<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Amendment No. 3
Mountasia Entertainment International, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, NO PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
624547105
--------------------------
(CUSIP Number)
MEI Holdings, L.P.
4200 Texas Commerce Tower West
2200 Ross Ave.
Dallas, Texas 75201
Attention: Daniel A. Decker
(214) 220-4900
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
With a copy to:
Robert A. Profusek, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York
(212) 326-3939
September 25, 1996
------------------------------------
(Date of Event which Requires Filing
of this Statement)
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 this statement / /.
(Continued on following page)
(Page 1 of 15 Pages)
<PAGE> 2
SCHEDULE 13D
================================================================================
CUSIP No. 624547105 Page 2 of Pages
================================================================================
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MEI Holdings, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /x/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
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
0
NUMBERS OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIAL 11,727,970
LY OWNED --------------------------------------------------------------
BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
SCHEDULE 13D
================================================================================
CUSIP No. 624547105 Page 3 of Pages
================================================================================
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MEI GenPar, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /x/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
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
0
NUMBERS OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIAL 11,727,970
LY OWNED --------------------------------------------------------------
BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 4
SCHEDULE 13D
================================================================================
CUSIP No. 624547105 Page 4 of Pages
================================================================================
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
HH Genpar Partners
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /x/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBERS OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIAL 11,727,970
LY OWNED --------------------------------------------------------------
BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 5
SCHEDULE 13D
================================================================================
CUSIP No. 624547105 Page 5 of Pages
================================================================================
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Hampstead Associates, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /x/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBERS OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIAL 11,727,970
LY OWNED --------------------------------------------------------------
BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 6
SCHEDULE 13D
================================================================================
CUSIP No. 624547105 Page 6 of Pages
================================================================================
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
RAW GenPar, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /x/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Texas
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBERS OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIAL 11,727,970
LY OWNED --------------------------------------------------------------
BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON --------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /x/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 7
SCHEDULE 13D
================================================================================
CUSIP NO. 624547105 PAGE 7 OF PAGES
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
InMed, Inc. d/b/a Incap, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /X/
- --------------------------------------------------------------------------------
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
Texas
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-------------------------------------------------------------
NUMBERS OF 8 SHARED VOTING POWER
SHARES 11,727,970
BENEFICIAL -------------------------------------------------------------
LY OWNED 9 SOLE DISPOSITIVE POWER
BY EACH 0
REPORTING -------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 8
SCHEDULE 13D
================================================================================
CUSIP NO. 624547105 PAGE 8 OF PAGES
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Donald J. McNamara
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /X/
- --------------------------------------------------------------------------------
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
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-------------------------------------------------------------
NUMBERS OF 8 SHARED VOTING POWER
SHARES 11,727,970
BENEFICIAL -------------------------------------------------------------
LY OWNED 9 SOLE DISPOSITIVE POWER
BY EACH 0
REPORTING -------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 9
SCHEDULE 13D
================================================================================
CUSIP NO. 624547105 PAGE 9 OF PAGES
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert A. Whitman
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /X/
- --------------------------------------------------------------------------------
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
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-------------------------------------------------------------
NUMBERS OF 8 SHARED VOTING POWER
SHARES 11,727,970
BENEFICIAL -------------------------------------------------------------
LY OWNED 9 SOLE DISPOSITIVE POWER
BY EACH 0
REPORTING -------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 10
SCHEDULE 13D
================================================================================
CUSIP NO. 624547105 PAGE 10 OF PAGES
================================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Daniel A. Decker
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP a / /
b /X/
- --------------------------------------------------------------------------------
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
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
-------------------------------------------------------------
NUMBERS OF 8 SHARED VOTING POWER
SHARES 11,727,970
BENEFICIAL -------------------------------------------------------------
LY OWNED 9 SOLE DISPOSITIVE POWER
BY EACH 0
REPORTING -------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 11,727,970
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,727,970
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* /X/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.45%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 11
This Amendment No. 3 amends and supplements the Statement on Schedule
13D filed on June 17, 1996, as amended by Amendments No. 1 and No. 2 (the
"Schedule 13D"), by MEI Holdings, L.P., a Delaware limited partnership, and
certain other persons. Capitalized terms used herein which are not otherwise
defined herein are so used with the respective meanings ascribed to them in
the Schedule 13D.
Item 4 of the Schedule 13d is hereby amended by replacing all
references to "Purchaser" with "Holdings" and by adding the following thereto:
On September 25, 1996, pursuant to the letter amendment dated July 23,
1996, the Company and Holdings finalized the Amended and Restated Investment
Agreement, dated June 5, 1996, as amended and restated (the "Amended Investment
Agreement"), Exhibit G (Sale Option and Purchase Option Terms) to the Amended
Investment Agreement, the Warrant, the Standstill Agreement, the Registration
Rights Agreement and the Management Lock-up Agreements. Copies of such
finalized documents are filed as Exhibits 1, 2, 5, 6, 7 and 8 hereto,
respectively, and are incorporated herein by this reference.
Item 7 of the Schedule 13D is hereby amended and restated in its
entirety as follows:
Exhibit 1 - Amended and Restated Investment Agreement, dated
June 5, 1996 as amended and restated.
Exhibit 1A- Letter amending Investment Agreement, dated July 23,
1996.
Exhibit 2 - Warrant, dated August 28, 1996.
Exhibit 3 - Financing Commitment letter, dated June 5, 1996.
Exhibit 4 - Form of By-Law Amendments attached as Exhibit C to the
Investment Agreement.
Exhibit 5 - Standstill Agreement, dated August 28, 1996.
Exhibit 6 - Registration Rights Agreement, dated August 28, 1996.
