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.
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 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.
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"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 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
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or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (vi)
all guarantees by such Person of Indebtedness of others, (vii) all Capital
Lease Obligations of such Person, (viii) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty and (ix) all obligations, contingent or otherwise, of
such Person in respect of bankers' acceptances. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership
in which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
"Indemnified Liabilities" has the meaning ascribed to it in
Section 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.
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"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 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.
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"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.
"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.
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(b) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the phrases "ordinary course of business" and "ordinary course of business
consistent with past practice" refer to the business and practice of 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.
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(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.
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.
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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.
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
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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.
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.
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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):
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,
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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 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.
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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.
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.
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(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 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
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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 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.
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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
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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.
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.
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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 ss. 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 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
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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 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
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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.
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.
▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Prospect Street, to:
Prospect Street NYC Discovery Fund, LP
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▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, III
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇, Esq.
If to KEP, to:
Bank of New York, as Trustee of the Employees Retirement Plan
of Keyspan Energy Corp.
c/o The Brooklyn Union Gas Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Cullen & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, 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.
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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.
(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 super sede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
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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
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."
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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
(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;
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(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 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.
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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 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
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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 ▇▇▇ 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 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.
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IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officer of each party hereto as of the
date first above written.
SKYLINE MULTIMEDIA
ENTERTAINMENT, INC.
By:
-----------------------
Name:
Title:
NEW YORK SKYLINE, INC.
By:
-----------------------
Name:
Title:
SKYLINE VIRTUAL REALITY, INC.
By:
-----------------------
Name:
Title:
SKYLINE CHICAGO, INC.
By:
-----------------------
Name:
Title:
SKYLINE MAGIC, INC.
By:
-----------------------
Name:
Title:
SKYLINE LAS VEGAS, INC.
By:
-----------------------
Name:
Title:
BANK OF NEW YORK, AS TRUSTEE
FOR THE EMPLOYEES RETIREMENT PLAN
OF KEYSPAN ENERGY CORP.
By:
-----------------------
Name:
Title:
PROSPECT STREET NYC DISCOVERY
FUND, L.P.
By: Prospect Street Discovery Fund,
Inc., its General Partner
By:
-----------------------
Name:
Title:
Schedule 2.1
Lender Loan Amount
------ -----------
1. Keyspan $500,000
2. Prospect Street $435,000
