>
OFFICERS TITLE
- -------- -----
<S> <C>
JOHN F. BARRY III, ESQ. EXECUTIVE VICE PRESIDENT
PRESTON I. CARNES VICE PRESIDENT
JOHN A. FRABOTTA VICE PRESIDENT
KEVIN F. LITTLEJOHN, C.P.A., M.S.T. VICE PRESIDENT
RICHARD E. OMOHUNDRO, JR., C.P.A. CO-PRESIDENT
JOSEPH COTE CO-PRESIDENT
</TABLE>
<PAGE> 16
ANNEX A
_ _____
<TABLE>
<CAPTION>
Date of Number of Price per Brokerage Fees Total
Purchase Shares Share and Expenses Cost
- -------- --------- --------- -------------- -----
<S> <C> <C> <C> <C>
4/23/97 3,000 $3.875 $ 345.73 $11,970.73
4/25/97 1,800 $3.625 $ 225.30 $ 6,750.30
6/19/97 1,500 $3.125 $ 156.93 $ 4,844.43
6/19/97 1,500 $3.00 $ 160.65 $ 4,660.65
6/20/97 1,500 $3.50 $ 195.19 $ 5,445.19
7/02/97 2,600 $3.25 $ 359.76 $ 8,809.76
7/08/97 2,000 $3.25 $ 235.27 $ 6,735.27
------ ----- --------- ----------
Totals: 13,900 $1,678.83 $49,216.33
====== ===== ========= ==========
</TABLE>
<PAGE> 17
EXHIBIT INDEX
Exhibit A - Stock Purchase Agreement, dated as of June 30, 1995 by and
between Skyline Multimedia Entertainment, Inc. and Prospect
Street NYC Discovery Fund, LP.*
Exhibit B - Stockholders Agreement, dated as of June 30, 1995 by and
between Zalman Silber and Prospect Street NYC Discovery Fund,
L.P.*
Exhibit C - Registration Rights Agreement, dated as of June 30, 1995 by
and between Skyline Multimedia Entertainment, Inc. and
Prospect Street NYC Discovery Fund L.P.*
Exhibit D - Certificate of Amendment of the Certificate of Incorporation
of Skyline Multimedia Entertainment, Inc.*
Exhibit E - Guarantee of Zalman Silber, dated as of June 30, 1995.*
Exhibit F - Note Purchase Agreement, dated as of November 6, 1996 by and
between Skyline Multimedia Entertainment, Inc. and Prospect
Street NYC Discovery Fund, L.P.*
Exhibit G - Demand Promissory Note issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P. on November 6, 1996 in the principal amount of
$1,500,000.*
Exhibit H - Letter Agreement, dated as of October 23, 1996 between Skyline
Multimedia Entertainment, Inc, and Prospect Street NYC
Discovery Fund, L.P.*
Exhibit I - Guarantee of Zalman Silber, dated November 6, 1996.*
Exhibit J - Senior Credit Agreement, dated as of December 20, 1996 by and
among Skyline Multimedia Entertainment, Inc., New York
Skyline, Inc., Skyline Virtual Reality, Inc., Skyline Chicago,
Inc., Skyline Magic, Inc., Skyline Las Vegas, Inc., Prospect
Street NYC Discovery Fund, L.P. and Bank of New York, as
Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company.*
Exhibit K - Amended and Restated Registration Rights Agreement, dated as
of December 20, 1996 by and among Skyline Multimedia
Entertainment, Inc., Prospect Street NYC Discovery Fund, L.P.
and Bank of New York, as Trustee for the Employees Retirement
Plan of the Brooklyn Union Gas Company.*
Exhibit L - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P. on December 20, 1996 to purchase 133,333 shares of Common
Stock.*
Exhibit M - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund, L.P.
on December 20, 1996 to purchase 13,008 shares of Common
Stock.*
Exhibit N - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company on
December 20, 1996 to purchase 66,667 shares of Common Stock.*
Exhibit O - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company on
December 20, 1996 to purchase 30,893 shares of Common Stock.*
Exhibit P - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Prospect Street NYC Discovery Fund,
L.P. on December 20, 1996 in the principal amount of
$1,500,000.*
<PAGE> 18
Exhibit Q - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas
Company on December 20, 1996 in the principal amount of
$1,000,000.*
Exhibit R - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company on
December 31, 1996 to purchase 48,780 shares of Common Stock.*
Exhibit S - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas
Company on December 31, 1996 in the principal amount of
$500,000.*
Exhibit T - First Amendment to Senior Credit Agreement, dated as of
February 18, 1997, by and among Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality, Inc., Skyline Chicago, Inc., Skyline Magic, Inc.,
Skyline Las Vegas, Inc., Prospect Street NYC Discovery Fund,
L.P., and Bank of New York, as Trustee for the Employees
Retirement Plan of the Brooklyn Union Gas Company.*
Exhibit U - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for the
Employees Retirement Plan of the Brooklyn Union Gas Company on
February 18, 1997 to purchase 48,780 shares of Common Stock.*
Exhibit V - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Bank of New York, as Trustee for
the Employees Retirement Plan of the Brooklyn Union Gas
Company on February 18, 1997 in the principal amount of
$500,000.*
Exhibit W - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Co-Investment Fund,
L.P. on March 14, 1997 to purchase 43,902 shares of Common
Stock.*
Exhibit X - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Prospect Street NYC Co-Investment
Fund, L.P. on March 14, 1997 in the principal amount of
$450,000.*
Exhibit Y - Second Amendment to Senior Credit Agreement, dated as of March
21, 1997, by and among Skyline Multimedia Entertainment, Inc.,
New York Skyline, Inc., Skyline Virtual Reality Inc., Skyline
Chicago, Inc., Skyline Magic, Inc., Skyline Las Vegas, Inc.,
to Prospect Street NYC Discovery Fund, L.P., Bank of New York,
as Trustee for the Employees Retirement Plan of the Brooklyn
Union Gas Company, Prospect Street NYC Co-Investment Fund,
L.P. and Bank of New York, as Trustee for Brooklyn Union Gas
Company Non-Bargaining Health VEBA.*
Exhibit Z - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, as Trustee for
Brooklyn Union Gas Company Non-Bargaining Health VEBA on March
21, 1997 to purchase 39,024 shares of Common Stock.*
Exhibit AA - Senior Promissory Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality Inc., Skyline Chicago, Inc., Skyline Magic, Inc. and
Skyline Las Vegas, Inc. to Brooklyn Union Gas Company
Non-Bargaining Health VEBA on March 21, 1997 in the principal
amount of $400,000.*
<PAGE> 19
Exhibit BB - Senior Secured Credit Agreement, dated as of May 20, 1998, by
and among Skyline Multimedia Entertainment, Inc., New York
Skyline, Inc., Skyline Virtual Reality, Inc., Skyline Chicago,
Inc., Skyline Las Vegas, Inc., Bank of New York, as Trustee
for the Employees Retirement Plan of Keyspan Energy Corp. and
Prospect Street NYC Discovery Fund, L.P.
Exhibit CC - Senior Secured Note issued by Skyline Multimedia
Entertainment, Inc., New York Skyline, Inc., Skyline Virtual
Reality, Inc., Skyline Chicago, Inc., and Skyline Las Vegas,
Inc. to Prospect Street NYC Discovery Fund, L.P. in the
principal amount of $435,000.
Exhibit DD - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Prospect Street NYC Discovery Fund,
L.P.
Exhibit EE - Security Agreement, dated as of May 20, 1998, by and among
Skyline Multimedia Entertainment, Inc., New York Skyline,
Inc., Skyline Virtual Reality, Inc., Skyline Chicago, Inc.,
Skyline Las Vegas, Inc., Bank of New York, as Trustee for the
Employees Retirement Plan of Keyspan Energy Corp. and Prospect
Street NYC Discovery Fund, L.P.
Exhibit FF - Pledge Agreement, dated as of May 20, 1998, by and among
Skyline Multimedia Entertainment, Inc., Bank of New York, as
Trustee for the Employees Retirement Plan of Keyspan Energy
Corp. and Prospect Street NYC Discovery Fund, L.P.
Exhibit GG - Amended and Restated Separation Agreement and General Release,
dated as of May 15, 1998, by and among Zalman Silber, Skyline
Multimedia Entertainment, Inc., Bank of New York, as Trustee
for the Employees Retirement Plan of Brooklyn Union Gas Co. and
Prospect Street NYC Discovery Fund, L.P.
Exhibit HH - Senior Secured Note issued by Skyline Multimedia Entertainment,
Inc., New York Skyline, Inc., Skyline Virtual Reality, Inc.,
Skyline Chicago, Inc., and Skyline Las Vegas, Inc. to Bank of
New York, as Trustee for the Employees Retirement Plan of
Keyspan Energy Corp. in the principal amount of $500,000.
Exhibit II - Stock Purchase Warrant issued by Skyline Multimedia
Entertainment, Inc. to Bank of New York, at Trustee for the
Employees Retirement Plan of Keyspan Energy Corp.
* Previously filed
<PAGE> 1
EXHIBIT BB
SENIOR SECURED CREDIT AGREEMENT
dated as of May 20, 1998
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.,
BANK OF NEW YORK, AS TRUSTEE FOR
THE EMPLOYEES RETIREMENT PLAN OF
KEYSPAN ENERGY CORP.
AND
PROSPECT STREET NYC DISCOVERY FUND, L.P.
<PAGE> 2
SENIOR SECURED CREDIT AGREEMENT, dated as of May 20, 1998 by
and among Bank of New York, as Trustee for the Employees Retirement Plan of
Keyspan Energy Corp.("KEP") and Prospect Street NYC Discovery Fund, L.P.
("Prospect Street") (KEP and Prospect Street each a "Lender," and collectively,
the "Lenders"), and Skyline Multimedia Entertainment, Inc., a New York
corporation ("SMEI" or the "Company"), New York Skyline, Inc., a New York
corporation ("NYSI"), Skyline Virtual Reality, Inc., a Delaware corporation
("SCI"), Skyline Magic, Inc., a Delaware corporation ("SMI"), and Skyline Las
Vegas, Inc., a Delaware corporation ("SLVI") (SMEI, NYSI, SCI, SMI and SLVI,
each a "Borrower" and, jointly and severally, the "Co-Borrowers").
WHEREAS, capitalized terms not otherwise defined herein have
the meanings set forth in Section 1.1; and
WHEREAS, the Co-Borrowers wish to obtain financing and the
Lenders desire to provide such financing to the Co-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.
"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 10% 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 Secured Credit Agreement, the
Exhibits, Annexes and the certificates or other documents or instruments
delivered in accordance herewith, as the
<PAGE> 3
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, 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 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.
"Borrowing Certificate" means a certificate executed and
delivered by the Co-Borrowers in accordance with the terms of Section 2.2 and
substantially in the form of Exhibit A hereto.
"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; provided, however, that the issuance of securities pursuant to
Options under the existing stock option plans of a Borrower shall not be deemed
a Business Combination for purposes hereof.
"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.
"Business or Condition" means, with respect to any Person, the
business, condition, results of operations, Assets and Properties or 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.
"Change of Control" means 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 the Lenders
or any Affiliate of the Lenders of shares representing more
<PAGE> 4
than 50% of the aggregate ordinary voting power (in the absence of
contingencies) represented by the issued and outstanding capital stock of SMEI.
"Closing" means the making of the Loan hereunder in accordance
with the provisions herein.
"Closing Date" means the date on which the Loan is to be made
in accordance with the provisions herein, which date shall be April 15, 1998.
"Co-Borrowers" has the meaning ascribed to it in the forepart
of this Agreement (and includes, unless the context otherwise requires, any
predecessor of any Borrower).
"Contract" means any agreement, lease, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Equity Financing" means an equity financing pursuant to which
the Company receives gross proceeds of at least three million dollars
($3,000,000), exclusive of conversion of the Notes.
"Event of Default" has the meaning ascribed to it in Article
VII herein.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Final Maturity Date" means the date on which the Lenders
demand repayment of the Notes, which date shall not be prior to July 15, 1998.
"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.
"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,
<PAGE> 5
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 8.2.
"Indemnitees" has the meaning ascribed to it in Section 8.2.
"Indemnitor" has the meaning ascribed to it in Section 8.2.
"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.
"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" has the meaning ascribed to it in the forepart of
this Agreement.
"Liabilities" means all Indebtedness, obligations and other
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.
"Liens" means any mortgage, pledge, assessment, security
interest, lien, adverse claim, levy, charge or other encumbrance of any kind, or
other Contract granting any of the foregoing.
"Loan" means the loan in the amount set forth on Schedule 2.1
hereto made by the Lenders to the Co-Borrowers in accordance with the terms
herein.
"Loan Period" means the period commencing on the Closing Date
and ending on the first date on which the Loan and all other amounts owing under
this Agreement and any Operative Agreement have been indefeasibly satisfied in
full.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and
<PAGE> 6
expenses, including without limitation interest, reasonable expenses of
investigation, court costs, reasonable fees and expense of attorneys,
accountants and other experts or other reasonable 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 either of the Lenders may be indemnified pursuant to Section
8.2 hereof or (ii) asserting or disputing any rights under this Agreement
against any party hereto or otherwise).
"Notes" means the Senior Secured Promissory Notes of the
Co-Borrowers, due on the Final Maturity Date, issued pursuant to Section 2.1(b),
in the form attached as Exhibit C hereto.
"Operative Agreements" means the Notes, the Warrants, the
Subsidiary Stock Pledge Agreements, the Subsidiary Guarantee Agreement, the
Indemnity, Subrogation and Contribution Agreement, the Subordination Agreement
and the Security Agreement and any supporting or other agreements required
hereby or thereby to be entered into in connection with the transactions
contemplated by this Agreement.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, limited liability
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"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.
"Prospect Street Entities" means Prospect Street NYC Discovery
Fund, L.P., Prospect Street NYC Co-Investment Fund, L.P. and Connecticut
Financial Developments, L.P.
"Responsible Officer" means the Chief Executive Officer or
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 Investment 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).
"SEC" means the Securities and Exchange Commission.
<PAGE> 7
"SEC Reports" means those reports filed by the Company with
the SEC pursuant to the Securities Act and the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Security Agreement" means the Security Agreement, dated as of
the Closing Date, by and among the Co-Borrowers and the Lenders, substantially
in the form and to the effect of Exhibit D hereto, as such agreement may be
amended, modified or restated from time to time.
"Subsidiary" means any Person in which the Co-Borrowers,
directly or indirectly through Subsidiaries or otherwise, beneficially owns more
than fifty percent (50%) of either the equity interests or the voting power of
such Person.
"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 5.7 herein.
"Subsidiary Stock Pledge Agreement" means the Subsidiary Stock
Pledge Agreement dated as of the Closing Date, by and among the Co-Borrowers and
the Lenders, attached as Exhibit F hereto, as such agreement may be amended,
modified or restated from time to time.
"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 similar governmental charges, whether
disputed or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Transfer Tax" has the meaning set forth in Section 5.4.
"Warrants" or "Warrant Certification" means the form of
Warrant Certificate attached as Exhibit G hereto, as such Certificate may be
amended, modified or restated from time to time.
(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"
<PAGE> 8
and "ordinary course of business consistent with past practice" refer to the
business and practice of the Co-Borrowers 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 FINANCING
2.1 Loan; Issuance of the Notes.
(a) Subject to the terms and conditions herein, and relying
upon the representations and warranties of the Co-Borrowers herein set forth,
the Lenders agree to make a Loan to the Co-Borrowers on the Closing Date in an
aggregate principal amount as set forth on Schedule 2.1 hereto. The Lenders
shall make payment of the Loan by wire transfer of funds to such account in New
York City as the Co-Borrowers may designate in the Borrowing Certificate.
Amounts paid or prepaid in respect of the Loan may not be re-borrowed.
(b) Upon the making of the Loan, the Co-Borrowers shall issue
Notes in the aggregate principal amount of the Loan.