Exhibit 7 - Management Lock-up Agreements, dated August 28, 1996.
Exhibit 8 - Sale Option and Purchase Option Terms attached as
Exhibit G to the Investment Agreement.
Exhibit 99- Agreement Among Filing Parties.
<PAGE> 12
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be filed collectively on
behalf of it and each of MEI GenPar, L.P., HH GenPar Partners, Hampstead
Associates, Inc., RAW GenPar, Inc., InMed, Inc., Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker.
Dated: September 26, 1996 MEI HOLDINGS, L.P.
By: MEI GenPar, L.P.
Its General Partner
By: HH GenPar Partners
Its General Partner
By: Hampstead Associates, Inc.
Its Managing General Partner
By: /s/ Daniel A. Decker
---------------------------
Daniel A. Decker
Executive Vice President
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of it and each of MEI Holdings, L.P., HH GenPar Partners, Hampstead
Associates, Inc., RAW GenPar, Inc., InMed, Inc., Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker.
Dated: September 26, 1996 MEI GENPAR, L.P.
By: HH GenPar Partners
Its General Partner
By: Hampstead Associates, Inc.
Its Managing General Partner
By: /s/ Daniel A. Decker
-------------------------------
Daniel A. Decker
Executive Vice President
<PAGE> 13
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of it and each of MEI Holdings, L.P., MEI GenPar, L.P., Hampstead
Associates, Inc., RAW GenPar, Inc., InMed, Inc., Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker.
Dated: September 26, 1996 HH GENPAR PARTNERS
By: Hampstead Associates, Inc.
Its Managing General Partner
By: /s/ Daniel A. Decker
-----------------------------
Daniel A. Decker
Executive Vice President
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of it and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, RAW GenPar, Inc., InMed, Inc., Donald J. McNamara, Robert A. Whitman
and Daniel A. Decker.
Dated: September 26, 1996 HAMPSTEAD ASSOCIATES, INC.
By: /s/ Daniel A. Decker
----------------------------------
Daniel A. Decker
Executive Vice President
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of it and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, Hampstead Associates, Inc., InMed, Inc., Donald J. McNamara, Robert A.
Whitman and Daniel A. Decker.
Dated: September 26, 1996 RAW GENPAR, INC.
By: /s/ Robert A. Whitman
-----------------------------------
Robert A. Whitman
President
<PAGE> 14
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of it and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, Hampstead Associates, Inc., RAW GenPar, Inc., Donald J. McNamara,
Robert A. Whitman and Daniel A. Decker.
Dated: September 26, 1996 INMED, INC.
By: /s/ Daniel A. Decker
-----------------------------
Daniel A. Decker
President
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of him and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, Hampstead Associates, Inc., RAW GenPar, Inc., InMed, Inc.,
Robert A. Whitman and Daniel A. Decker.
Dated: September 26, 1996
/s/ Donald J. McNamara
----------------------------------
Donald J. McNamara
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of him and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, Hampstead Associates, Inc., RAW GenPar, Inc., InMed, Inc.,
Donald J. McNamara and Daniel A. Decker.
Dated: September 26, 1996
/s/ Robert A. Whitman
----------------------------------
Robert A. Whitman
<PAGE> 15
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct and agrees that this statement may be jointly filed on
behalf of him and each of MEI Holdings, L.P., MEI GenPar, L.P., HH GenPar
Partners, Hampstead Associates, Inc., RAW GenPar, Inc., InMed, Inc., Donald J.
McNamara and Robert A. Whitman.
Dated: September 26, 1996 /s/ Daniel A. Decker
---------------------------------------
Daniel A. Decker
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
1 Amended and Restated Investment Agreement, dated
June 5, 1996 as amended and restated
2 Warrant dated August 28, 1996
5 Standstill Agreement, dated August 28, 1996
6 Registration Rights Agreement, dated August 28, 1996
7 Management Lock-up Agreements, dated August 28, 1996
8 Sale Option and Purchase Option Terms
attached as Exhibit G to the Amended Investment Agreement
</TABLE>
<PAGE> 1
Exhibit 1
AMENDED AND RESTATED INVESTMENT AGREEMENT
Investment Agreement, dated as of June 5, 1996, as amended and
restated in its entirety, between MEI Holdings, L.P., a Delaware limited
partnership (the "Purchaser"), and Mountasia Entertainment International, Inc.,
a Georgia corporation (the "Company").
I. SHARE PURCHASE; WARRANT; OTHER FINANCING
1.1. Share Purchase. (a) The Company has authorized the issuance and
sale to the Purchaser hereunder of (i) a number of newly issued shares of Common
Stock, no par value (the "Common Stock"), of the Company that equals 45.45% of
the Closing Outstanding Shares (defined below), rounded up to the nearest whole
number (the "Shares"), and (ii) a warrant substantially in the form of Exhibit A
hereto (the "Warrant"), which will entitle the holder thereof to have issued to
it shares of Common Stock on the terms and subject to the conditions of the
Warrant (such shares of Common Stock, the "Warrant Shares"). For purposes of
this Agreement, the term "Closing Outstanding Shares" means the number of shares
of Common Stock outstanding immediately following the Closing.
(b) On the terms and subject to the conditions hereinafter set
forth, at the Closing, the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, for an aggregate price equal to $40.0
million (the "Purchase Price"), the Shares and the Warrant (collectively, the
"Securities").
(c) As an inducement to the Company to enter into this Agreement and
to consummate the transactions contemplated hereby, the Purchaser is willing to
make available to the Company certain interim financing on the terms and subject
to the conditions set forth in the documents attached as Exhibit B
(collectively, the "Interim Financing Facility Commitment").
(d) The Company will have the right to require the Purchaser to
purchase, and the Purchaser will have the right to require the Company to sell
to it, for a purchase price of up to $22,700,000 on the terms and subject to the
conditions set forth in the document attached hereto as Exhibit G, either (i) if
Shareholder Approval (as defined in Section 4.16) has been obtained, shares of
Company Common Stock or (ii) if Shareholder Approval has not been obtained,
shares of Company Series F Preferred Stock, no par value, the terms and
conditions of which are attached as Annex A to Exhibit G ("Series F Preferred").
1.2. Purchase Price. The Purchase Price will be
payable on the terms and subject to the conditions hereof in cash
by bank wire transfer of New York Clearing House funds to an
<PAGE> 2
account of the Company designated by the Company by written notice to the
Purchaser at least five calendar days prior to the Closing Date, provided that
all or a portion of the principal amount of all financing from MEI Financings,
L.P., an affiliate of the Purchaser ("MEIF"), to the Company under the Interim
Financing Facility Commitment (plus accrued and unpaid interest and any other
expenses relating thereto) will be applied by MEIF, on behalf of the Purchaser,
and accepted by the Company, in lieu of cash to pay a portion of the Purchase
Price in accordance with the Disbursement Instructions agreed to by the Company
and the Purchaser.
1.3. Closing. The closing (the "Closing") of the purchase and sale
of the Securities will take place at the offices of Rogers & Hardin, 2700 Cain
Tower, 229 Peachtree St., N.E., Atlanta, Georgia at 10:00 a.m. local time on
August 28, 1996 or, if later, two business days after satisfaction or waiver of
the conditions (other than the conditions to be satisfied concurrently with the
Closing) set forth in Article V (or such other date to which the parties may
agree); provided, that all conditions set forth in Article V are satisfied or
waived at Closing. (The date on which the Closing occurs is the "Closing Date".)
1.4. Closing Deliveries. (a) At or prior to the
Closing, the Purchaser will deliver to the Company:
(i) the Purchase Price, in accordance with Section
1.2;
(ii) a certificate executed by an authorized signatory of the
general partner of the Purchaser ("Purchaser's GP") certifying that the
conditions set forth in Section 5.1(a) have been satisfied;
(iii) copies of the Standstill Agreement duly executed
by the Purchaser; and
(iv) the legal opinion of JDR&P, addressed to the Company and dated
as of the Closing Date, generally as to the matters covered by Sections
3.1 and 3.2.
(b) At or prior to the Closing, the Company will
deliver to the Purchaser:
(i) such number of validly issued stock certificates evidencing the
Shares as the Purchaser requests at least two business days before the
Closing;
(ii) the Warrant duly executed by the Company;
(iii) a certificate executed by each of the Chief Executive Officer
and Chief Financial Officer of the Company certifying that the conditions
set forth in Section 5.2(a)
2
<PAGE> 3
have been satisfied and that the By-Laws of the Company have been amended
and restated to be in their entirety as set forth in Exhibit C;
(iv) copies of the Standstill Agreement duly executed by the
Company;
(v) copies of the Registration Rights Agreement duly executed by the
Company; and
(vi) the legal opinion of Rogers & Hardin, counsel to the Company,
addressed to the Purchaser and dated as of the Closing Date, generally as
to the matters set forth in Section 2.1 (as to the Company only), 2.2(a),
2.3, 2.4, 2.8 and 2.13.
(c) At or prior to the Closing, the Company and the Purchaser will
deliver to each other such other documents and instruments required to be
delivered by them pursuant to Article V.
1.5. Post-Closing Adjustment. The Purchaser and the Company
acknowledge that the Purchaser made the assumptions set forth in Schedule 1.5
hereto in connection with its evaluation and the pricing of its proposed
investment in the Company. If any such assumption is or becomes incorrect in a
manner adverse to the Company, the Purchaser will be entitled to the issuance of
additional shares of Common Stock (or, if such issuance would cause the
Purchaser to own a majority of the Common Stock and Shareholder Approval has not
been obtained, Series F Preferred) in an amount equal to the reduction of the
value of the Purchaser's equity interest in the total enterprise value of the
Company and as further set forth in Schedule 1.5. Accordingly, in any such
event, (a), if any portion of such amount is susceptible of calculation by
reference to the amounts set forth on Schedule 1.5, and any attachments thereto,
then additional shares of Common Stock (or Series F Preferred in the
circumstances provided above) shall be promptly issued to Purchaser or (b), if
any portion of such amount is not susceptible of such calculation, the parties
will negotiate in good faith to determine, by mutual agreement, the number of
additional shares of Common Stock (or Series F Preferred in the circumstances
provided above) to be issued to the Purchaser (without any additional
consideration therefor) and, if no such agreement is reached within 30 calendar
days after the Purchaser requests such a further issuance, the Purchaser may
thereafter refer the matter to an independent third party with meaningful
experience in the management of and investment in high growth companies (the
"Arbitrator"). The Arbitrator shall be chosen by the Company and the Purchaser
or if they cannot agree within 10 calendar days, chosen by the President of the
American Arbitration Association upon the request of either the Purchaser or the
Company for final determination which shall be binding in the absence of fraud
or malfeasance. In making any such
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determination, the Purchaser and the Company or the Arbitrator, as the case may
be, will follow the principles set forth in Schedule 1.5 hereto. Notwithstanding
the foregoing, no adjustment will be made to any matter under this Section 1.5
unless a request therefor has been made by the Purchaser not later than December
31, 2000. With respect to decisions and determinations of the Company required
pursuant to this Section 1.5 (including the matters on Schedule 1.5), if the
Standstill Agreement is still in effect, then those directors designated by the
Purchaser pursuant to Section 2.1 will abstain from any decisions and/or
determinations required of the Company and, if the Standstill Agreement is no
longer in effect, the Board of Directors will appoint a committee of directors,
independent of the Purchaser, to direct the Company in such decisions and
determinations.