2.2 Borrowing Procedure. In order to request the Loan, the
Co-Borrowers shall hand deliver or telecopy to the Lenders a duly completed
Borrowing Certificate on or prior to April 15, 1998. The Borrowing Certificate
shall be irrevocable, shall be signed by or on behalf of each of the
Co-Borrowers by a Responsible Officer, and shall specify the following
information: (i) the date of the Loan (which shall be the Closing Date); (ii)
the amount of the Loan; and (iii) the number and location of the account in New
York City to which funds are to be disbursed.
2.3 Repayment of Loan.
(a) The Co-Borrowers unconditionally promise to pay to the
Lenders the then unpaid principal amount of the Notes issued to the Lenders,
together with all accrued and unpaid interest thereon, on the Final Maturity
Date.
(b) The Lenders shall maintain an account or accounts
evidencing the Indebtedness of the Co-Borrowers to the Lenders resulting from
the Loan, including the amounts of principal and interest payable and paid to
the Lenders from time to time under this Agreement.
(c) The entries made in the accounts maintained pursuant to
paragraph (b) above shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided, however, that the failure of the
Lenders to maintain such accounts or any error therein shall not in any manner
affect the obligations of the Co-Borrowers to repay the Loan in accordance with
its terms.
<PAGE> 9
2.4 Interest on Notes.
(a) The Notes 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%; provided, however, that, upon an Event of Default under Section 7.1
herein, the rate of interest per annum shall increase to a rate per annum of
21%.
(b) Interest on the Notes shall be payable on the earlier to
occur of the Final Maturity Date and the consummation of an Equity Financing.
2.5 Optional Prepayment.
(a) The Co-Borrowers shall have the right at any time and from
time to time to prepay the Notes, in whole or in part. Written notice of
prepayment under this Section 2.5 shall be given to the Lenders at least five
(5) days but not more than thirty (30) days before the prepayment date set forth
in such notice; provided, however that each partial prepayment shall be in a
principal amount that is an integral multiple of $10,000 and not less than
$100,000.
(b) Each notice of prepayment shall specify the prepayment
date and the principal amount of the Notes (or portion thereof) to be prepaid
and shall be irrevocable and shall commit the Co-Borrowers to prepay the
principal amount of such Note (together with accrued and unpaid interest
thereon) by the amount stated therein on the date stated therein.
2.6 Payments.
(a) The Co-Borrowers shall make each payment (including
principal of and interest on the Notes, and any fees or expenses or other
amounts) hereunder and under any Operative Agreement not later than 2:00 p.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 by wire transfer of immediately available or next day funds to such
account as the Lenders shall have designated.
(b) Whenever any payment (including principal of and interest
on the Notes, 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 or fees or expenses, if applicable.
2.7 Optional Conversion. In the event that an Equity
Financing has been consummated on or before July 15, 1998, the holders of the
Notes, may, at their option, convert all, but not less than all, of the
principal amount of the Notes such that each $1.00 of principal amount of the
Notes are converted into that number of units of securities offered in the
Equity Financing as are purchaseable thereunder for $1.25. Upon such conversion,
accrued and unpaid interest on the Notes shall be immediately payable to the
Lenders in cash.
<PAGE> 10
2.8 Warrant Certificate. Immediately upon the earlier of (x)
the prepayment of all or any portion of any Note and (y) expiration of the 10
day notice period with respect to notification to the Company's shareholders
that the Company has requested a waiver from the Nasdaq Stock Market, Inc. of
certain corporate governance rules to which the Company is subject, SMEI will
issue to each Lender a Warrant Certificate, the terms of which shall be
substantially the same as those set forth in Exhibit G hereto. Notwithstanding
the foregoing, such Warrant Certificates shall be issued no later than June 15,
1998.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CO-BORROWERS
The Co-Borrowers hereby represent and warrant to the Lenders
as follows:
3.1 Organization. Each of the Co-Borrowers is a corporation
duly organized and validly existing under the Laws of its respective state of
incorporation. Each of the Co-Borrowers is duly qualified, licensed or admitted
to do business 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 the Co-Borrowers taken as a whole. Each of the
Co-Borrowers has, prior to the execution of this Agreement, delivered to the
Lenders true and complete copies of its certificate of incorporation and by-laws
as in effect on the date hereof.
3.2 Power and Authority. Each of the Co-Borrowers has all
requisite 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), the
Notes and the Warrants required hereunder to be issued on such date. The
execution and delivery by the Co-Borrowers of this Agreement and the Operative
Agreements to which they are a party, and the performance by the Co-Borrowers of
their obligations hereunder and thereunder, including without limitation the
issuance and sale (pursuant to this Agreement) of the Notes and the Warrants
required hereunder to be issued on such date, have been duly and validly
authorized by all necessary action of the board of directors. This Agreement has
been duly and validly executed and delivered by the Co-Borrowers and constitutes
(and upon the execution and delivery by the Co-Borrowers of the Operative
Agreements to which they are a party, such Operative Agreements will constitute)
legal, valid and binding obligations of the Co-Borrowers enforceable against the
Co-Borrowers in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights generally and as the same
may be limited by general principles of equity.
3.3 Subsidiaries. The Subsidiaries of SMEI are NYSI, SVRI,
SCI, AMI and SLVI. There are no other Subsidiaries of any of the Co-Borrowers.
<PAGE> 11
3.4 No Conflicts. The execution and delivery by the
Co-Borrowers of this Agreement do not, and the execution and delivery by the
Co-Borrowers of the Operative Agreements to which they are a party, the
performance by the Co-Borrowers of their obligations under this Agreement and
such Operative Agreements and the consummation of the transactions contemplated
hereby and thereby did not, do not and could not reasonably be expected to:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of incorporation or
by-laws of any of the Co-Borrowers;
(b) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to any of the Co-Borrowers or
any of their Assets and Properties;
(c) (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 the Co-Borrowers to obtain, from any Person other than the
Lenders, the Prospect Street Entities or any of their respective affiliates, 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, or (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
any material Contract or material License to which the Co-Borrowers are a party
or by which any of their Assets and Properties are bound; or
(d) result in the creation or imposition of any Lien upon any
of the Co-Borrowers or any of their Assets and Properties (other than in favor
of the Lenders).
3.5 Capitalization. The Company's authorized capital stock
consists of: 19,000,000 shares of common stock, $.001 par value per share, of
which 1,385,000 shares are issued and outstanding and 110,000 shares are held as
treasury shares as of the date hereof; 1,000,000 shares of Class A Common Stock,
par value $.001 per share, of which 960,000 shares are issued and outstanding as
of the date hereof; and 5,000,000 shares of preferred stock, par value $.001 per
share, of which 1,090,909 shares have been designated as Series A Convertible
Participating Preferred Stock. Additionally, as of the date hereof, not
including the Warrants, there are outstanding options and warrants to purchase
an aggregate of 6,968,572 shares of Common Stock.
ARTICLE IV
CONDITIONS TO THE LOAN
The obligation of the Lenders to make the Loan hereunder is
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 any the
Lenders in its sole discretion):
<PAGE> 12
4.1 Borrowing Certificate. The Lenders shall have received a
Borrowing Certificate as required by Section 2.2.
4.2 Representations and Warranties. Each of the
representations and warranties made by the Co-Borrowers 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. The Co-Borrowers 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 the
Co-Borrowers at or before the Closing.
4.4 Secretary's Certificate. Each of the Co-Borrowers shall
have delivered to each of the Lenders a certificate, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of the Co-Borrowers,
substantially in the form and to the effect of Exhibit H hereto.
4.5 Orders and Laws. Except as previously disclosed to the
Lenders or contained in the SEC Reports, 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, 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, the Lenders, the
Co-Borrowers, 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
Operative Agreements or any of the transactions or events contemplated hereby or
thereby, declare unlawful the transactions or events contemplated by this
Agreement or any of the Operative Agreements or present a reasonable risk of
damages to the Lenders.
4.6 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority required to be obtained, taken or made to permit the
Lenders or the Co-Borrowers to perform their respective 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 the
Lenders, (c) shall not impose any material limitations or restrictions on either
of the Lenders, (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
<PAGE> 13
and the Operative Agreements shall have occurred.
4.7 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by the Lenders or the Co-Borrowers of their
respective 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 the Lenders or the Co-Borrowers are 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 the Lenders or the Business or
Condition of the Co-Borrowers, (a) shall have been obtained, (b) shall be in
form and substance reasonably satisfactory to each of the Lenders, (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; provided, however, that any
such required consents (or in lieu thereof waivers) from the Lenders, the
Prospect Street Entities or their respective Affiliates under any Contract or
other instrument or agreement shall hereby be deemed obtained.
4.8 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.
4.9 Issuance of Notes and Warrants. The Co-Borrowers shall
have issued the Notes as required by Section 2.1 and SMEI shall have issued the
Warrant Certificates as required by Section 2.8.
4.10 Potential Event of Default, Event of Default. No event
shall have occurred and be continuing or would result from the consummation of
the Loan contemplated by the Borrowing Certificate which would constitute a
Potential Event of Default or an Event of Default.
4.11 Additional Matters. All corporate and other proceedings
to be taken on the part of the Co-Borrowers 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
of the Lenders.
ARTICLE V
AFFIRMATIVE COVENANTS
The Co-Borrowers covenant and agree with each of the Lenders
that, at all times during the Loan Period or any other times that either Lender
shall hold securities of the Company or any Co-Borrower, the Co-Borrowers will,
and will cause each of their Subsidiaries, if any, to comply with each of the
covenants and agreements contained in this Article V.
<PAGE> 14
5.1 Financial and Business Information.
(a) Quarterly Statements. The Co-Borrowers shall deliver to
each of the Lenders, as soon as practicable, and in any event within 45 days
after the close of each of the first three fiscal quarters of each fiscal year
of the Co-Borrowers, true and complete copies of the consolidated balance
sheets, and the related consolidated statements of income, stockholders' equity
and cash flows of the Co-Borrowers as at the close of such quarter and covering
operations for such quarter, and the portion of the Co-Borrowers' fiscal year
ending on the last day of such quarter, setting forth in each case in
comparative form the figures for the comparable period of the previous fiscal
year, as set forth in Co-Borrowers' public reports under the Exchange Act as
filed with the SEC.
(b) Annual Statements. The Co-Borrowers shall deliver to each
of the Lenders, as soon as practicable after the end of each fiscal year of the
Co-Borrowers, and in any event within 90 days thereafter, true and complete
copies of the consolidated and consolidating balance sheets of the Co-Borrowers
at the end of such year and the consolidated and consolidating statements of
income, stockholders' equity and cash flows of the Co-Borrowers for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, as set forth in the Co-Borrowers' public reports under the Exchange
Act as filed with the SEC; and these shall be accompanied by an opinion thereon
of a firm of independent certified public accountants of recognized national
standing selected by the Co-Borrowers.
(c) Other Reports. The Co-Borrowers shall deliver to each of
the Lenders, promptly upon their becoming available, one copy of each financial
statement, report, notice or proxy statement sent by the Co-Borrowers to
stockholders generally, of each financial statement, report, notice or proxy
statement sent by the Co-Borrowers or any of their Subsidiaries to the SEC or
any successor agency, if applicable, of each regular or periodic report and any
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Co-Borrowers or any of
their Subsidiaries with, or received by such Person in connection therewith
from, any securities exchange or the SEC or any successor agency, of any press
release issued by the Co-Borrowers or any of their Subsidiaries, and of any
material of any nature whatsoever prepared by the SEC or any successor agency
thereto or any state blue sky or securities law commission which relates to or
affects in any way the Co-Borrowers or any of their Subsidiaries.
(d) Requested Information. The Co-Borrowers shall deliver to
each of the Lenders, with reasonable promptness, such other documents, reports,
data and information as from time to time may be reasonably requested by either
of the Lenders.
5.2 SBA Forms; Inspection. Prior to the Closing, the
Co-Borrowers shall deliver to Prospect Street any documentation required
pursuant to the SBA Act or the SBA Regulations, including, but not limited to:
SBA Forms 480, 652 and 1031 and the SBA Certificate dated as of the Closing Date
and executed by the chief executive officer or president of each of the
Co-Borrowers, substantially in the form and to the effect of Exhibit I hereto.
At any time and from time to time, at the request of Prospect Street, such
Co-Borrower shall permit
<PAGE> 15
Prospect Street and/or the SBA and/or any Person designated by Prospect Street
to inspect any of the properties, corporate books and financial records of such
Co-Borrower, if any, to discuss their respective affairs and finances with the
officers and employees of such Co-Borrower and to make extracts from the copies
of such books and records, all at such time as Prospect Street may reasonably
request, including, but not limited to, for purposes of verifying information
provided to Prospect Street and required by the SBA.
5.3 Inspection. The Co-Borrowers shall permit either of the
Lenders and their nominees, assignees, and representatives, in a manner
reasonably calculated not to unduly disrupt or interfere with the conduct of the
Co-Borrowers' business and upon at least three (3) days prior notice, to visit
and inspect any of the Assets and Properties of the Co-Borrowers, to examine all
its books of account, records, reports and other papers not contractually
required of the Co-Borrowers to be confidential or secret, to make copies and
extracts therefrom, and to discuss its affairs, finances and accounts with its
officers, directors, key employees and independent public accountants or any of
them (and by this provision, the Co-Borrowers authorize said accountants to
discuss with the Lenders or their nominees, assignees and representatives the
finances and affairs of the Co-Borrowers), all at such reasonable times and as
often as may be reasonably requested.
5.4 Corporate Existence; Compliance. The Co-Borrowers shall,
and shall cause each Subsidiary to, cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence of the
Co-Borrowers and all necessary approvals and licenses of any Governmental or
Regulatory Authority. The Co-Borrowers shall comply with all Laws applicable to
the Co-Borrowers and comply with all agreements to which the Co-Borrowers are a
party, the violation of which could reasonably be expected to have a material
adverse effect on the Business or Condition of the Co-Borrowers.
5.5 Payment of Liabilities. The Co-Borrowers shall pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all Liabilities (including Taxes) of the
Co-Borrowers, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the
Co-Borrowers. The Co-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, any
Operative Agreement, and the Notes, 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).
5.6 Insurance: Maintenance of Properties. The Co-Borrowers
shall keep adequately insured by duly licensed insurers all material Assets and
Properties of the Co-Borrowers and also keep the Co-Borrowers adequately insured
at all times with responsible insurance carriers against liability on account of
damage to persons or property and under all
<PAGE> 16
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 the Lenders. The Co-Borrowers
shall maintain and preserve, in all material respects, all of the Assets and
Properties of the Co-Borrowers necessary or useful in the proper conduct of
their business in good working order and condition, ordinary wear and tear
excepted.
5.7 Notice of Certain Events. The Co-Borrowers shall promptly
notify each of the Lenders in writing (i) of the commencement of any Action or
Proceeding to which the Co-Borrowers or any Subsidiary is a party where the
amount in controversy is in excess of $50,000, singularly or cumulatively, for
all claims arising from a single incident, to which the Co-Borrowers 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.
5.8 Subsidiary Guarantors; Contribution. The Borrower shall
cause each Subsidiary to promptly enter into a Subsidiary Guarantee Agreement as
a Subsidiary Guarantor thereunder and the Security Agreement as a Subsidiary
Grantor thereunder. The Co-Borrowers shall each promptly enter into an
Indemnitee, Subrogation and Contribution Agreement with respect to each other.
5.9 Further Assurances. The Co-Borrowers shall 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.
5.10 Board Seats. Upon notice to the Company, Keyspan shall
have the right to designate two members to the Company's Board of Directors,
provided, however, that such designees shall be subject to the approval of the
Company, which approval shall not be unreasonably withheld.
ARTICLE VI
NEGATIVE COVENANTS
Each Co-Borrower covenants and agrees with each Lender that,
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 Indebtedness. Without consent of the Lenders, 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 constituting Capital Lease
Obligations; and
(iii) 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.