1.6 Dividends. If the Company pays a dividend or makes a
distribution on its Common Stock (other than a dividend or distribution as to
which an adjustment is made under Section 5 of the Warrant) between the Closing
Date and the date of issuance of shares of Common Stock or Series F Preferred
to Purchaser pursuant to the Warrant or Section 1.5 (the "Issuance Date"), the
Purchaser will be entitled to receive such distribution on the Issuance Date as
though the shares issued pursuant to the Warrant or Section 1.5 were issued and
outstanding on the Determination Date (as defined in the Warrant) of such
dividend or distribution. If the Company pays a dividend or makes a
distribution on its Common Stock payable in capital stock of the Company,
adjustments will be made as provided in the Warrant and the determination of
the number of Adjustment Shares pursuant to Section 1.5 will take into account
such dividend or distribution.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company acknowledges that the Purchaser was induced to enter
into, and entered into, this Agreement relying upon the representations,
warranties and covenants of the Company set forth in this Agreement.
Accordingly, the Company represents and warrants to, and covenants with, the
Purchaser as follows:
2.1. Organization. (a) Each of the Company and each of its
Subsidiaries (which for the purposes of this Agreement will include any and all
corporations, partnerships or other legal entities in which the Company or one
or more of its other Subsidiaries has the power to (x) elect a majority of the
board of directors or similar governing body or (y) otherwise direct the
management and operations thereof, including without limitation limited
partnerships in which the Company or other Subsidiaries are general partners),
other than wholly inactive Subsidiaries of the Company having no liabilities,
material assets or operations (which inactive Subsidiaries are identified as
such on Schedule 2.1): (i) is a corporation or other legal entity duly organized
or formed, validly existing and in good
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standing or otherwise authorized to transact business under the laws of the
jurisdiction of its organization, (ii), except as disclosed on Schedule 2.1, has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and (iii) is duly qualified or
licensed and in good standing or otherwise authorized to transact business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or license
necessary, except in each case to the extent that (A) any Subsidiary's failure
to be so organized, existing, in good standing or otherwise authorized or
qualified or (B) the Company's or any Subsidiary's failure to be so licensed
could not be reasonably expected to have a Material Adverse Effect. For purposes
of this Agreement, the term "Material Adverse Effect" means the existence or
occurrence of any event or circumstance which, alone or together with like
events and circumstances, could have a material adverse effect on (1) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company, any Significant Subsidiary or of Non-Significant Subsidiaries
which together would constitute a Significant Subsidiary taken as a whole, (2)
the ability of the Company or any Subsidiary freely and without liability to
perform its obligations under this Agreement and the other documents
contemplated hereby or any Material Contract, or (3) the validity or
enforceability of any of the documents referred to in the immediately proceeding
clause (2) or the rights or remedies of the Purchaser hereunder or thereunder.
For purposes of this Agreement, the term "Significant Subsidiary" means, at any
time, any Subsidiary, the book value (net of applicable loss allowances and
other reserves) of the total assets of which aggregates at least 5% of the
consolidated book value (net of applicable loss allowances and other reserves)
of the total assets of the Company and its consolidated subsidiaries.
(b) Schedule 2.1 sets forth a true and correct list of all of the
Subsidiaries, their jurisdictions of organization or formation, the percentage
or other interests owned (directly or indirectly) by the Company and the owners
of all other capital stock or equity interests therein.
2.2. Capitalization. (a) The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock and 6,000,000 shares of preferred
stock, no par value (the "Preferred Stock"), of which the shares of each series
listed by series on Schedule 2.2(a) (such shares, the "Outstanding Preferred
Stock") are issued and outstanding on the date hereof. Schedule 2.2(a) also sets
forth the dividend rate and liquidation preference of each series of Outstanding
Preferred Stock and a brief description of the voting and conversion rights, if
any, relating thereto. All of the previously outstanding preferred stock of the
Company (including without limitation the Class A Nonvoting Preferred Stock, the
Class B Nonvoting Preferred Stock, the Class C Nonvoting Preferred Stock and the
Class D Nonvoting Preferred
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Stock) has been redeemed by the Company or has converted into Common Stock as of
prior to the Closing.
(b) Schedule 2.2(b) lists all of the Subsidiaries that own or are
entitled to receive shares of the capital stock of the Company and the number of
such shares owned by each listed Subsidiary. Except as set forth in the
preceding sentences of this Section 2.2, there are no shares of capital stock of
the Company authorized, issued or outstanding.
(c) Except for the obligations of the Company arising under (i) the
Outstanding Preferred Stock, (ii) the indebtedness listed on Schedule 2.2(c)
(the "Convertible Debt"), (iii) the options and warrants listed on Schedule
2.2(c) (the "Existing Options and Warrants") (which Schedule lists the holders
of the Existing Options and Warrants, the strike prices thereof, the number of
shares of capital stock subject thereto, the expiration date thereof and any
anti-dilution provisions relating thereto), and (iv) this Agreement and the
Warrant, there are no outstanding subscriptions, options, warrants, rights,
convertible securities or any other agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock or other
securities of the Company or any Subsidiary obligating the Company or any
Subsidiary to (A) issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any Subsidiary, (B)
grant, extend or enter into any subscription, option, warrant, right,
convertible security or other similar agreement or commitment, or (C) make
payment of money or incurrence of indebtedness based upon market prices of the
Company's securities or changes in the Company's capitalization.
2.3. Validity of Shares, Etc. Each of the Shares, the Warrant Shares
and Class F Preferred have been duly authorized for issuance and, when issued to
the Purchaser for the consideration set forth herein and as otherwise provided
herein, will be duly and validly issued, fully paid, non-assessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. At the Closing, upon exercise of the Warrant and upon issuance of
shares of Class F Preferred pursuant this Agreement, from time to time, as the
case may be, the Purchaser will acquire good and valid title to the relevant
Shares, Warrant Shares and Class F Preferred, in each case free and clear of any
and all liens, claims, charges, encumbrances, restrictions on voting or
alienation or otherwise, or adverse interests (collectively, "Encumbrances").
2.4. Authority; Binding Effect; Etc. (a) The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and the other documents contemplated hereby (collectively, the "Transaction
Documents"), to perform its obligations and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the
Company of the Transaction Documents, the performance by the
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Company of its obligations thereunder and the consummation by the Company of the
transactions contemplated thereby have been duly and validly authorized by the
Board of Directors of the Company (the "Board"), and no other corporate
authorizations, approvals or proceedings are required in connection with such
execution, delivery, performance or consummation under the Company's Articles of
Incorporation, By-Laws, any agreement or instrument to which the Company is a
party or any law, rule, regulation or requirement to which the Company is
subject. The Transaction Documents have been or will be duly and validly
executed and delivered by the Company, and each of the Transaction Documents
constitutes or will constitute valid and binding agreement of the Company,
enforceable against the Company in accordance with its respective terms.
(b) The Board has taken all actions necessary to (i) approve each of
the Transaction Documents and the transactions contemplated thereby and,
accordingly, neither the transactions contemplated thereby nor (as to Part 3)
any subsequent transactions involving the Purchaser not contemplated thereby are
subject to Parts 2 and 3 of Article 11 of the Georgia Business Corporation Code
(the "GBCC") and (ii) amend the Rights Agreement, dated April 24, 1996, between
the Company and Continental Stock Transfer & Trust Company, and rights
thereunder as specified in Schedule 2.4(b) (the "Rights Plan Amendment").
2.5. SEC Filings. (a) Except as described on Schedule 2.5(a), the
Company and each of its Subsidiaries have filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since January
1, 1994, including without limitation all exhibits thereto (collectively, the
"SEC Documents"), each of which complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the dates so filed. None of the SEC Documents
(as of their respective filing dates) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) Except as described on Schedule 2.5(b), the audited and
unaudited consolidated financial statements, together with notes thereto, of the
Company and its Subsidiaries included (or incorporated by reference) in the SEC
Documents filed by the Company present fairly the financial position of the
Company and its consolidated Subsidiaries as of the date thereof and the results
of their operations for the periods then ended. The audited and unaudited
financial statements, together with the notes thereto, of each Subsidiary
included (or incorporated by reference) in the SEC Documents filed by such
Subsidiary present fairly the financial position of each such Subsidiary and its
consolidated Subsidiaries as of the dates thereof and the results
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<PAGE> 8
of their operations for the periods then ended. Except as described on Schedule
2.5, all audited financial statements referred to above have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") for year-end financial information and with the instructions to
Form 10-K and Regulation S-X, and all unaudited financial statements referred to
above have been prepared in accordance with GAAP for interim financial
information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, except as described on Schedule 2.5(b), while such unaudited
financial statements do not include all the information and footnotes required
by GAAP for complete financial statements, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Neither the Company nor any of its Subsidiaries has any liabilities or
obligations, fixed or contingent, not reflected in such financial statements,
except for (i) liabilities and obligations which in the aggregate are not
material and have been incurred in the ordinary course of business since
December 31, 1995 and (ii) liabilities and obligations specifically listed and
described in reasonable detail on Schedule 2.5(b).
(c) The Company's exchange offer, dated March 29, 1996, as amended,
has been terminated and withdrawn in accordance with the terms thereof and
applicable Law without any material cost or liability to the Company and without
the purchase of any Common Stock tendered for exchange pursuant thereto, and all
shares of such Common Stock tendered pursuant thereto were or will be promptly
returned to the holders thereof. All partnership, joint venture or other
interests acquired or agreed to be acquired by the Company or a Subsidiary
thereof, and all acquisitions of businesses or assets (either directly or by
stock or other security acquisition, merger or otherwise), have been carried out
by the Company or a Subsidiary thereof in conformity with all securities and
other Laws (including without limitation so-called "roll-up" Laws) and the terms
of all contracts and commitments of the Company relating thereto, and the
Company has no liabilities or obligations, fixed or contingent, in respect
thereof except as described in Schedule 2.5(c).
2.6. Absence of Certain Changes, Etc. (a) Except as disclosed on
Schedule 2.6(a), since December 31, 1995, neither the Company nor any of its
Subsidiaries has entered into any Material Contract (other than the Transaction
Documents and the transactions contemplated thereby) or any material
transaction, or conducted its business and operations other than in the ordinary
course of business consistent with past practice, and no Material Adverse Effect
has occurred or been suffered since such date.
(b) Except (i) as disclosed in SEC Documents filed prior to the date
hereof, (ii) for compensation and benefits paid or payable to officers,
directors and employees described (to the extent required) in the SEC Documents
(or, if subsequent thereto,
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not materially different than the compensation and benefits so described), or
(iii) as listed and described on Schedule 2.6(b), since January 1, 1995 the
Company and its Subsidiaries have not entered into any transaction, or made any
payment to or for the benefit of, directly or indirectly, any officer, director
or shareholder of the Company or any Subsidiary, or any Affiliate, Associate or
relative of any of the foregoing, or made or entered into any transaction or
agreement that would be required to be described on Schedule 2.6(b) pursuant to
Rules 401 or 402 of the SEC's Regulation S-K if such Rules applied to
disclosures by the Company on Schedule 2.6(b). Schedule 2.6(b) also sets forth a
list of all outstanding accounts payable or receivable between the Company and
any of its directors or officers (other than routine requests for expense
reimbursements).