6.2 Liens. Without consent of the Lenders, 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 securing Indebtedness of up to an
aggregate amount of $250,000 at any time outstanding for all Borrowers and
Subsidiaries taken together.
6.3 Merger, Consolidation, Sale of Assets. Without consent of
the Lenders, 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 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 6.14).
6.4 Lease Obligations. No Borrower shall, except for real
property leases requiring annual lease payments not exceeding $250,000 in the
aggregate for all Co-Borrowers, create or suffer to exist or permit any
Subsidiary to create or suffer to exist, any obligations for the payments of
rental for any property under leases or agreements to lease having a term of one
year or more.
6.5 Loans and Investments. Without consent of the Lenders, 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
the Borrowers 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, and (iii) money market
accounts or other similar low-risk, liquid investments approved by the board of
directors of such Borrower.
6.6 Dividends, Etc. Without consent of the Lenders, 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.
6.7 Subsidiaries. Without consent of the Lenders, no Borrower
shall, nor shall it permit any of its Subsidiaries to, unless prior written
notice has been given to the Lenders, organize or cause to exist any Subsidiary.
<PAGE> 17
6.8 Sale and Leaseback. Without consent of the Lenders, 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 by such
Borrower or such Subsidiary to such Person.
6.9 Charter Documents; Directors. Without consent of the
Lenders, 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 certificate of incorporation of the Company.
6.10 Certain Limitations. Other than as permitted pursuant to
this Agreement, without consent of the Lenders, 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 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. Without consent of the Lenders, no Borrower shall,
nor shall it permit any of its Subsidiaries to, enter into any agreement with
any Person other than the Lenders pursuant to this Agreement or any Operative
Agreement.
6.11 Conflicting Agreements. Without consent of the Lenders,
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.
6.12 Use of Proceeds. Without consent of the Lenders, 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.
6.13 Affiliate Transactions. Without consent of the Lenders,
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
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.
6.14 Change in Nature of Business. Without consent of the
Lenders, 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
<PAGE> 18
reasonably related thereto.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of
Default") shall occur and be continuing:
7.1 Failure To Make Payments When Due. Failure to pay any
installment of principal or interest of the Loan when due, whether at stated
maturity, by acceleration, by notice of prepayment, or otherwise; or
7.2 Default in Other Agreements. Any event or condition
occurs that results in any Indebtedness of the Co-Borrowers in excess of $50,000
in the aggregate for the Co-Borrowers 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
7.3 Breach of Certain Covenants and Agreements. Failure of
the Co-Borrowers to materially perform or comply with (i) any term or condition
contained in Article V (other than Sections 5.5 and 5.7 herein), or (ii) any
other term contained in this Agreement or the Operative Agreements; and, in the
case of clause (ii), and provided that the Co-Borrowers have complied with
Section 5.7, such failure shall not have been remedied or waived within ten (10)
days after receipt of written notice from either of the Lenders of such default;
or
7.4 Breach of Warranty. Any representation or warranty made
by the Co-Borrowers in this Agreement or any Operative Agreement or in any
written statement or certificate at any time given by the Co-Borrowers 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
7.5 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 Co-Borrower 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 Co-Borrower 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 Co-Borrower or over all or a substantial part of any of
<PAGE> 19
their respective Assets and Properties, shall have been entered; or an interim
receiver, trustee or other custodian of any Co-Borrower 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 Co-Borrower, and the
continuance of any such events in this clause (b) for sixty (60) days unless
dismissed, bonded, stayed, vacated or discharged; or
7.6 Voluntary Bankruptcy; Appointment of Receiver, Etc. Any
Co-Borrower shall 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 their Assets and Properties; the making by any
Co-Borrower of any assignment for the benefit of creditors; the admission by any
Co-Borrower in writing of their inability to pay its debts as such debts become
due; or the board of directors of any Co-Borrower (or any committee thereof)
adopts any resolution or otherwise authorizes action to approve any of the
foregoing; or
7.7 Judgments and Attachments. Except as previously
disclosed to the Lenders or as set forth on Schedule 7.7 hereto, 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 fifty
thousand dollars ($50,000), which is not covered by insurance, for any
Co-Borrower and all Subsidiaries, taken together, shall be entered or filed
against any Co-Borrower 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
7.8 Other Agreements. Any material provision of this
Agreement or any other Operative Agreement shall cease to be a valid and binding
obligation against any Co-Borrower except in accordance with its terms and
except solely by reason of any act or omission of either of the Lenders, or any
Co-Borrower, shall so state in writing; or
7.9 Change of Control. A Change of Control shall occur.
THEN, (i) upon the occurrence of any Event of Default
described in the foregoing Sections 7.5 or 7.6, the unpaid principal amount of
and accrued interest on the 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 the Co-Borrowers, and the
obligations of each of the Lenders hereunder shall thereupon terminate; and (ii)
upon the occurrence of any other Event of Default, either of the Lenders may, at
any time by written notice to the Co-Borrowers, declare the Loan to be, and the
same shall forthwith become, due and payable, together with accrued interest
thereon, and the obligations of each of the Lenders hereunder shall thereupon
terminate.
<PAGE> 20
ARTICLE VIII
MISCELLANEOUS
8.1 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 the Co-Borrowers, to:
Skyline Multimedia Entertainment, Inc.
350 Fifth Ave., Suite 612
New York, NY 10118
Facsimile No.: (212) 564-0652
Attn: President
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile No.: (212) 969-2900
Attn: Neil S. Belloff, Esq.
If to Prospect Street, to:
Prospect Street NYC Discovery Fund, LP
250 Park Avenue, 17th Floor
New York, NY 10177
Facsimile No.: (212) 490-1566
Attn: John F. Barry, III
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 KEP, to:
Bank of New York, as Trustee of the
Employees Retirement Plan of
Keyspan Energy Corp.
<PAGE> 21
c/o The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, NY 11201-3850
Facsimile No. (718) 643-1341
Attn: Thomas Riordan
with a copy to:
Cullen & Dykeman
177 Montague Street
Brooklyn, NY 11201
Facsimile No.: (718) 935-1304
Attn: Lance D. Myers, 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 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 at least ten
(10) days prior to the effective date of such notice.
8.2 Indemnity.
(a) Agreement to Indemnify. The Co-Borrowers (as
"Indemnitors") agrees to indemnify each of the Lenders, each holder of any Loan,
Notes or Warrants, and any stockholder, member, general partner, limited
partner, officer, director, manager, agent and Affiliate of either of the
Lenders 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 any breach of any representation or warranty of
the Co-Borrowers contained in this Agreement or any Operative Agreement (the
"Indemnified Liabilities").
(b) Notice of Claim. Each Indemnitee shall give the
Indemnitors 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, however, that any
failure to give such notice shall not affect the obligations of the Indemnitors
unless (and then solely to the extent) the ability of the Indemnitors to provide
such indemnification is prejudiced thereby.
<PAGE> 22
(c) Control of Defense. The Indemnitors 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 they are 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 Indemnitors shall have stated in a writing delivered to the
Indemnitee that, as between the Indemnitors and the Indemnitee, the Indemnitors
are responsible to the Indemnitee with respect to such claim to the extent and
subject to the limitations set forth herein; provided, however, that the
Indemnitors 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
Indemnitors; provided, further, that with respect to any claim as to which the
Indemnitee is controlling the defense, the Indemnitors will not be liable to any
Indemnitee for any settlement of any claim pursuant to this Section 8.2 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, each
Indemnitor 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 Indemnitor.
8.3 Entire Agreement. This Agreement and the Operative
Agreements 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.
8.4 Purchase for Investment.
(a) The Lenders hereby represent and warrant to the
Co-Borrowers that:
(i) the Notes will be acquired by the Lenders for their own
account for the purpose of investment and not with a view to
the resale or distribution of all or any part of the Notes in
violation of the Securities Act, it being understood that the
right to dispose of the Notes shall be entirely within the
discretion of each of the Lenders, subject to contractual
commitments of the Lenders to the Co-Borrowers;
(ii) each is an "accredited investor" as such term is defined
in Rule 501 of Regulation D of the Securities Act;
(iii) they has been given access to all information they
deemed reasonably necessary to evaluate their investment in
the Co-Borrowers; and
(iv) they have such experience and knowledge in financial and
business matters to be capable of evaluating the merits and
risks of their investment in the Co-Borrowers and have
reviewed the merits of such investment with tax and legal
<PAGE> 23
counsel and other advisors to the extent they deemed
advisable.
(b) The Lenders covenant that they will not sell or otherwise
transfer the Notes except pursuant to an effective registration statement under
the Securities Act and in compliance with state securities laws, or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Co-Borrowers, is exempt from registration under the Securities Act and under
applicable state securities laws.
(c) The Lenders understand that the Notes have not been
registered under the Securities Act in reliance on an exception therefrom under
Section 4(2) of the Securities Act, and that such securities shall bear the
following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT (I)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH
STATE SECURITIES LAWS OR (II) IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE SKYLINE
MULTIMEDIA ENTERTAINMENT, INC., IS EXEMPT FROM REGISTRATION
THEREUNDER AND UNDER APPLICABLE STATE SECURITIES LAWS."
The Co-Borrowers shall remove such legend upon receipt of an
opinion from counsel to the Lenders, reasonably satisfactory in form and
substance to counsel to the Co-Borrowers, that the requirements for such legend
have terminated.
8.5 Confidentiality.
(a) As to so much of the information and other material
furnished under or in connection with this Agreement (whether furnished before,
on or after the date hereof, including without limitation information furnished
pursuant to Sections 5.1 and 5.2 hereof) as constitutes or contains confidential
business, financial or other information of the Co-Borrowers, the Lenders
covenant that:
(i) the Lenders shall not, provided that the Co-Borrowers have
given written notice to the Lenders of the confidential nature
of such information, disclose such information to Persons
other than their respective employees, counsel, accountants,
shareholders, members, partners, limited partners, officers,
directors and agents (which Persons shall be advised of the
confidential nature of such information);
(ii) the Lenders shall not use such information other than in
connection with evaluating or monitoring the Lenders'
investment in the Co-Borrowers; and
<PAGE> 24
(iii) the Lenders shall not use such information in a manner
known by the Lenders to be adverse to the Co-Borrowers, or its
business or assets;
provided, however, that the foregoing obligation shall not apply if:
(A) the Lenders are advised by their respective legal counsel
that such disclosure or delivery may be required by law,
regulation or judicial or administrative order;
(B) such information is otherwise in the public domain at the
time of disclosure, or becomes publicly known, in each case,
through no breach of this Agreement or any other obligation by
the Lenders;
(C) such information becomes known to the Lenders through
disclosure by sources other than the Co-Borrowers having the
right to disclose such confidential information without any
restriction thereon;
(D) such information is generally disclosed to third parties
by the Co-Borrowers without similar restriction on such third
parties;
(E) such information is approved for release by written
authorization of the Co-Borrowers;
(F) such information is independently developed by such
Lender;
(G) such Lender uses such information in connection with any
litigation or arbitration for the purpose of enforcing its
rights against the Co-Borrowers under this Agreement or any
Operative Agreement; or
(H) such information is disclosed in connection with a
transfer or proposed transfer of securities of the
Co-Borrowers and the transferee or proposed transferee agrees
prior to such disclosure to be bound by this Section 8.5.
8.6 Further Assurances, Post-Closing Cooperation. At any time
or from time to time after each Closing, the Co-Borrowers shall execute and
deliver to each of the Lenders such other documents and instruments, provide
such materials and information and take such other actions as either of the
Lenders may reasonably request more effectively to vest title to a Note in such
Lender and otherwise to cause the Co-Borrowers to fulfill their respective
obligations under this Agreement and the Operative Agreements to which they are
a party.
8.7 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of the Notes, or
consent to any departure by the Co-Borrowers therefrom, shall in any event be
effective unless in writing and signed by both the Lenders and the Co-Borrowers.
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 the
<PAGE> 25
Co-Borrowers in any case shall entitle the Co-Borrowers to any further notice or
demand in similar or other circumstances, unless otherwise specifically required
herein. Any amendment, modification, termination, waiver or consent effected in
accordance with this Section 8.7 shall be binding upon the holder of the Notes
and each future holder of the Notes.
8.8 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.
8.9 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 8.2.
8.10 Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by the Co-Borrowers
without the prior written consent of both of the Lenders and any attempt to do
so will be void. Subject to the foregoing sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.
8.11 Headings. The headings used in this Agreement have
been inserted for convenience of reference only and do not define or limit the
provisions hereof.
8.12 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.
8.13 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.
8.14 Consent to Jurisdiction and Service of Process. ALL
JUDICIAL
<PAGE> 26
PROCEEDINGS BROUGHT AGAINST THE CO-BORROWERS WITH RESPECT TO THIS AGREEMENT, ANY
OPERATIVE AGREEMENT, ANY LOAN, ANY NOTE OR ANY COMMON STOCK 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 THE CO-BORROWERS ACCEPT FOR
THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT, ANY OPERATIVE AGREEMENT, ANY LOAN AND ANY NOTE. THE
CO-BORROWERS DESIGNATE AND APPOINT CSC NETWORKS/PRENTICE HALL LEGAL AND
FINANCIAL SERVICES AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THEM
IRREVOCABLY AGREEING IN WRITING TO SERVE, AS THEIR AGENT TO RECEIVE ON THEIR
BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY THEM TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO THE CO-BORROWERS AT THEIR ADDRESS PROVIDED IN SECTION 8.1, 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 THE
CO-BORROWERS REFUSES TO ACCEPT SERVICE, THE CO-BORROWERS HEREBY AGREE THAT
SERVICE UPON THEM 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 THE LENDERS TO BRING PROCEEDINGS AGAINST THE
CO-BORROWERS IN THE COURTS OF ANY OTHER JURISDICTION.
8.15 Waiver of Jury Trial. THE CO-BORROWERS HEREBY WAIVE,
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 OR ANY NOTE OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY THE
CO-BORROWERS AGAINST THE LENDERS 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 UNDER
ANY OPERATIVE AGREEMENT, ANY LOAN, AND ANY NOTE, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH; THE CO-BORROWERS HEREBY WAIVE, RELEASE AND
AGREE NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. THE CO-BORROWERS
AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND
ACKNOWLEDGE THAT THE LENDERS WOULD NOT EXTEND TO THE CO-BORROWERS ANY LOAN
<PAGE> 27
HEREUNDER IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
8.16 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.
<PAGE> 28
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: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
NEW YORK SKYLINE, INC.
By: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE VIRTUAL REALITY, INC.
By: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE CHICAGO, INC.
By: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE MAGIC, INC.
By: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE LAS VEGAS, INC.
By: /s/ Steven Schwartz
-------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
<PAGE> 29
BANK OF NEW YORK, AS TRUSTEE FOR THE
EMPLOYEES RETIREMENT PLAN OF KEYSPAN
ENERGY CORP.
By: /s/ Stephen P. Weis
------------------------------------
Name: Stephen P. Weis
Title:
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund,
Inc., its General Partner
By: /s/ John F. Barry
------------------------------------
Name: John F. Barry
Title: President
<PAGE> 30
SCHEDULE 2.1
Lender Loan Amount
1. Keyspan $500,000
2. Prospect Street $435,000
<PAGE> 1
EXHIBIT CC
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS
SECURITY MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT (I)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR (II) IN A TRANSACTION WHICH,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO SKYLINE
MULTIMEDIA ENTERTAINMENT, INC., IS EXEMPT FROM REGISTRATION
THEREUNDER AND UNDER APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT
CERTAIN SENIOR SECURED CREDIT AGREEMENT, DATED AS OF MAY 20,
1998, BY AND AMONG SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND
THE CO-BORROWERS AND LENDERS NAMED THEREIN, AS SUCH AGREEMENT
MAY BE AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME AND THAT
CERTAIN SECURITY AGREEMENT, DATED AS OF MAY 20, 1998, BY AND
AMONG SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND THE
CO-BORROWERS AND LENDERS NAMED THEREIN, AS SUCH AGREEMENT MAY BE
AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
Senior Secured Demand Note
$435,000 May 20, 1998
New York, New York No.2
FOR VALUE RECEIVED, 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
("SVR"), Skyline Chicago, Inc., a Delaware corporation ("SCI"), Skyline Magic,
Inc., a Delaware corporation ("SMI") and Skyline Las Vegas, Inc., a Delaware
corporation ("SLVI"), hereby promise to pay to Prospect Street NYC Discovery
Fund, L.P., or its registered successors or assigns (the "Registered Holder"),
Four Hundred Thirty Five Thousand U.S. Dollars ($435,000.00) on demand given on
or after July 15, 1998 (the date of such demand referred to herein as the
"Maturity Date") in accordance with the provisions of this Note. This Note is
issued by the Company pursuant to the Senior Secured Credit Agreement, dated as
of May 20, 1998 (as such agreement may be amended, modified or restated from
time to time, the "Credit Agreement"), by and among the Company, the Company's
subsidiaries, the
<PAGE> 2
Registered Holder and The Bank of New York, as trustee for the Employees
Retirement Plan of Keyspan Energy Corp. This Note is secured by the collateral
pledged to the Registered Holder pursuant to the Collateral Documents (as
defined herein). All capitalized terms used and not defined herein shall have
the meaning ascribed to such terms in the Credit Agreement.
"Collateral Documents" means the Security Agreement, the
Subordination Agreement, the Subsidiary Stock Pledge Agreement, the Subsidiary
Guarantee, and the Indemnity, Subrogation and Contribution Agreement (in each
case, as the same may be amended, modified or restated from time to time), and
all certificates, schedules, exhibits and other documents required to be
delivered in connection with such agreements.
1. Interest. Interest will accrue on the unpaid principal
amount of this Note from the date hereof at a rate of 14% per annum; provided,
however, that, upon an Event of Default under Section 7.1 of the Credit
Agreement, the rate of interest shall increase to a rate per annum of 21%.
Interest accrued on this Note shall be payable on the earlier of (a) the
Maturity Date, and (b) the date of consummation of an Equity Financing. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company shall pay principal
and interest on this Note by wire transfer of immediately available funds to the
account specified by the Registered Holder in a written notice to the Company
delivered at least three Business Days prior to such payment date. If a payment
date is other than a Business Day, payment shall be made on the next succeeding
Business Day. All payments shall be applied first, to all accrued and unpaid
interest hereon, and second, to principal.
3. Prepayment. At its option, the Company may, 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 to the
Registered Holder at least 5 days but not more than 30 days before the
prepayment date set forth in such notice at the address provided in or pursuant
to Section 9 herein. Any such prepayment shall be in an amount of at least
$100,000 and in integrals of $10,000, 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. Once due notice of prepayment is
given, a portion of the principal amount of this Note (in such amount as the
notice states shall be prepaid) shall become due and payable on the optional
prepayment date.
4. Repayment. The Company will repay this Note in full, in
cash on the Maturity Date at 100% of the then outstanding principal amount of
this Note plus accrued but unpaid interest thereon to such date.
5. Optional Conversion. In the event that an Equity Financing
has been consummated prior to July 15, 1998, the holders of this Note may, at
their option, convert all, but not less than all, of the principal amount of
this Note such that each $1.00 of principal
<PAGE> 3
amount of this Note shall convert into that number of units of securities
offered in such Equity Financing as are purchaseable for $1.25. Upon such
conversion, accrued and unpaid interest hereon shall be immediately payable to
the Registered Holder in cash.
6. Events of Default; Remedies. Events of Default and the
consequences of Events of Default are set forth in Article VII of the Credit
Agreement. All provisions of Article VII of the Credit Agreement are
specifically hereby incorporated herein in full by this reference.
7. Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, 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 of $250,000, or any multiple thereof (or
in any such lesser amount as shall equal the then unpaid principal amount of the
Note or Notes so exchanged), 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 (subject to
Section 15 herein); provided, however, that upon any such exchange there shall
be filed with the Company the name and address for all purposes hereof of the
payee of each Note delivered in the 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.
8. 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
this Note, 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 sworn or notarized agreement shall be satisfactory) or, in the case of any
such mutilation upon surrender of this Note, the Company shall (at its 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.
9. Securities Act. This Note has not been registered under the
Securities Act of 1933 and applicable state securities laws. Therefore, the
Company may require, as a condition of allowing the transfer or exchange of this
Note, that the Registered Holder furnish to the Company an opinion of counsel
reasonably acceptable to the Company to the effect that such transaction is
allowable under the Securities Act of 1933 and applicable state securities laws.
10. 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:
<PAGE> 4
If to the Registered Holder, to:
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, N.Y. 10177
Facsimile No.: (212) 490-1566
Attn: John F. Barry, III
with a copy to:
Morgan, Lewis & Bockius, LLP
101 Park Avenue
New York, N.Y. 10178
Facsimile No.: (212) 309-6273
Attn: Ira White, Esq.
If to the Company, to:
Skyline Multimedia Entertainment, Inc.
350 Fifth Ave., Suite 612
New York, NY 10118
Facsimile No.: (212) 564-0652
Attn: President
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile No.: (212) 969-2900
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 10, 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 upon 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 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 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 at least ten days prior
to the effective date of such change.
<PAGE> 5
11. 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.
12. Note Register. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer of
this Note. 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.
13. Waiver. Subject to the provisions of the Credit Agreement,
any term or condition of this Note may be waived at any time by the party that
is entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Note, in any one or more instances, shall be deemed to be or construed
as a waiver of the same or any other term or condition of this Note on any
future occasion. All remedies, either under this Note or by law or otherwise
afforded, will be cumulative and not alternative.
14. Amendment. This Note may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf the
Registered Holder and the Company and otherwise in accordance with the
provisions of the Credit Agreement.
15. Binding Effect. No obligation of the Company hereunder may
be assigned (by operation of law or otherwise) by the Company or assumed by
another Person without the prior written consent of the Registered Holder and
otherwise in accordance with the provisions of the Credit Agreement and any
attempt to do so will be void. This Note or any portion hereof may be assigned
by the Registered Holder to any Person; provided, however, that the aggregate
principal amount so assigned shall be at least $250,000 (or any such lesser
amount as shall equal the then unpaid principal amount of this Note). Subject to
the foregoing, this Note is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
Prior to the assignment of this Note or any portion hereof by the Registered
Holder to any other Person, such Person shall be required to make
representations and warranties to the Company substantially similar to those
contained in Section 8.4 of the Credit Agreement and agree to be bound by the
terms of the Credit Agreement applicable to the Lender.
[Remainder Intentionally Blank]
<PAGE> 6
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first above written.
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By: /s/ Steven Schwartz
---------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
NEW YORK SKYLINE, INC.
By: /s/ Steven Schwartz
---------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE VIRTUAL REALITY, INC.
By: /s/ Steven Schwartz
---------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE CHICAGO, INC.
By: /s/ Steven Schwartz
---------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE MAGIC, INC.
By: /s/ Steven Schwartz
---------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
<PAGE> 7
SKYLINE LAS VEGAS, INC.
By: /s/ Steven Schwartz
--------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
<PAGE> 1
EXHIBIT DD
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.
COMMON STOCK PURCHASE WARRANT
Date of Issuance: , 1998 Certificate No. 2
----- --- ---
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York
corporation (the "Company"), hereby grants to Prospect Street NYC Discovery
Fund, L.P. and or its registered assigns (the "Registered Holder"), the right to
purchase from the Company, subject to the terms and conditions herein contained
that number of shares of common stock par value $.001 of the Company (the
"Warrant Shares") as set forth in Section 1A hereof, at a price per share of
$.375 (the "Exercise Price"). This Warrant is issued pursuant to the Senior
Secured Credit Agreement dated as of May 20, 1998, 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").
Certain capitalized terms used herein are defined in Section 2 hereof. All other
capitalized terms used and not defined herein shall have the meaning ascribed to
such terms in the Credit Agreement.
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 only upon the happening of the following events and for the
amount of shares stated:
(i) In the event the entire principal amount of the Notes
(plus all accrued and unpaid interest thereon) is
repaid prior to July 15, 1998, then this Warrant
shall be exerciseable into such number of shares of
Common Stock that equals 32% of such Common Stock on
a Fully Diluted Basis on the date of such issuance;
or
(ii) In the event the entire principal amount of the Notes
has not been repaid (plus all accrued and unpaid
interest thereon) or converted (pursuant to the terms
of the Notes) prior to July 15, 1998, then this
Warrant shall be exercisable into such number of
shares of Common Stock that equal
<PAGE> 2
47.167% of the Common Stock on a Fully Diluted Basis
at the time of issuance. Upon consummation of an
Equity Financing and repayment or conversion of the
entire principal amount of the Notes (plus all
accrued and unpaid interest thereon) before July 15,
1998, this Warrant shall be cancelled and of no
further force and effect.
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.
(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.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this
<PAGE> 3
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.
(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) 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, or, if such unissued
Warrant Shares are insufficient to comply with such reserve requirement, the
Company shall use its best efforts to increase the authorized capital stock of
the Company in an amount sufficient to comply herewith and submit such proposal
for approval by the Company's shareholders at the next annual meeting of
shareholders of the Company. 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 applicable law of 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.
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
<PAGE> 4
issued.
SECTION 2. Definitions. The following terms have the meanings set forth
below:
"Common Stock" means the common stock, par value $.001 per share and
the Class A common stock, par value $.001 per share (the "Class A Common
Stock"), 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 Class A 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.
"Equity Financing " has the meaning ascribed thereto in the Credit
Agreement.
"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. 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 then 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.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Common Stock, all shares of Common Stock outstanding at the
time of determination and all
<PAGE> 5
shares issuable upon the exercise of options or convertible or exchangeable
securities or warrants (giving effect to the Warrant Shares issuable hereunder).
"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 issued
under this Warrant; 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 3. 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 Register 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 4. 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 5. 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 6. 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
<PAGE> 6
economic benefits to such Warrants or Warrant Shares. 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 7. 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 8. 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 9. 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 10. 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 11. 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 12. 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. THIS AGREEMENT
SHALL BE GOVERNED BY AND
<PAGE> 7
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> 8
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> 9
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> 10
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (Certificate No. ____) with respect to the number of the
Warrant Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature _________________________________
_________________________________
Witness _________________________________
<PAGE> 1
EXHIBIT EE
SECURITY AGREEMENT
Dated as of May 20, 1998
WHEREAS, pursuant to the terms of a Senior Secured Credit
Agreement dated as of May 20, 1998 (as the same may be amended, modified or
restated from time to time, the "Credit Agreement") by and among Bank of New
York, as Trustee for the Employees Retirement Plan of Keyspan Energy Corp.
("KEP") and Prospect Street NYC Discovery Fund, L.P. ("Prospect Street") (KEP
and Prospect Street each a "Lender," and collectively, the "Lenders"), and
Skyline Multimedia Entertainment, Inc., a New York corporation ("SMEI" or the
"Company"), New York Skyline, Inc., a New York corporation ("NYSI"), Skyline
Virtual Reality, Inc., a Delaware corporation ("SVR"), Skyline Chicago, Inc., a
Delaware corporation ("SCI") Skyline Magic, Inc., a Delaware corporation
("SMI"), and Skyline Las Vegas, Inc., a Delaware corporation ("SLVI") (SMEI,
NYSI, SVR, SCI, SMI and SLVI, each a "Co-Borrower" and "Grantor" and
collectively referred to herein as the "Grantors"), the Lenders have agreed to
make Loans to the Co-Borrowers in the amounts set forth in the Credit Agreement.
Unless otherwise defined herein or on Schedule A hereto, capitalized terms used
herein shall have the meanings ascribed to them in the Credit Agreement
WHEREAS, Grantors, as an inducement to the Lenders to make the
Loans, have agreed to grant to the Lenders a security interest in the Collateral
(as defined below).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Security Interest. As security for the payment when
and as due of all Obligations, Grantors grant to the Lenders a security interest
in all of the following types of its property in which they have a right or
interest now existing or hereafter acquired or arising, wherever such property
is located or situated, including all parts, accessions, substitutions,
replacements, proceeds (including all cash received in respect of any
Collateral) and products thereof, thereto and therefor, except such property
which, as of the date hereof, is subject to an existing security interest
(provided, however, that upon release of any such existing security interest,
such property shall be deemed Collateral hereunder) other than the security
interests held by the Prospect Street Entities (which security interest shall be
subordinated to the security interest granted to the Lenders hereunder) or
cannot by the terms of its governing instrument be pledged as Collateral
hereunder without resulting in a default, breach, violation or acceleration
under such governing instrument:
(a) all inventory and other goods which, in connection with
its business are held or being processed for sale or lease or to be furnished
under contracts of service, or have been so furnished, including raw materials,
work in progress, finished goods, and materials and supplies used or consumed in
its business ("Inventory");
<PAGE> 2
(b) all accounts, accounts receivable, receivables, contracts,
contract rights and leases, and all other rights to payment, whether or not
evidenced by an instrument or chattel paper and whether or not payment has been
earned by performance (collectively, "Accounts");
(c) all instruments, negotiable instruments, and all other
writings which evidence a right to the payment of money which is in the ordinary
course of business transferred by delivery with any necessary endorsement or
assignment ("Instruments");
(d) all (i) copyrights, copyright registrations and
applications for copyright registration, including, without limitation, all
renewals and extensions thereof, the right to recover for all past, present and
future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto (collectively, "Copyrights"), (ii)
patents and patent applications, including, without limitation, the inventions
and improvements described and claimed therein together with all reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, all income, royalties, damages and payments now or hereafter due and/or
payable under and with respect thereto, including, without limitation, damages
and payments for past or future infringements thereof, the right to sue for
past, present and future infringements thereof, and all rights corresponding
thereto throughout the world ("Patents"), and (iii) trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, prints and labels on which said trademarks,
corporate names, company names, business names, fictitious business names, trade
names, trade styles and service marks have appeared or appear, designs and
general intangibles of like nature, and the goodwill associated therewith, now
existing or hereafter adopted or acquired, all right, title and interest therein
and thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired (collectively,
"Trademarks") together with (A) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used or useful in its
business; (B) all licenses or user or other agreements granted to it with
respect to any of the foregoing, in each case whether now or hereafter owned or
used; (C) all information, customer lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and automatic
machinery software and programs, and the like; (D) all field repair data, sales
data and other information relating to sales or service of products now or
hereafter manufactured; (E) all accounting information and all media in which or
on which any of the information or knowledge or data or records may be recorded
or stored and all computer programs used for the compilation or printout of such
information, knowledge, records or data; (F) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held; and (G) all causes of action, claims and warranties now or
hereafter owned or acquired in respect of any of the items listed above;
(e) all documents, documents of title, bills of lading, dock
warrants, dock receipts, warehouse receipts and orders for the delivery of
goods, and all other documents which in the regular course of business or
financing are treated as adequately evidencing that a Person in
<PAGE> 3
possession is entitled to receive, hold and dispose of the document and the
goods it covers ("Documents");
(f) all "equipment", as such term is defined in the Uniform
Commercial Code as in effect from time to time in the State of New York (the
"Uniform Commercial Code"), now owned or hereafter acquired wherever located
and, in any event, including all machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer equipment with
software and peripheral equipment (other than software constituting part of the
Accounts), and all engineering, processing and manufacturing equipment office
machinery, furniture, material handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts, molds, dies,
stamps, motor vehicles, rolling stock and other equipment of every kind and
nature, trade fixtures and fixtures not forming a part of real property, all
whether now owned or hereafter acquired, and wherever situated, together with
all additions and accessions thereto, replacements therefor, all parts therefor,
all substitutes for any of the foregoing, fuel therefor, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and all
products and proceeds thereof and condemnations awards and insurance proceeds
with respect thereto ("Equipment");
(g) all "contracts", as such term is defined in the Uniform
Commercial Code, now owned or hereafter acquired or entered into by it and, in
any event, including all contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper (as defined below), Documents or Instruments)
in or under which it may now or hereinafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account ("Contracts");
(h) all chattel paper, including any writing or writings which
evidence both a monetary obligation and a security interest in or a lease of
specific goods, and, when a transaction is evidenced both by a security
agreement or a lease and by an instrument or a series of instruments, the group
of writings taken together ("Chattel Paper");
(i) all books and records (including computer databases and
software for accessing it) related to any of the foregoing;
(j) all securities, including but not limited to stocks
(whether Common or Preferred shares), bonds, options, warrants, mutual funds and
other instruments commonly referred to as securities ("Securities"); and
(k) all other tangible or intangible property, including,
without limitation, all proceeds, products and accessions of and to any of the
property described in clauses (a) through (j) above in this Section 1
(including, without limitation, any proceeds of insurance thereon), and, to the
extent related to any property described in said clauses or such proceeds,
products and accessions, all books, correspondence, credit files, records,
invoices and other papers, including without limitation all tapes, cards,
computer runs and other papers and documents in the possession or under its
control or any computer bureau or service company from time to time acting for
it.