2.7. Disclosure. No representation or warranty made by the Company
in this Agreement or to be made in the other documents contemplated hereby, no
statement contained in any written financial or operating data furnished or to
be furnished by or on behalf of the Company to the Purchaser in connection with
the transactions contemplated hereby and thereby (including without limitation
the unaudited interim financial statements, consolidated or otherwise, of the
Company delivered to the Purchaser, but excluding any financial forecasts or
projections) contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were or will be made, not misleading, or necessary in order fully to provide the
information required or purported to be provided therein.
2.8. No Violation. Except as set forth on Schedule 2.8(a), neither
the negotiation, execution or delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations thereunder, nor the
consummation by the Company of the transactions contemplated thereby (a) has
constituted or will constitute a breach or violation under the Articles of
Incorporation or By-Laws of the Company or the governing documents of any of its
Subsidiaries or (b) has constituted or will constitute a breach, violation or
default (or be an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any Encumbrances upon any
of the properties or assets of the Company or any of its Subsidiaries under, any
Material Contract or any other note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which the Company or any of its
Subsidiaries is a party or by which they or any of their respective properties
or assets are bound or otherwise, or (c) has constituted or will constitute a
violation of any order, writ, injunction, decree, statute, rule or regulation of
any court or governmental authority applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, except in the case
of clauses (b) and (c)
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above, such breaches, violations, defaults, terminations, accelerations or
creation of Encumbrances which, singly or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. Nothing in this Agreement will
constitute a representation or warranty of the Company with respect to the
application of Schedule D of the rules of the National Association of Securities
Dealers to this Agreement or the transactions contemplated hereby.
2.9. Environmental Matters. Except as set forth on Schedule 2.9, to
the best knowledge of the Company after due inquiry, each of the representations
and warranties set forth in paragraphs (a) through (e) of this Section 2.9 is
true and correct with respect to each parcel of real property owned leased,
managed or operated by the Company or any of its Subsidiaries (the
"Properties"), except as circumstances giving rise to any such failure to be so
true and correct could not reasonably be expected to have a Material Adverse
Effect:
(a) The Properties do not contain, and have not previously
contained, therein, thereon or thereunder, including without limitation the soil
and groundwater thereunder, any Hazardous Materials (defined below) in
concentrations which violate Environmental Laws (defined below).
(b) The Properties, and all operations and facilities at the
Properties, are in compliance with all Environmental Laws, and there is no
Hazardous Materials contamination or violation of any Environmental Law that
could interfere with the continued operation of any of the Properties or impair
the fair saleable value thereof.
(c) Neither the Company nor any of its Subsidiaries has received any
written complaint, or notice of violation, alleged violation, investigation,
advisory action, potential liability or potential responsibility, regarding
environmental protection matters or permit compliance with regard to the
Properties, nor is any governmental authority contemplating delivering to the
Company or any of its Subsidiaries any such notice.
(d) Except in compliance with Environmental Laws, Hazardous
Materials have not been generated, released, treated, stored or disposed of at,
on or under any of the Properties, nor have any Hazardous Materials been
transferred from the Properties to any other location.
(e) There are no governmental, administrative or judicial actions or
proceedings pending or contemplated under any Environmental Laws to which the
Company or any of the Subsidiaries is or will be named as a party with respect
to the Properties, nor are there any consent decrees, other decrees, consent
orders, administrative orders or other orders, or other
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administrative or judicial requirements, outstanding under any Environmental Law
with respect to any of the Properties.
For the purposes of this Agreement, the following terms have the following
meanings: (i) "Environmental Laws" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards or conduct concerning public or occupational
health and safety, the environment or any Hazardous Material as now in effect
and applied, or as in effect and applied at the time the event occurred, which
gave rise to the alleged violation, as the case may be, and (ii) "Hazardous
Materials" means (A) petroleum and petroleum products, radioactive materials,
asbestos in any form that is or could become friable, transformers or other
equipment that contained polychlorinated biphenyls, and radon gas, (B) any other
chemicals, materials or substances defined as of included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous pollutants," "contaminants" or "pollutants," or words of similar
import, under any applicable Environmental Law, and (C) any other chemical,
material or substance exposure to which is regulated by any governmental
authority.
2.10. Employee Benefit Matters. (a) Disclosure. Schedule 2.10(a)
lists all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus pay,
stock option, restricted stock, deferred and incentive compensation,
supplemental retirement, stock purchase, severance, vacation pay, sick pay or
other plans, programs or arrangements to which the Company or any "Control Group
Member" (all entities that are required to be treated as a single employer with
the Company under Section 414 of the Code (defined below)) maintains or sponsors
(the "Benefit Plans"). Each of the Benefit Plans has been administered in
compliance with its terms and all filing, reporting, disclosure, funding and
other applicable requirements of ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"). With respect to each Benefit Plan, the Company has
furnished the Purchaser with true and correct copies of (i) all such Benefit
Plans, (ii) each summary plan description and summary of material modification,
(iii) the most recently filed Internal Revenue Service ("IRS") Form 5500, and
(iv) the most recently received IRS determination letter.