<PAGE> 4
All of the foregoing property described in this Section 1 and any part thereof
as to each Grantor or collectively, the Grantors, as the case may be, is
hereinafter called "Collateral". The security interest granted hereby shall be
continuing and shall secure all present and future Obligations whether or not at
some prior point in time all Obligations then outstanding shall have been
satisfied.
Section 2. Representations and Warranties. (a) The chief
executive office of each of the Grantors is as set forth on Schedule B. Except
for the Lenders' security interest hereunder, Liens not involving amounts in
excess of $10,000 and as otherwise described on Schedule C hereto, each Grantor
hereby warrants and represents that it is the sole owner of the Collateral
attributable to it, free from any Lien, claim, set-off, defense or counterclaim;
that all items of Collateral are in all respects what they purport to be; that
there is no financing statement now on file in any public office covering any
Collateral; and there is no fact that would impair its title to the Collateral,
the Collateral's validity or enforceability, each Grantor's ability to perform
its obligations hereunder, the Lenders' rights hereunder, or the validity or
first priority of the security interest and lien upon the Collateral created by
this Agreement.
(b) As of the date hereof, none of the Grantors own or uses
any Copyrights, Patents or Trademarks or any Copyrights, Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Copyright Office or United States Patent and Trademark Office or any similar
office or agency or any other country or any political subdivision thereof,
other than those described in Schedule D, Schedule E, and Schedule F hereto,
respectively.
(c) Grantors further warrant that they are aware of no
significant third party claim that any aspect of any Grantors' present or
contemplated business operations infringes or will infringe any Trademarks.
Grantors represent and warrant that all United States Trademark registrations
and applications listed in Schedule F are valid, subsisting and have not been
canceled and that except as listed in Schedule F, Grantors are not aware of any
third-party claim that any of said registrations is invalid or unenforceable. To
the best knowledge of Grantors, Grantors have used or intend to use the
Trademarks to identify themselves, as the case may be, and the goods and
services covered by the Trademarks and all registrations thereof are subsisting
and in full force and effect.
(d) Grantors represent and warrant that they own or are
licensed to practice under all Patents and Copyrights that they now own or
practice under. Grantors further warrant that they are aware of no significant
third party claim that any aspect of Grantors' present or contemplated business
operations infringes or will infringe any Patent or any Copyright of any third
party. The Copyrights shown on Schedule D hereto, unless otherwise stated
therein, are duly recorded or filed for recording in the United States Copyright
Office. The Patent registrations shown on Schedule E hereto, unless otherwise
stated therein, are valid and subsisting and in full force and effect. None of
the Patents has been abandoned or dedicated, and, except to the extent that the
Lenders, upon prior written notice by Grantors, shall consent, and Grantors will
not do any act, or omit to do any act, whereby the Patents may become abandoned
<PAGE> 5
or dedicated and shall notify the Lenders immediately if it knows of any reason
or has reason to know that any application or registration may become abandoned
or dedicated.
(e) In no event shall any Grantor, either itself or through
any agent, employee, licensee or designee, (i) file an application for the
registration of any Copyright, Patent or Trademark with the United States
Copyright Office or United States Patent and Trademark Office or any similar
office or agency of any other country or any political subdivision thereof or
(ii) file any assignment of or grant of security interest in any Copyright,
Patent or Trademark that any Grantor may acquire from a third party, with the
United States Copyright Office or United States Patent and Trademark Office or
any similar office or agency of any other country or any political subdivision
thereof, unless such Grantor shall, on or prior to the date of such filing,
notify the Lenders thereof, and upon request of the Lenders, execute and deliver
any and all assignments, agreements, instruments, documents and papers as the
Lenders may request to evidence the Lenders' interest in such Copyright, Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby constitutes each Lender
its attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(f) Grantors will perform all acts and execute all documents,
including, without limitation, grants of security interest in form suitable for
filing with the United States Copyright Office and United States Patent and
Trademark Office, substantially in the forms of Exhibit 1, Exhibit 2 and Exhibit
3 hereto, respectively, reasonably requested by the Lenders at any time to
evidence, perfect, maintain, record and enforce the Lenders' interest in the
Collateral or otherwise in furtherance of the provisions of this Agreement.
(g) Grantors will take all steps reasonably necessary in any
proceeding before the United States Copyright Office or United States Patent and
Trademark Office or any similar office or agency of any other country or any
political subdivision thereof, to maintain each application and registration of
the Copyrights, Trademarks and Patents.
(h) Grantors assume all responsibility and liability arising
from the use of the Copyrights, Patents and Trademarks, and each Grantor hereby
indemnifies and holds each Lender harmless from and against any claim, suit,
loss, damage or expense (including reasonable attorneys' fees) arising out of
any alleged defect in any product manufactured, promoted or sold by any Grantor
in connection with any Copyright, Patent or Trademark or out of the manufacture,
promotion, labeling, sale or advertisement of any such product by such Grantor.
Each Grantor agrees that the Lenders do not assume, and shall have no
responsibility for, the payment of any sums due or to become due under any
agreement or contract included in the Collateral or the performance of any
obligations to be performed under or with respect to any such agreement or
contract by such Grantor, and each Grantor hereby indemnifies and holds each
Lender harmless with respect to any and all claims by any person relating
thereto.
(i) All licenses with respect to Patents, Trademarks or
Copyrights, or any other license or sublicense, to which any Grantor is a party
are set forth on Schedule G hereto.
<PAGE> 6
Section 3. Location and Use of Collateral. Grantors shall:
(i) keep all Inventory and all records pertaining to
Collateral, at or affixed to the location of its chief executive office set
forth on Schedule B or such other place or places as it may designate in a
writing delivered to the Lenders thirty (30) days before moving such Collateral
or records to another place, and may use such Collateral only for purposes for
which it is commonly employed in Grantors' type of business;
(ii) as soon as practicable after the date hereof, but in any
event within sixty (60) days after such an item of property becomes Collateral,
deliver to the Lenders all Instruments, Documents and Chattel Paper that are
Collateral, with all endorsements or assignments necessary, or in the Lenders'
judgment reasonably appropriate, for each item of such Collateral to be
transferable; and
(iii) keep the proceeds of all Collateral segregated from
property that is not Collateral or proceeds thereof so that it may readily be
identified as proceeds of Collateral.
Section 4. Financing Statements and Notice. Grantors hereby
authorize the Lenders, without notice or the signature of any Grantor, to file
any financing statements and any amendments thereto or continuations thereof,
naming each Grantor as debtor and the Lenders as secured parties. At the
Lenders' request, each Grantor will join with the Lenders in executing any such
financing statements, amendments or continuations. In order to perfect, maintain
or protect its security interest, the Lenders may give notice of its security
interest in Collateral and may deliver a copy of this Agreement to any Person.
Section 5. Preservation of Collateral and Security Interest.
(a) Each Grantor shall maintain tangible Collateral in at least as good
condition as it is on the date hereof or when acquired by such Grantor, ordinary
wear and tear excepted, and not permit anything to be done that will materially
impair the value of any Collateral. Each Grantor shall at all times keep
accurate and complete records with respect to Collateral and shall furnish to
the Lenders upon request copies of its records relating to Collateral and all
additional information reasonably requested by the Lenders. The respective
representatives of the Lenders shall, during reasonable business hours and upon
notice given two Business Days in advance, have the right to enter upon any
Grantor's premises, inspect Collateral, and examine and make copies of such
Grantor's records relating to Collateral at such Grantor's expense.
(b) No Grantor shall make an assignment, pledge, mortgage, or
other transfer of Collateral or any interest in it other than in the ordinary
course of its business, and shall keep all Collateral free from all Liens;
provided, however, that the foregoing limitations shall not apply to (i)
purchase money security interests or capital lease transactions in connection
with the purchase or lease of Equipment to be used by such Grantor in the
ordinary course of its business or (ii) such other dispositions of Collateral as
the Lenders may approve in writing in advance. Within ten (10) days of its
occurrence, Grantors shall give written notice to the Lenders of any material
loss of, or material damage to, Collateral; Grantors shall give immediate
written notice to the
<PAGE> 7
Lenders of any Lien, against or upon Collateral having such value which shall
not be discharged, released or satisfied within ten (10) days. The Lenders, at
their option, may pay or cause the discharge of taxes, Liens at any time levied
or placed on Collateral, take any action to maintain and preserve Collateral and
remedy any breach of any Grantor hereunder. Each Grantor shall do, execute and
deliver all additional acts, deeds, and instruments as the Lender may require,
to more completely vest in and assure to the Lenders their rights hereunder.
Section 6. Limitation on Modifications of Accounts. No Grantor
will, without the prior written consent of the Lenders, grant any extension for
the time of payment of any of the Accounts, compromise, compound or settle the
same for less than the full amount thereof, release, wholly, or partly, any
Person liable for the payment thereof, or allow any credit or discount
whatsoever thereon other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business; provided,
however, that so long as no Event of Default (as defined in Section 8) has
occurred or is continuing, any Grantor may, without the prior written consent of
the Lender, allow in the ordinary course of business as adjustments to amounts
owing under its Accounts (i) an extension or renewal of the time or times of
payment, or the settlement for less than the total unpaid balance, which such
Grantor finds appropriate in accordance with sound business judgment and (ii) a
refund or credit due as a result of returned, damaged or non-conforming
merchandise.
Section 7. Insurance. Each Grantor will maintain insurance on
its respective portion of the Collateral in such amounts and with such coverage
as is reasonably satisfactory to the Lenders and as is consistent with coverage
usually carried by corporations of a similar size engaged in the same or similar
business similarly situated. Any proceeds received by any Grantor in payment for
loss of or damage to Collateral under such insurance shall be held in trust by
such Grantor and be Collateral hereunder; it shall be applied by such Grantor to
repair or replace the Collateral in respect of which it was received, and if not
so applied, to payment of Obligations. Each Grantor will give the Lenders
immediate written notice of the receipt by such Grantor and amount of any such
insurance proceeds and prior written notice of the manner in which such proceeds
shall be applied. Upon the Lenders' request, such Grantor shall deliver
certificates of such insurance to the Lender.
Section 8. Events of Default. (a) "Events of Default" shall
exist hereunder if:
(i) Any Grantor shall fail to perform any Obligation, or to
pay any sum to the Lenders, when and as due, whether by acceleration or
otherwise;
(ii) any representation or warranty of any Grantor set forth
herein shall prove to have been false or misleading in any material respect (if
not qualified by materiality) and in any respect (if qualified by materiality)
when made or deemed to have been made and, if such breach of representation or
warranty is capable of being cured within such time, such breach shall have
continued for ten (10) Business Days (A) after notice of such breach if such
Grantor has complied with Section 8(b) hereof or (B) after the date of such
breach if such Grantor has not complied with Section 8(b) hereof;
(iii) any obligation of any Grantor under this Agreement shall
not be complied
<PAGE> 8
with and, if such noncompliance is capable of being cured within such time, such
noncompliance shall have continued for ten (10) Business Days (A) after notice
of such noncompliance if such Grantor has complied with Section 8(b) hereof or
(B) after the date of such noncompliance if such Grantor has not complied with
Section 8(b) hereof; or
(iv) an Event of Default as defined in the Credit Agreement
shall occur and be continuing.
(b) Each Grantor shall, promptly upon becoming aware thereof,
notify the Lenders in writing of any Event of Default and any 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.
Section 9. Rights Following an Event of Default. Following and
during the continuance of an Event of Default, each of the following provisions
shall apply:
(a) the Lenders shall have all rights and remedies afforded by
the Uniform Commercial Code, to a secured creditor having a security interest in
property to which Article 9 thereof applies.
(b) Each Grantor will, upon receipt of any proceeds, dividend,
stock certificate or other sums arising from the sale or other disposition of
Collateral or any instrument evidencing an obligation to pay such sums, hold
same in trust for the Lenders in the form received, and will forthwith, without
notice or demand, endorse, transfer and deliver same to the Lenders, and, should
such Grantor obtain possession of goods, the sale or lease of which gave rise to
an Account, such Grantor shall hold same in trust for the Lenders subject to the
security interest hereunder.
(c) Each Grantor hereby irrevocably appoints each of the
Lenders its true and lawful agent to act in such Grantor's name or in such
Lender's name as fully and completely as though such Lender was the absolute
owners of Collateral for all purposes. Any Lender may exercise all of such
Grantor's rights of collection, enforcement, conversion or exchange and all
other similar rights, privileges and options pertaining to Collateral, all of
such Grantor's rights to commence, prosecute or settle any legal actions, give
releases, or settle or compromise any rights, with respect to Collateral, and
generally all of such Grantor's rights to sell, assign, transfer, pledge,
convey, make any agreement with respect to, or otherwise deal with, Collateral.
The Lender may execute and deliver any and all documents and take any and all
actions on behalf of such Grantor in order to carry out the provisions of this
Agreement.
Nothing herein shall be construed as requiring the Lenders to
make any demand or inquiry as to the nature or sufficiency of any payment, or to
take any action with respect to Collateral or moneys, proceeds or income due, or
to become due thereunder, and no such action taken or omitted to be taken, or
delay, by the Lender, shall give rise to any defense, counterclaim or set-off in
favor of any Grantor or to any claim or action against the Lenders. The Lenders
shall have the right, upon consultation with such Grantor, to communicate with
any account debtor of
<PAGE> 9
such Grantor in order to verify Account balances from time to time, provided
that such verification right shall be exercised in a commercially reasonable
manner and pursuant to documentation and procedures acceptable to such Grantor.
The Lenders shall have the right, without prior notice to any Grantor, to notify
or to require such Grantor to notify the parties obligated on any Collateral to
make payment thereon directly to the Lenders. Each such Grantor shall give such
notice itself if requested to do so by the Lenders.
(d) No Grantor shall make any further use of the Copyrights,
Patents or Trademarks for any purpose without the consent of the Lenders and
shall, upon the request of the Lenders, use its best efforts to obtain all
requisite consents or approvals by the licensor of each license to which such
Grantor is a party, including but not limited to those set forth on Schedule G
hereto, to effect the assignment of all of Grantor's right, title and interest
thereunder to the Lenders or its designees.
(e) The Lenders may, at any time and from time to time, upon
fifteen (15) days' prior notice to the appropriate Grantor, license (whether
general, special or otherwise, and whether on an exclusive or nonexclusive
basis) any of the Copyrights, Patents or Trademarks, throughout the world for
such term or terms, on such conditions, and in such manner, as the Lenders shall
in its sole discretion determine.