(b) Qualified Retirement Plans. None of the Benefit Plans which is a
"pension plan" (as defined in Section 3(2) of ERISA) (the "Pension Plans") is a
"multiemployer plan" as defined in Section 3(37) of ERISA, or is subject to the
requirements of Title IV of ERISA, Section 302 or ERISA or Section 412 of the
Code. Each Pension Plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a determination letter from the IRS that
it is so qualified, and no
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fact or event has occurred since the date of such determination letter that
could adversely affect the qualified status of any such Pension Plan. Neither
the Company nor any Control Group Member has incurred any liability for any
penalty of tax under Sections 4971, 1972, 4975, 4979 or 1980 of the Code or
Section 502 of ERISA.
(c) Welfare Benefit Plans. Each of the Benefit Plans which is a
"welfare plan", as defined in Section 3(1) of ERISA (the "Welfare Plans") has at
all times been in compliance with the provisions of Section 4980B of the Code.
None of the Welfare Plans provides for or promises post-retirement health or
life benefits to current employees or retirees of the Company or any Control
Group Member.
(d) Other. Neither the Company nor any Control Group Member has
incurred any liability under Title IV of ERISA, including without limitation any
liability in connection with the termination or reorganization of any pension
plan subject to Title IV of ERISA, or withdrawal from multiemployer plan, and no
fact or event exists which could give rise to any such liability. All
contributions, premiums or payments required to be made with respect to any
Benefit Plan have been made on or before their due date. Except as described in
Schedule 2.10(d), neither the Company nor any of its Subsidiaries has any
obligation to pay any money, incur any liability or take any other action in
respect of any present or former employee as a result of the Transaction
Documents or any transaction contemplated thereby, none of the Company or any
such Subsidiary is a party to any so-called "golden parachute," "tin parachute,"
severance agreement or similar agreement or plan nor do any options or other
rights vest or accelerate as a result thereof.
2.11. Breaches, Violations and Defaults. Except as set forth on
Schedule 2.11, neither the Company nor any Subsidiary is (a) in breach or
violation of or default under, nor has an event occurred which, with notice or
lapse of time or both, would constitute a default under, any Material Contract
or any other note, bond, mortgage, indenture, deed of trust, license,
certificate, permit, approval, lease agreement or other instrument to which the
Company or any of its Subsidiaries is a party or by which they or any of their
respective properties or assets are bound or pursuant to which they operate any
of their businesses or facilities or (b) in violation of any order, writ,
injunction, decree, statute, rule or regulation of any court or governmental
authority applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets (collectively, "Laws"), except such breaches,
violations, defaults, terminations, accelerations or creation of Encumbrances
which, singly or in the aggregate, could not reasonably be expect to have a
Material Adverse Effect.
2.12. Litigation. Except as disclosed in the SEC Documents, on
Schedule 2.12 or in a writing delivered by the
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Company to the Purchaser on the date hereof and prior to the execution of this
Agreement which makes express reference to this Section 2.12, (a) neither the
Company nor its Subsidiaries is a party to any, and there are no pending or, to
the best of the best knowledge of the Company after due inquiry, threatened,
legal, administrative, arbitration or other proceedings, claims, actions or
governmental investigations or inquiries of any nature whatsoever against any of
them or to which any of their assets or properties are subject, which could
reasonably be expected to have a Material Adverse Effect, (b) neither the
Company nor its Subsidiaries or their respective officers and directors, nor any
of their respective properties is a party to any order, judgment or decree of
any court, governmental agency, commission, arbitrator, or regulatory authority
which could reasonably be expected to have a Material Adverse Effect, and (c)
there is no agreement, order or memorandum in writing by, from or with any
regulatory agency specifically affecting or relating to the assets, properties
or operations of the Company or any of its Subsidiaries which could reasonably
be expected to have a Material Adverse Effect.
2.13. Consents and Approvals. Except for the requirements of the
Exchange Act and except as set forth in Schedule 2.13, no authorization, consent
or approval of, or filing with, any court or any public body or authority and no
consent or approval of any third party or parties is necessary for the
execution, performance and consummation by the Company of the transactions
contemplated by this Agreement or the other documents contemplated hereby.
2.14. Indebtedness. Schedule 2.14 lists all indebtedness of the
Company and each of the Subsidiaries for borrowed money, the deferred purchase
price of property or services and so-called capitalized leases (collectively,
"Indebtedness") and all guarantees and similar arrangements in respect of
Indebtedness of others, including without limitation Affiliates, together, in
each case, with a description (or a copy) of the instruments or agreements
giving rise to such Indebtedness or guarantee obligation, including without
limitation all modifications and amendments thereto and a list of any assets
securing each item of such Indebtedness.
2.15. Credit Agreement; Material Contracts. The
Company has delivered to the Purchaser true and correct copies of
the Credit Agreement and all other Material Contracts together
with all amendments, modifications or alterations thereto.
2.16. Brokers. Except as described on Schedule 2.16, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any of its
Subsidiaries.
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2.17. Taxes. (a) The Company and each of its Subsidiaries (i) has
filed when due (taking into account extensions) with the appropriate federal,
state, local, foreign and other governmental agencies, all tax returns,
estimates and reports required to be filed by it, (ii) has either paid when due
and payable or established adequate reserves or otherwise accrued all requisite
taxes, and (iii) has or will establish in accordance with GAAP accruals and
reserves that are adequate for the payment of all taxes not yet due and payable
and attributable to any period preceding the Closing Date. Schedule 2.17 sets
forth those tax returns of the Company and its Subsidiaries (or any predecessor
entities) for all periods that currently are the subject of audit by any
federal, state, local or foreign taxing authority and accurately describes the
nature and amount of all deferred taxes and the manner in which the Company has
made accruals thereof.
(b) Neither the Company nor its Subsidiaries (nor any predecessor
corporation to either the Company or such Subsidiary) has executed or filed with
the Internal Revenue Service or any other taxing authority, any agreement or
other document extending, or having the effect of extending, the period of
assessment or collection of any taxes.