(f) The Lenders may (without assuming any obligations or
liability thereunder) enforce, and shall have the exclusive right to enforce,
against any licensee or sublicensee all rights and remedies of each Grantor in,
to and under any one or more license agreements with respect to the Collateral,
and take or refrain from taking any action under any thereof, and each such
Grantor hereby releases the Lenders from, and agrees to hold the Lenders free
and harmless from and against any claims arising out of, any action taken or
omitted to be taken with respect to any such license agreement.
(g) The Lenders may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof (including, without limitation, reasonable attorneys' fees
and all legal and other expenses which may be incurred by the Lenders), and then
to the Obligations, in such order as is set forth in this Agreement; and each
Grantor shall remain liable and will pay the Lenders on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Lenders to take any such
action at any time.
In the event of any such license, assignment, sale or other
disposition of all or any part of the Collateral, after the occurrence or
continuation as hereinabove provided of an Event of Default, each Grantor shall
supply its know-how and expertise relating to the manufacture and sale of the
products bearing or in connection with the Copyrights, Trademarks or Patents,
and its customer lists and other records relating to the Copyrights, Trademarks
or Patents and to the distribution of said products, to the Lenders or their
designees.
(h) Concurrently with the execution and delivery hereof, each
Grantor is
<PAGE> 10
executing and delivering to the Lenders, in the form of Exhibit 4 hereto,
originals of a Power of Attorney for the implementation of the assignment, sale
or other disposal of the Copyrights, Trademarks and Patents pursuant hereto, and
each Grantor hereby releases the Lenders from any claims, causes of action and
demands at any time arising out of or with respect to any actions taken or
omitted to be taken by the Lenders under the power of attorney granted herein,
other than actions taken or omitted to be taken through the gross negligence or
willful misconduct of the Lenders.
Section 10. Possession of Collateral. After and during the
continuance of an Event of Default, the Lenders shall be entitled, without
notice to any Grantor, to appointment of a receiver to take possession of
Collateral, and may require each Grantor to assemble Collateral and make the
same available to the Lenders at a place to be designated by the Lender
reasonably convenient to both parties. The Lenders' duty of care with respect to
Collateral shall be limited to the exercise of reasonable care. The Lenders
shall be deemed to have exercised reasonable care if Collateral is accorded
treatment requested by such Grantor in writing or substantially the same as that
the Lenders accord their own property. The Lenders shall not be deemed to have
failed to exercise reasonable care solely because it may have failed to accord
Collateral treatment requested by such Grantor or to take steps to preserve
rights against prior parties or property.
Section 11. Application of Proceeds. The proceeds of any
collection or sale of Collateral, as well as any Collateral consisting of cash,
shall be applied by the Lenders as follows:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Lenders in connection with this Agreement or any of the
Obligations, including, but not limited to, all court costs and the reasonable
fees and expenses of the agents and legal counsel of the Lenders, the repayment
of all advances made by the Lenders hereunder on behalf of any Grantor and any
other reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder;
SECOND, to the payment in full of the principal and interest
of the Notes outstanding;
THIRD, to the payment in full of all Obligations (other than
those referred to above) owed to the Lenders; and
FOURTH, to each Grantor, its successors and assigns, or as a
court of competent jurisdiction may otherwise direct.
Section 12. Remedies Cumulative and not Waivable. The rights
and remedies of the Lenders herein expressly specified are cumulative and not
exclusive of other contractual, common law or statutory rights and remedies that
the Lenders may have, including without limitation, the right of set-off and all
rights and remedies of a secured creditor under Article 9 of the Uniform
Commercial Code as adopted in New York. The Lenders shall be under no duty to
exercise or withhold the exercise of any of its rights and remedies provided
hereunder or otherwise. No omission or delay by the Lenders in exercising any
such right or remedy shall
<PAGE> 11
operate as a waiver or partial waiver of any such right or remedy; nor shall any
single or partial exercise of any such right or remedy preclude further exercise
of such right or remedy, or exercise of any other right or remedy.
Section 13. Remedies Fully Exercisable. All rights and
remedies that the Lenders may have available to it under arrangements to secure
or support the Obligations (including but not limited to any right of setoff,
guaranty, bond, letter of credit, insurance, security agreement, pledge,
mortgage or deed of trust) may be exercised from time to time, in part or in
whole, and in any order by the Lenders without marshaling any Grantor's assets,
and without regard to the effect of exercise of one right or remedy upon another
right or remedy, the existence of other Liens upon any of such Grantor's assets,
or the relative degree or amount of equity that such Grantor shall have in one
asset as against another.
Section 14. Notices, Waiver of Presentment, Etc. 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:
<PAGE> 12
. If to Grantors, to:
c/o Skyline Multimedia Entertainment, Inc.
350 Fifth Ave., Suite 612
New York, NY 10118
Facsimile No.: (212) 564-0652
Attn: President
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile No.: (212) 969-2900
Attn: Neil S. Belloff, Esq.
If to the Lenders, to:
Bank of New York, as Trustee for the Employees Retirement
Plan of Keyspan Energy Corp.
c/o The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, NY 11201-3850
Facsimile No.: (718)-643-1341
Attn: Thomas Riordan
with a copy to
Cullen & Dykman
177 Montague Street
Brooklyn, NY 11201
Facsimile No.: (718) 935-1304
Attn: Lance D. Myers, Esq.
and
Prospect Street NYC Discovery Fund, L.P.
250 Park Avenue, 17th Floor
New York, NY 10177
Facsimile No.: (212) 490-1566
Attn: John F. Barry, III
<PAGE> 13
with a copy to:
Morgan Lewis & Bockius
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6002
Attn: Ira White, 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 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 at least ten
(10) days prior to the effective date of such notice.
Each Grantor hereby waives presentment, notice of dishonor and
protest of any instruments included in or evidencing Obligations and all other
notices and demands not expressly required by this Agreement.
Section 15. New York Law; Resolution of Disputes. 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. Except as may be otherwise provided herein or
as the context may require, all terms used herein shall have the meaning
ascribed to them by the Uniform Commercial Code as adopted in New York. In
connection with any dispute which may arise under this Agreement, each Grantor,
for itself and in respect of its property, hereby irrevocably submits to,
consents to, and waives any objection to, the jurisdiction of the courts of the
State of New York located in the Borough of Manhattan in the City of New York or
of the United States District Court for the Southern District of New York, or,
at the option of the Lender, to the courts of any jurisdiction in which such
Grantor or any Collateral may be located, and waives any objection to the laying
of venue in such a court. Each Grantor admits that any such dispute may be
resolved at least as conveniently in such a court as in any other court and,
will not seek dismissal or a change of venue on the ground that resolution of
such a dispute in any such court is not convenient or in the interests of
justice. No Grantor shall seek a jury trial in any action based upon or arising
out of this Agreement or any related document or agreement. No Grantor will seek
to consolidate any such action with any other action in which trial by jury has
not been waived.
<PAGE> 14
Section 16. Waiver; Amendment. None of the terms and
conditions of this Agreement may be changed, waived, modified or varied in any
manner whatsoever without the written approval of each party hereto.
Section 17. Termination, Release of Collateral. After the
Termination Date (as defined below) this Agreement shall terminate and the
Lenders, at the request and expense of Grantors, will execute and deliver to
Grantors a proper instrument or instruments (including Uniform Commercial Code
termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Agreement as to Grantors, and will duly assign, transfer and
deliver to Grantor (without recourse and without any representation or warranty)
such of the Collateral as may be in the possession of the Lenders and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which all payment Obligations have been irrevocably satisfied in full.
Section 18. Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts executed by all the parties hereto shall be lodged
with each Grantor and each Lender.
Section 19. Other Provisions. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof. It
sets forth all representations relied upon by Grantors in connection with it.
The Lenders, and their respective directors, officers, limited partners, general
partners, attorneys, agents and employees, shall not be liable to Grantors for
any loss or damage caused by any act or omission on the part of any of them
unless such loss or damage shall have been caused by the gross negligence or
wilful misconduct of such Person. This Agreement shall be binding upon the
successors and assigns of Grantors and shall inure to the benefit of the
successors of the Lenders. In the event any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained shall not be affected or impaired in any way. Section headings used
herein are for convenience only and shall not affect the construction of this
Agreement.
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be executed and delivered by their respective
representatives thereunto duly authorized as of the date first above written.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By: /s/ Steven Schwartz
--------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
NEW YORK SKYLINE, INC.
By: /s/ Steven Schwartz
--------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE VIRTUAL REALITY, INC.
By: /s/ Steven Schwartz
--------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE CHICAGO, INC.
By: /s/ Steven Schwartz
--------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
[Signature Page to Security Agreement]
<PAGE> 16
SKYLINE MAGIC, INC.
By: /s/ Steven Schwartz
----------------------------------
Name: Steven Schwartz
Title: Executive Director of Operations
and Finance
SKYLINE LAS VEGAS, INC.
By: /s/ Steven Schwartz
----------------------------------
Name: Steven Schwartz
Title: Executive Director of Operations
and Finance
BANK OF NEW YORK, AS
TRUSTEE FOR THE EMPLOYEES
RETIREMENT PLAN OF KEYSPAN
ENERGY CORP.
By: /s/ Stephen P. Weis
----------------------------------
Name: Stephen P. Weis
Title:
PROSPECT STREET NYC DISCOVERY FUND,
L.P.
By: Prospect Street Discovery Fund, Inc.
its General Partner
By: /s/ John F. Barry
----------------------------------
Name: John F. Barry
Title: President
[Signature Page to Security Agreement]
<PAGE> 17
SCHEDULE A TO SECURITY AGREEMENT
Definitions
As used herein the following terms have the following respective meanings:
Obligations shall mean:
i. (x) the principal of and accrued interest on the
Loans and the Notes and (y) all other obligations and indebtedness (including
without limitation indemnities, fees, expenses and interest on any such
obligations and indebtedness) of Grantors to the Lenders now existing or
hereafter incurred under, arising out of, or in connection with, the Loans, the
Notes, the Credit Agreement, the Warrants or any of the Security Documents;
ii. any and all sums advanced by the Lenders in
accordance with the terms of the Security Documents in order to preserve the
Collateral or preserve its security interest in the Collateral; and
iii. in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations or liabilities of
Grantors, on and after an Event of Default shall have occurred and be
continuing, the expenses of re-taking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral, or of any
exercise by the Lenders of its rights under the Loans, the Notes, the Credit
Agreement, the Warrants or any of the Security Documents, together with
attorneys' fees and expenses and court costs and all other amounts paid by the
Lenders under the Loans, the Notes, the Credit Agreement, the Warrants or any of
the Security Documents.
Security Agreement: shall mean this Agreement, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
Security Documents: shall mean the Security Agreement, the Subsidiary
Guarantee Agreement, the Subsidiary Stock Pledge Agreement and any other
instrument or agreement which purports to grant to the Lenders a security
interest in or a Lien on property to secure any Obligations, or which is stated
therein to be a Security Document. All references to any Security Document shall
mean such Security Document, as the same may be amended, modified or restated
from time to time in accordance with the terms thereof.
<PAGE> 18
SCHEDULE B TO SECURITY AGREEMENT
Grantors' Chief Executive Office
c/o Skyline Multimedia Entertainment, Inc.
350 Fifth Ave., Suite 612
New York, NY 10118
<PAGE> 19
SCHEDULE D TO SECURITY AGREEMENT
List of Copyrights, Copyright Registrations and
Applications for Copyright Registrations
None.
<PAGE> 20
SCHEDULE E TO SECURITY AGREEMENT
List of Patents and Patent Applications
None.
<PAGE> 21
SCHEDULE F TO SECURITY AGREEMENT
List of Trade Names, Trademarks, Service Marks
Trademark and Service Mark Registrations And
Applications for Trademark and Service Mark Registrations
<TABLE>
<S> <C> <C>
Mark Application (A) Registration or Filing Date
Registration (R)
or Series No. (S)
</TABLE>
Skyline has a registered trademark in "Skyride" and its Logo.
<PAGE> 22
SCHEDULE G TO SECURITY AGREEMENT
Licenses
License in the trademark "XS: Too Much is Not Enough" from NAMCO.
<PAGE> 23
SCHEDULE H TO SECURITY AGREEMENT
Location of Collateral
c/o Skyline Multimedia Entertainment, Inc.
350 Fifth Ave.
New York, NY 10118
c/o XS, New York
1457-1463 Broadway
New York, NY 10036
<PAGE> 1
EXHIBIT FF
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of May 20, 1998 among Skyline
Multimedia Entertainment, Inc., a New York corporation ("Pledgor"), and Bank of
New York, as Trustee for the Employees Retirement Plan of Keyspan Energy Corp.
("KEP") and Prospect Street NYC Discovery Fund, L.P. ("Prospect Street") (KEP
and Prospect Street collectively, the "Pledgees").
WHEREAS, Pledgor is the holder of all the issued and
outstanding capital stock (the "Stock") of New York Skyline, Inc., a New York
corporation ("NYSI"), Skyline Virtual Reality, Inc., a Delaware corporation
("SVR"), Skyline Chicago, Inc., a Delaware corporation ("SCI"), Skyline Magic,
Inc., a Delaware corporation ("SMI"), and Skyline Las Vegas, Inc., a Delaware
corporation ("SLVI") (SMEI, NYSI, SVR, SCI, SMI and SLVI, each a "Subsidiary,"
and collectively the "Subsidiaries").
WHEREAS, Pledgor and the Subsidiaries have entered into a
Senior Secured Credit Agreement with the Pledgees, dated as of May 20, 1998 (the
"Credit Agreement"); and
WHEREAS, in order to induce the Pledgees to enter into the
Credit Agreement, Pledgor has agreed to pledge and grant a security interest in
the Stock of each of the Subsidiaries to the Pledgees to secure the prompt and
complete payment when due and performance by Pledgor of its obligations under
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Pledgor hereby agrees with Pledgees as follows:
1. Pledge. Pledgor hereby pledges, assigns, hypothecates,
transfers and delivers to the Pledgees, and grants to the Pledgees a first lien
on and first priority security interest in the Stock of each of the Subsidiaries
and any and all proceeds thereof (together with any securities and other
property referred to in Section 4 hereof, the "Pledged Shares"), as collateral
security for (i) the prompt and complete payment when due (whether at the stated
maturity, by acceleration or otherwise) and performance of its obligations and
liabilities under, arising out of or in connection with the Credit Agreement and
(ii) the due and punctual payment and performance by Pledgor of its obligations
and liabilities under, arising out of or in connection with this Agreement
(collectively, the "Liabilities").
The obligations hereunder shall not be affected, impaired or
discharged, in whole or in part, by virtue of the illegality, invalidity or
unenforceability of any aspect of the Credit Agreement, or by any modification
of the terms of the Credit Agreement (including without limitation payment
amounts and terms). Pledgor is herewith delivering
<PAGE> 2
to the Pledgees the certificates representing the Pledged Shares registered in
the name of Pledgor, together with undated stock powers executed in blank. Such
certificates represent all the shares of each Subsidiary issued and outstanding
as of the date hereof. There are no warrants, options or other rights to acquire
shares of the capital stock of any Subsidiary, and no agreements by any
Subsidiaries to issue additional shares of its capital stock.
2. Inducing Representations of Pledgor. The Pledgor
acknowledges and agrees that the representations and warranties made by Pledgor
in the Credit Agreement constitute an inducement for the Pledgees to enter into
the Credit Agreement and this Agreement.
3. Covenants. Pledgor covenants and agrees as follows:
(a) Pledgor covenants and agrees that it will defend
the Pledgees' right, title and security interest in and to the Pledged Shares
and the proceeds thereof against the claims and demands of all persons
whomsoever.
(b) Pledgor shall not make or permit any changes to
the certificate of incorporation or by-laws of any Subsidiary and shall enter
into no agreements affecting or relating to the Pledged Shares.
(c) Pledgor shall not permit any Subsidiary to issue
or agree to issue any additional shares of its capital stock, or grant any
options, warrants or other rights to acquire shares of its capital stock.
4. Dividends, Distributions, etc. If, while this Agreement is
in effect, Pledgor shall become entitled to receive or shall receive any rights
or securities, whether as an addition to, in substitution for, or in exchange
for the Pledged Shares, or otherwise, Pledgor agrees to accept the same as agent
for the Pledgees and to hold the same in trust for the Pledgees and to deliver
the same forthwith to the Pledgees in the exact form received, with the
endorsement of Pledgor when necessary and appropriate and undated stock powers
duly executed in blank, to be held by the Pledgees, subject to the terms hereof,
as additional security for the Liabilities, and the securities represented by
such certificates shall become part of the "Pledged Shares" for all purposes of
this Agreement. In case any dividends are paid in respect of the Pledged Shares
or any property shall be distributed upon or with respect to the Pledged Shares
for any reason whatsoever, the property so distributed shall be delivered to the
Pledgees, to be held by the Pledgees as collateral security for the Liabilities.
All sums of money and property so paid or distributed in respect of the Pledged
Shares which are received by Pledgor shall, until paid or delivered to the
Pledgees, be held by Pledgor in trust as security for the Liabilities.
5. Administration of Security. The following provisions shall
govern the administration of the Pledged Shares:
<PAGE> 3
(a) Pledgor may not take any action with respect to
the Pledged Shares without the prior written consent of the Pledgees.
(b) Irrevocable Proxy. Pledgor hereby grants to
Pledgees an irrevocable proxy to file proofs of claim and vote or consent in
connection with the Pledged Shares (and is herewith executing and delivering to
Pledgor an Irrevocable Proxy to such effect) upon the occurrence of an Event of
Default under the Credit Agreement. Upon the request of the Pledgees, Pledgor
agrees to deliver to the Pledgees such further evidence of such irrevocable
proxy or such further irrevocable proxies with respect to the foregoing as the
Pledgees may request.
(c) Subject to any sale by the Pledgees or other
disposition by the Pledgees of the Pledged Shares or other property pursuant to
this Agreement, the Pledged Shares and any other property then held as part of
the Pledged Shares in accordance with the provisions of this Agreement shall be
delivered to Pledgor, upon full payment, satisfaction and termination of all of
the Liabilities and the termination pursuant to Section 16 hereof of the lien
and security interest hereby granted.
6. Certain Rights of the Pledgees. (a) The Pledgees shall not
be liable for failure to collect or realize upon the Liabilities, or any part
thereof, or for any delay in so doing, nor shall the Pledgees be under any
obligation to take any action whatsoever with regard thereto.
(b) The Pledged Shares held by the Pledgees hereunder
may, if an Event of Default has occurred and is continuing, without notice, be
registered in the name of the Pledgees or its nominee, which may thereafter
without notice exercise all rights, privileges or options pertaining to the
Pledged Shares as if it were the absolute owner thereof, including without
limitation, the right to exchange at its discretion the Pledged Shares, or any
portion thereof, upon the exercise by the Pledgees of any right, privilege or
option pertaining to the Pledged Shares, and in connection therewith, to deposit
and deliver the Pledged Shares with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Pledgees may determine, all without liability except to account for property
actually received by the Pledgees but the Pledgees shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
7. Remedies. (a) Upon the occurrence of an Event of Default
under the Credit Agreement, the Pledgees without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of the time and place of public or private sale) to or upon Pledgor or any other
person (all and each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate and realize upon
the Pledged Shares or any portion thereof, and/or may forthwith sell, assign,
give option or options to purchase, contract to sell or otherwise dispose of and
deliver said Pledged Shares, or any portion thereof, in one
<PAGE> 4
or more portions at public or private sale or sales, at any exchange, broker's
board or at any of the Pledgees' offices or elsewhere upon such terms and
conditions as the Pledgees may deem advisable and at such prices as the Pledgees
may deem best, for cash or on credit or for future delivery without assumption
of any credit or risk, with the right to the Pledgees upon any such sale or
sales, public or private, to purchase the whole or any portion of said Pledged
Shares so sold, free of any right or equity of redemption in Pledgor, which
right or equity is hereby expressly waived or released.
(b) The Pledgees shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the safekeeping or otherwise of the Pledged Shares or any portion
thereof, in any way relating to the rights of the Pledgees hereunder, including
reasonable attorneys' fees and legal expenses, to the payment, in whole or in
part, of the Liabilities in such order as the Pledgees may elect, and only after
so paying over such net proceeds and after the payment by the Pledgees of any
amount required by any provision of law, including, without limitation, the
Uniform Commercial Code of the State of New York (the "UCC"), need the Pledgees'
accounts for the surplus, if any, to Pledgor.
(c) Pledgor agrees that the Pledgees shall not be
obligated to give more than thirty (30) days' notice of the time and place of
any public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice shall be reasonable
notification of such matters. No notification need be given to Pledgor if it has
signed after default a statement renouncing or modifying any right to
notification of sale or other intended disposition.
(d) In addition to the rights and remedies granted to
the Pledgees in this Agreement and in any other instrument or agreement
securing, evidencing or relating to any of the Liabilities, the Pledgees shall
have all the rights and remedies of a secured party under the UCC. Pledgor
further agrees to waive and agrees not to assert any rights or privileges which
it may acquire under the UCC, and Pledgor shall be liable for any deficiency if
the proceeds of any sale or other disposition of the Pledged Shares are
insufficient to pay all amounts to which the Pledgees are entitled, and the
reasonable fees and expenses of any attorneys retained by the Pledgees to
collect such deficiency.
8. No Disposition, etc. Without the prior written consent of
the Pledgees, Pledgor agrees that it will not sell, assign, transfer, exchange,
or otherwise dispose of, or grant any option with respect to, the Pledged
Shares, or any portion thereof, nor will it create, incur or permit to exist any
pledge, lien, mortgage, hypothecation, security interest, charge, option or any
other encumbrance with respect to the Pledged Shares, or portion thereof,
interest therein, or any proceeds thereof.
9. Sale of Pledged Shares. (a) Pledgor recognizes that the
Pledgees may be unable to effect a public sale of the Pledged Shares by reason
of certain prohibitions contained in the Securities Act of 1933, as amended (the
"Act"), and
<PAGE> 5
applicable state securities laws, but may be compelled to resort to one or more
private sales of portions of the Pledged Shares to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof.
(b) Pledgor further agrees to do or cause to be done
all such other acts and things as may be necessary to make such sale or sales of
the Pledged Shares or any portion thereof valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs, injunctions,
decrees or awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales, all at Pledgor's expense, provided that Pledgor shall be under no
obligation to take any action to enable the Pledged Shares or any portion
thereof to be registered under the provisions of the Act.
Pledgor further agrees that a breach of any of the covenants
contained in this Section 9 will cause irreparable injury to the Pledgees, that
the Pledgees have no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 9
shall be specifically enforceable against Pledgor, and Pledgor hereby waives and
agrees not to assert any defenses to an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing under the Credit Agreement.
10. Indemnification and Reimbursement. (a) Pledgor agrees to
indemnify the Pledgees and their respective partners, stockholders, directors,
officers, employees, agents and affiliates (jointly and severally, the
"Indemnitees") against, hold them harmless of and from, and to the extent paid
by any Indemnitees reimburse them for, any and all loss, liability, cost, damage
and expense, including, without limitation, reasonable attorneys' fees and
expenses, which the Indemnitees may suffer or incur by reason of any action,
claim or proceeding brought by or against any Indemnitee or in which any
Indemnitee may become involved (as a plaintiff, defendant, nonparty or in any
other capacity, including without limitation in any action brought in
interpleader or against Pledgor) or in connection with any investigation,
whether conducted by an Indemnitee or another, arising out of or relating
directly or indirectly in any way to the Pledged Shares, this Agreement or any
transaction to which the Pledged Shares or this Agreement directly or indirectly
relates.
(b) If the indemnification provided for in paragraph
(a) of this Section 10 is for any reason held to be unavailable, Pledgor shall
contribute such amounts as are just and equitable to pay the Indemnitees or to
reimburse them for the aggregate of any and all losses, liabilities, costs,
damages and expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred by the Indemnitees as a result of or in connection with,
any amount paid in settlement of any action, claim or proceeding arising out of
or relating directly or indirectly in any way to the Pledged Shares or this
Agreement or any transaction to which the Pledged Shares or this Agreement
directly or indirectly relates. The provisions of this Section 10 shall survive
any termination of this Agreement.
<PAGE> 6
11. Further Assurances; Expenses. (a) Pledgor agrees that at
any time and from time to time upon the written request of the Pledgees, Pledgor
will execute and deliver such further documents and do such further acts and
things as the Pledgees may reasonably request consistent with the provisions
hereof in order to effect the intent and purposes of this Agreement.
(b) Pledgor shall promptly pay on demand all
expenses, including reasonable attorneys' fees and disbursements, of the
Pledgees in connection with the administration or enforcement of this Agreement
or any other matter arising out of this Agreement.
12. Severability. 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. The Pledgees shall not by
any act, delay, omission or otherwise be deemed to have waived any of its
remedies hereunder, and no waiver by the Pledgees shall be valid unless in
writing and signed by the Pledgees and then only to the extent therein set
forth. A waiver by the Pledgees of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Pledgees would otherwise have on any further occasion. No failure to exercise,
nor any delay in exercising on the part of the Pledgees, any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
14. Successors. This Agreement and all obligations of Pledgor
hereunder shall be binding on and enforceable against the permitted successors
and assigns of Pledgor, including, without limitation, any trustee in bankruptcy
or any other successor by operation of law, and shall, together with the rights
and remedies of the Pledgees hereunder, inure to the benefit of the Pledgees.
Without limiting the generality of the foregoing sentence, all rights and powers
granted hereby to the Pledgees, or any agent or representative of the Pledgees,
may be exercised by any successor or assignee or any agent or representative of
such successor or assignee.
15. Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York without regard to its conflicts of law rules.
16. Termination. This Agreement and the lien and security
interest granted hereunder shall not terminate until the full and complete
performance and
<PAGE> 7
satisfaction of all the Liabilities.
17. Amendment. This Agreement may not be modified or amended
except in a writing signed by Pledgor and the Pledgees.
[Remainder is Intentionally Blank]
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered on the date first above written.
PLEDGOR:
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By: /s/ Steven Schwartz
-----------------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
PLEDGEES:
BANK OF NEW YORK, AS
TRUSTEE FOR THE EMPLOYEES
RETIREMENT PLAN OF KEYSPAN
ENERGY CORP.
By: /s/ Stephen P. Weis
-----------------------------------
Name: Stephen P. Weis
Title:
PROSPECT STREET NYC
DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund,
Inc., its general partner
By: /s/ John F. Barry
-----------------------------------
Name: John F. Barry
Title: President
<PAGE> 1
EXHIBIT GG
AMENDED AND RESTATED
SEPARATION AGREEMENT
AND
GENERAL RELEASE
This Amended and Restated Separation Agreement and General Release is
made this 15th day of May, 1998 by and among Zalman Silber ("Silber"), Skyline
Multimedia Entertainment, Inc. (the "Company"), Prospect Street NYC Discovery
Fund L.P. ("Prospect Street") and the Employees Retirement Plan of the Brooklyn
Union Gas Company ("BUG").
WHEREAS, the parties hereto desire to amend the Separation Agreement
and General Release dated April 15, 1998 among the parties hereto, as amended by
Amendment No. 1 dated May 7, 1998 (the "Separation Agreement") and restate such
Separation Agreement in its entirety.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Separation Agreement is hereby
amended and restated in its entirety to read as follows:
A. As consideration for entering into this Agreement and the
terms and conditions set forth herein, I have been offered:
(i) as payment in connection with the purchase by the Company
of the securities referenced in Section B(iii) hereof,
$206,250 payable as follows: (1) $154,687.50 upon execution of
this Agreement, and (2) $51,562.50, of which amount I
acknowledge receipt of $21,654, and the balance of which is to
be paid bi-weekly at the rate of $3,750 commencing on the date
hereof until fully paid. Additionally, the Company agrees to
forgive amounts previously agreed to be refunded by me to the
Company in the amount of $750,000;
(ii) as payment in connection with the purchase by Prospect
Street of the securities referenced in Section B(V) hereof,
the aggregate amount of $100, which amount represents fair
value for such securities in light of the pledge related
thereto, and in consideration of Prospect Street and BUG
providing certain financing for the Company; and
(iii) the opportunity to continue to receive the
Company-subsidized health benefits I was receiving on the last
active day of my employment through the period ending on
January 15, 1999 or, at the Company's option, to receive the
economic equivalent thereof.
After consultation with my own counsel, I understand that
these payments and benefits exceed any payment, benefit, or
other thing of value that I might otherwise be
<PAGE> 2
entitled to under any Company policy, plan or procedure.
B. In consideration of the compensation and benefits to be received by
me pursuant to paragraph A hereof, I hereby:
(i) resign from all positions and capacities held with
the Company and its subsidiaries, including, but not
limited to, as an officer, director and employee of
the Company and its subsidiaries effective as of
April 15, 1998;
(ii) agree that during the ten year period ending on April
15, 2008 (the "Non-Compete Period"), I will not,
directly or indirectly, without the consent of the
Board of Directors of the Company: own, manage,
operate, join, control, or participate in or be
connected with, as an officer, employee, partner,
stockholder, director, adviser, consultant, agent or
otherwise (whether paid or unpaid), any business,
which directly or indirectly competes with the
currently existing or contemplated businesses of the
Company or its subsidiaries at locations within New
York City, including, but not limited to (a) engaging
in the food or souvenir concession business at the
same locations or at locations in close proximity to
where the Company currently conducts business, or (b)
leasing space or entering into licensing arrangements
to provide simulated rides, virtual reality arcade
games or theater-based attractions;
(iii) agree that all options and warrants previously issued
to me by the Company are deemed canceled as of April
15, 1998 and to submit to the Company all such
options and warrants in my possession;
(iv) grant to Prospect Street an irrevocable proxy coupled
with interest to vote all of the shares of capital
stock of the Company held by me, the form of which is
attached hereto as Exhibit A and to renew, reexecute
or reaffirm such irrevocable proxy as may from time
to time be required until the shares which are the
subject of such irrevocable proxy can be transferred
as contemplated in subparagraph (v) below and agree
to vote all shares of capital stock of the Company or
execute consents with respect thereto as shall be
instructed by Prospect Street;
(v) agree to transfer to Prospect Street all shares of
Class A common stock of the Company held by me
simultaneously with the release of such shares from
current escrow arrangements or pledge agreements and
to promptly instruct any escrow agent to transfer
such shares upon release; and
(vi) agree to use reasonable efforts to cause all shares
of Class A common stock currently held in escrow in
connection with the escrow arrangements or pledge
agreements referred to in paragraph B(v) above to be
substituted with an equal number of shares of common
stock of the Company, which shares of common stock
the Company hereby agrees to issue in exchange for
such Class A common stock.
<PAGE> 3
C. The Company has advised me of, and I acknowledge that I do not have
to sign this Separation Agreement and General Release.
D. By signing this Separation Agreement and General Release, and in
consideration for the payments and benefits described in paragraph A hereof, I,
for myself and my heirs, executors, administrators, trustees, legal
representatives and assigns (collectively referred to as the "Releasors") hereby
forever release and discharge the Company, and any and all of its parent
corporations, shareholders, creditors subsidiaries, divisions, and each of their
affiliated or related entities, officers, directors, employees, agents,
representatives, successors and assigns, and any and all of its or their past,
present or future officers, directors, agents, stockholders, trustees,
fiduciaries, administrators, employees or assigns (whether acting as agents for
the Company or in their individual capacities) (collectively referred to as
"Releasees"), from any and all claims, demands, causes of action, and
liabilities of any kind whatsoever (based upon any legal or equitable theory,
whether contractual, common-law, statutory, federal, state, local or otherwise),
whether known or unknown, by reason of any act, omission, transaction, conduct
or occurrence up to and including the date of execution of this Agreement, which
the Releasors ever had, now have or hereafter can, shall or may have against the
Releasees for, upon or by reason of any act, omission, transaction or occurrence
up to and including the effective date of this Agreement.
E. The Company, and any and all of its parent corporations,
shareholders, subsidiaries, divisions, and each of their affiliated or related
entities, officers, directors, employees, agents, representatives, successors
and assigns, and any and all of its or their past, present or future officers,
directors, agents, stockholders, trustees, fiduciaries, administrators,
employees or assigns (whether acting as agents for the Company or in their
individual capacities) (collectively referred to as "Releasors") hereby forever
release and discharge Zalman Silber, his heirs, executors, administrators,
trustees, legal representatives, advisors, family members and assigns
(collectively referred to as "Releasees") from any and all claims, demands,
causes of action, and liabilities of any kind whatsoever (based upon any legal
or equitable theory, whether contractual, common-law, statutory, federal, state,
local or otherwise), whether known or unknown, by reason of any act, omission,
transaction, conduct or occurrence up to and including the date of execution of
this Agreement, which the Releasors ever had, now have or hereafter can, shall
or may have against the Releasees for, upon or by reason of any act, omission,
transaction or occurrence up to and including the effective date of this
Agreement.
F. The parties hereto agree that from the date of this Agreement and
continuing indefinitely thereafter, none of the parties hereto shall say or do
anything which could disparage, undermine or be reasonable interpreted to
denigrate the capabilities, performance, integrity or reputation of any other
party or any of such other party's directors, officers, stockholders, agents,
employees, consultants, representatives or affiliates.
G. This Agreement constitutes the complete understanding between the
parties and supersedes all prior agreements with respect to the subject matter
hereof. No other promises or agreements shall be binding unless in writing and
signed by the parties.
H. This Agreement shall be governed by the laws of the State of New
York.
I. 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.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by each of the parties hereto as of the date first written above.
ZALMAN SILBER
SIGNATURE: /s/ Zalman Silber
---------------------------
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
By: /s/ Steven Schwartz
---------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
PROSPECT STREET NYC DISCOVERY FUND, L.P.
By: Prospect Street Discovery Fund, Inc., General Partner
By: /s/ John F. Barry
---------------------------
Name: John F. Barry, III
Title: President
EMPLOYEES RETIREMENT PLAN OF
THE BROOKLYN UNION GAS COMPANY
By: /s/ Thomas Riordan
---------------------------
Name: Thomas Riordan
Title:
<PAGE> 5
IRREVOCABLE PROXY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned (the "Grantor"), a shareholder of Skyline
Multimedia Entertainment, Inc., a New York corporation (the "Company"), does
hereby irrevocably constitute and appoint Prospect Street NYC Discovery Fund,
L.P. ("Prospect Street"), with full powers of delegation and substitution, as
attorney and agent for the Grantor and in its name, place and stead with respect
to any and all shares of capital stock of the Company of whatever class or
series from time to time held by the Grantor to vote as the Grantor's proxy or
proxies at any meeting of the shareholders of the Company (and any adjournment
thereof) or to take any consensual or other action permitted to be taken by the
Grantor as a shareholder of the Company, in each case with respect to such
matters, including without limitation, the election of directors, as may be
voted on, consented to or taken by, and according to the number of votes that
would be entitled to be cast by, the Grantor. This Proxy and all authority
conferred hereunder is irrevocable and coupled with an interest, and shall not
be terminated or terminable by any act of the Grantor or by operation of law,
including, without limitation, the death, dissolution, liquidation or cessation
of existence of the Grantor, or by the occurrence of any other event or events.
This Proxy is granted in consideration of the agreement by Prospect Street to
provide financing for the Company.
THIS PROXY SHALL REMAIN IN FULL FORCE AND EFFECT
AND BE ENFORCEABLE AGAINST ANY DONEE, ASSIGNEE
OR OTHER TRANSFEREE OF THE CAPITAL STOCK WHICH
IS THE SUBJECT HEREOF.
IN WITNESS WHEREOF, the Grantor has duly executed this Proxy as of the
15th day of April, 1998.
/s/ Zalman Silber
---------------------------
Zalman Silber
<PAGE> 6
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On April 15, 1998, Zalman Silber appeared before me and acknowledged to
me that he executed the foregoing instrument.
---------------------------
Notary Public
<PAGE> 1
EXHIBIT HH
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS
SECURITY MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT (I)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR (II) IN A TRANSACTION WHICH,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO SKYLINE
MULTIMEDIA ENTERTAINMENT, INC., IS EXEMPT FROM REGISTRATION
THEREUNDER AND UNDER APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT
CERTAIN SENIOR SECURED CREDIT AGREEMENT, DATED AS OF May 20,
1998, BY AND AMONG SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND
THE CO-BORROWERS AND LENDERS NAMED THEREIN, AS SUCH AGREEMENT
MAY BE AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME AND THAT
CERTAIN SECURITY AGREEMENT, DATED AS OF May 20, 1998, BY AND
AMONG SKYLINE MULTIMEDIA ENTERTAINMENT, INC. AND THE
CO-BORROWERS AND LENDERS NAMED THEREIN, AS SUCH AGREEMENT MAY BE
AMENDED, MODIFIED OR RESTATED FROM TIME TO TIME.
SKYLINE MULTIMEDIA ENTERTAINMENT, INC.
Senior Secured Demand Note
$500,000 May 20, 1998
New York, New York No. 1
FOR VALUE RECEIVED, 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
("SVR"), Skyline Chicago, Inc., a Delaware corporation ("SCI"), Skyline Magic,
Inc., a Delaware corporation ("SMI") and Skyline Las Vegas, Inc., a Delaware
corporation ("SLVI"), hereby promise to pay to Bank of New York, as Trustee for
the Employees Retirement Plan of Keyspan Energy Corp., or its registered
successors or assigns (the "Registered Holder"), Five Hundred Thousand U.S.
Dollars ($500,000.00) on demand given on or after July 15, 1998 (the date of
such demand referred to herein as the "Maturity Date") in accordance with the
provisions of this Note. This Note is issued by the Company pursuant to the
Senior Secured Credit Agreement, dated as of May 20, 1998 (as such agreement may
be amended, modified or restated from time to time, the "Credit Agreement"), by
<PAGE> 2
and among the Company, the Company's subsidiaries, the Registered Holder and
Prospect Street NYC Discovery Fund, L.P. This Note is secured by the collateral
pledged to the Registered Holder pursuant to the Collateral Documents (as
defined herein). All capitalized terms used and not defined herein shall have
the meaning ascribed to such terms in the Credit Agreement.
"Collateral Documents" means the Security Agreement, the
Subordination Agreement, the Subsidiary Stock Pledge Agreement, the Subsidiary
Guarantee, and the Indemnity, Subrogation and Contribution Agreement (in each
case, as the same may be amended, modified or restated from time to time), and
all certificates, schedules, exhibits and other documents required to be
delivered in connection with such agreements.
1. Interest. Interest will accrue on the unpaid principal amount
of this Note from the date hereof at a rate of 14% per annum; provided, however,
that, upon an Event of Default under Section 7.1 of the Credit Agreement, the
rate of interest shall increase to a rate per annum of 21%. Interest accrued on
this Note shall be payable on the earlier of (a) the Maturity Date, and (b) the
date of consummation of an Equity Financing. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company shall pay principal
and interest on this Note by wire transfer of immediately available funds to the
account specified by the Registered Holder in a written notice to the Company
delivered at least three Business Days prior to such payment date. If a payment
date is other than a Business Day, payment shall be made on the next succeeding
Business Day. All payments shall be applied first, to all accrued and unpaid
interest hereon, and second, to principal.
3. Prepayment. At its option, the Company may, 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 to the
Registered Holder at least 5 days but not more than 30 days before the
prepayment date set forth in such notice at the address provided in or pursuant
to Section 9 herein. Any such prepayment shall be in an amount of at least
$100,000 and in integrals of $10,000, 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. Once due notice of prepayment is
given, a portion of the principal amount of this Note (in such amount as the
notice states shall be prepaid) shall become due and payable on the optional
prepayment date.
4. Repayment. The Company will repay this Note in full, in cash
on the Maturity Date at 100% of the then outstanding principal amount of this
Note plus accrued but unpaid interest thereon to such date.
5. Optional Conversion. In the event that an Equity Financing
has been consummated prior to July 15, 1998, the holders of this Note may, at
their option, convert all, but not less than all, of the principal amount of
this Note such that each $1.00 of principal
<PAGE> 3
amount of this Note shall convert into that number of units of securities
offered in such Equity Financing as are purchaseable for $1.25. Upon such
conversion, accrued and unpaid interest hereon shall be immediately payable to
the Registered Holder in cash.
6. Events of Default; Remedies. Events of Default and the
consequences of Events of Default are set forth in Article VII of the Credit
Agreement. All provisions of Article VII of the Credit Agreement are
specifically hereby incorporated herein in full by this reference.
7. Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, 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 of $250,000, or any multiple thereof (or
in any such lesser amount as shall equal the then unpaid principal amount of the
Note or Notes so exchanged), 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 (subject to
Section 15 herein); provided, however, that upon any such exchange there shall
be filed with the Company the name and address for all purposes hereof of the
payee of each Note delivered in the 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.
8. 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 this Note, 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 sworn or
notarized agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of this Note, the Company shall (at its 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.
9. Securities Act. This Note has not been registered under the
Securities Act of 1933 and applicable state securities laws. Therefore, the
Company may require, as a condition of allowing the transfer or exchange of this
Note, that the Registered Holder furnish to the Company an opinion of counsel
reasonably acceptable to the Company to the effect that such transaction is
allowable under the Securities Act of 1933 and applicable state securities laws.
10. 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:
<PAGE> 4
If to the Registered Holder, to:
Bank of New York, as Trustee for the Employees Retirement Plan
of Keyspan Energy Corp.
c/o The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, NY 11201-3850
Facsimile No.: (718) 643-1341
Attn: Thomas Riordan
with a copy to:
Cullen & Dykman
177 Montague Street
Brooklyn, New York 11201
Facsimile No.: (718) 935-1304
Attn: Lance D. Myers, Esq.
If to the Company, to:
Skyline Multimedia Entertainment, Inc.
350 Fifth Ave., Suite 612
New York, NY 10118
Facsimile No.: (212) 564-0652
Attn: President
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Facsimile No.: (212) 969-2900
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 10, 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 upon 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 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 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
<PAGE> 5
change to the other party hereto at least ten days prior to the effective date
of such change.
11. 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.
12. Note Register. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer of
this Note. 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.
13. Waiver. Subject to the provisions of the Credit Agreement,
any term or condition of this Note may be waived at any time by the party that
is entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Note, in any one or more instances, shall be deemed to be or construed
as a waiver of the same or any other term or condition of this Note on any
future occasion. All remedies, either under this Note or by law or otherwise
afforded, will be cumulative and not alternative.
14. Amendment. This Note may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf the
Registered Holder and the Company and otherwise in accordance with the
provisions of the Credit Agreement.
15. Binding Effect. No obligation of the Company hereunder may
be assigned (by operation of law or otherwise) by the Company or assumed by
another Person without the prior written consent of the Registered Holder and
otherwise in accordance with the provisions of the Credit Agreement and any
attempt to do so will be void. This Note or any portion hereof may be assigned
by the Registered Holder to any Person; provided, however, that the aggregate
principal amount so assigned shall be at least $250,000 (or any such lesser
amount as shall equal the then unpaid principal amount of this Note). Subject to
the foregoing, this Note is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
Prior to the assignment of this Note or any portion hereof by the Registered
Holder to any other Person, such Person shall be required to make
representations and warranties to the Company substantially similar to those
contained in Section 8.4 of the Credit Agreement and agree to be bound by the
terms of the Credit Agreement applicable to the Lender.
<PAGE> 6
[Remainder Intentionally Blank]
<PAGE> 7
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first above written.
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
NEW YORK SKYLINE, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE VIRTUAL REALITY, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE CHICAGO, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
SKYLINE MAGIC, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
<PAGE> 8
SKYLINE LAS VEGAS, INC.
By: /s/ Steven Schwartz
-----------------------------
Name: Steven Schwartz
Title: Executive Director of
Operations and Finance
<PAGE> 1
EXHIBIT II
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.
COMMON STOCK PURCHASE WARRANT
Date of Issuance: _______ ___, 1998 Certificate No. 1
For value received, SKYLINE MULTIMEDIA ENTERTAINMENT, INC., a New York
corporation (the "Company"), hereby grants to Bank of New York as Trustee for
the Employees Retirement Plan of Keyspan Energy Corp. and or its registered
assigns (the "Registered Holder"), the right to purchase from the Company,
subject to the terms and conditions herein contained that number of shares of
common stock par value $.001 of the Company (the "Warrant Shares") as set forth
in Section 1A hereof, at a price per share of $.375 (the "Exercise Price"). This
Warrant is issued pursuant to the Senior Secured Credit Agreement dated as of
May 20, 1998, 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"). Certain capitalized terms
used herein are defined in Section 2 hereof. All other capitalized terms used
and not defined herein shall have the meaning ascribed to such terms in the
Credit Agreement.
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 only upon the happening of the following events and for
the amount of shares stated:
(i) In the event the entire principal amount of the Notes
(plus all accrued and unpaid interest thereon) is
repaid prior to July 15, 1998, then this Warrant
shall be exerciseable into such number of shares of
Common Stock that equals 32% of such Common Stock on
a Fully Diluted Basis on the date of such issuance;
or
(ii) In the event the entire principal amount of the Notes
has not been repaid (plus all accrued and unpaid
interest thereon) or converted (pursuant to the
terms of the Notes) prior to July 15, 1998, then this
Warrant shall be
<PAGE> 2
exercisable into such number of shares of Common
Stock that equal 47.167% of the Common Stock on a
Fully Diluted Basis at the time of issuance. Upon
consummation of an Equity Financing and repayment or
conversion of the entire principal amount of the
Notes (plus all accrued and unpaid interest
thereon) before July 15, 1998, this Warrant shall be
cancelled and of no further force and effect.
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.
(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.
<PAGE> 3
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance of any Warrants or any certificates representing Warrant Shares in a
name other than that of a Registered Holder, and the Company shall not be
required to issue or deliver such Warrant or certificate for Warrant Shares
unless and until the Person requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
(v) The Company shall not close its books against the transfer
of this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(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) 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, or, if such unissued
Warrant Shares are insufficient to comply with such reserve requirement, the
Company shall use its best efforts to increase the authorized capital stock of
the Company in an amount sufficient to comply herewith and submit such proposal
for approval by the Company's shareholders at the next annual meeting of
shareholders of the Company. 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 applicable law of 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.
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
<PAGE> 4
Person to whom a new Warrant for the unexercised portion of the rights hereunder
is to be issued.
SECTION 2. Definitions. The following terms have the meanings
set forth below:
"Common Stock" means the common stock, par value $.001 per share and
the Class A common stock, par value $.001 per share (the "Class A Common
Stock"), 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 Class A 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.
"Equity Financing " has the meaning ascribed thereto in the Credit
Agreement.
"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. 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 then 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.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of
<PAGE> 5
Common Stock, all shares of Common Stock outstanding at the time of
determination and all shares issuable upon the exercise of options or
convertible or exchangeable securities or warrants (giving effect to the Warrant
Shares issuable hereunder).
"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 issued
under this Warrant; 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 3. 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 Register 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 4. 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 5. 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 6. 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
<PAGE> 6
Warrant Shares to be exchanged for nonvoting stock or similar interests that
convey equivalent economic benefits to such Warrants or Warrant Shares. 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 7. 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 8. 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 9. 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 10. 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 11. 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 12. Descriptive Headings; Governing Law. The
descriptive headings of the several Sections and paragraphs of this Warrant are
inserted for convenience only and do not
<PAGE> 7
constitute a part of this Warrant. 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> 8
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> 9
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> 10
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 _________________________________