(c) Neither the Company nor any of its Subsidiaries is a party to,
is bound by, nor has any obligation under any tax sharing or similar agreement
or arrangement.
2.18. Charter and By-Laws. True and complete copies of the Articles
of Incorporation and By-Laws of the Company currently in effect, including all
amendments and modifications thereto, are attached hereto as Schedule 2.18.
2.19. Labor Matters. Except as set forth in Schedule 2.19, (a)
neither the Company nor any Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any Subsidiary and there are no organizational campaigns, petitions
or other unionization activities seeking recognition of a collective bargaining
unit which could affect the Company or any Subsidiary; (b) neither the Company
nor any Subsidiary has breached or otherwise failed to comply in all material
respects with the provisions of any collective bargaining or union contract and
there are no grievances outstanding against the Company or any Subsidiary under
any such agreement or contract which could reasonably be expected to have a
Material Adverse Effect; (c) there are no unfair labor practice complaints
pending against the Company or any Subsidiary before the National Labor
Relations Board or any other governmental authority or any current union
representation questions involving employees of the Company or any Subsidiary
which could reasonably be expected to have a Material Adverse Effect; (d) the
Company and each Subsidiary is currently in compliance in all material respects
with all applicable Laws relating to the employment of labor; (e) neither
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the Company nor any Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation by, any governmental authority relating to employees or
employment practices; (f) there is no charge or proceeding with respect to a
material violation of any occupational safety or healthy standards that has been
asserted or is now pending or, to the knowledge of the Company, threatened with
respect to the Company or any Subsidiary; and (g) there is no charge of
discrimination in employment or employment practices, for any reason, including
without limitation age, gender, race, religion, sexual preference or other
legally protected category, which has been asserted or is now pending or, to the
best knowledge of the Company after due inquiry, threatened before the United
States Equal Employment Opportunity Commission, or any governmental authority in
any jurisdiction in which the Company or any Subsidiary has employed or
currently employs any person.
2.20. Material Contracts. (a) Schedule 2.20(a) sets forth a list of
all of the following contracts (including without limitation oral and informal
arrangements) of the Company or any of the Subsidiaries (such contracts,
together with all material contracts, leases and subleases concerning the
management or operation of any real property to which the Company or any
Subsidiary is a party, being "Material Contracts") organized by category of
contract listed below:
(i) all joint venture, partnership or limited liability entity
contracts to which the Company or any Subsidiary is a party, whether as a
general or as a limited partner or participant;
(ii) all leases for real property to which the Company or any
Subsidiary is a party as lessee (including a description of the
termination dates thereof and any extension or purchase options);
(iii) all brokerage, agency, sales promotion, market research,
marketing, consulting and advertising contracts involving exclusive rights
or requiring payments in excess of $25,000 individually to which the
Company or any Subsidiary is a party that are not cancelable by the
Company or such Subsidiary without penalty or further payment on 30
calendar days' notice or less;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) involving exclusive
rights or requiring payments in excess of $25,000 individually to which
the Company or any Subsidiary is a party, that are not cancelable by the
Company or such Subsidiary without penalty or further payment on 30
calendar days' notice or less;
(v) all contracts with any governmental authority to which the
Company or any Subsidiary is a party;
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(vi) all material contracts that limit or purport to limit the
ability of the Company or any Subsidiary to compete in any line or
business or with any person or in any geographic area or during any period
of time;
(vii) all contracts between or among the Company or any Subsidiary
on the one hand and an Affiliate of any thereof on the other hand;
(viii) all development contracts relating to capital expenditures in
excess of $50,000 to which the Company or any Subsidiary is a party;
(ix) all tax-sharing or tax indemnity contracts;
(x) all contracts relating to the acquisition or divestiture of any
business or facility;
(xi) all policies of insurance, including without limitation
director and officer liability insurance;
(xii) all registration rights agreements;
(xiii) all documents relating to any Indebtedness of the Company or
any Subsidiary;
(xiv) all other contracts which are material to the Company, or any
Subsidiary or the conduct of the business of any thereof, or which would
be required to be disclosed under item 601 of Regulation S-K; and
(xv) all contracts relating to the matters described in Section
2.21.
For purposes of this Agreement, the term "lease" includes any and all leases,
subleases, sale/leaseback agreements or similar arrangements.
(b) Each Material Contract (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth on Schedule 2.13 are not obtained, will
continue in full force and effect without penalty or other adverse consequence.
Except as set forth on Schedule 2.20(b), neither the Company nor any Subsidiary
is in breach of or default under any Material Contract which breach or default
could be reasonably expected to have a Material Adverse Effect.
(c) Except as disclosed on Schedule 2.20(c), to the Company's best
knowledge after due inquiry, no other party to any Material Contract is in
breach thereof or default thereunder, which breach or default could, singly or
in the aggregate, be reasonably expected to have a Material Adverse Effect.
Except as
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disclosed on Schedule 2.20(c), the Company and its Subsidiaries have no
liabilities or obligations under any contract referred to in Section 2.20(a)(ix)
or (x) other than liabilities and obligations that were satisfied in full prior
to March 31, 1996.
(d) There is no contract or other arrangement granting any person
any preferential right to purchase, other than in the ordinary course of
business, any of the securities, properties or assets of the Company or any
Subsidiary.
(e) Except as described on Schedule 2.20(e), the Company or a wholly
owned Subsidiary thereof owns and has the exclusive right to use all trade
names, trademarks, copyrights and all other intellectual property rights, and
related registrations thereof and applications therefor, necessary to conduct
the business of the Company and its Subsidiaries anywhere in the world,
including without limitation the Company's "off track" operations (collectively,
the "IP Rights"). A list and brief description of the IP Rights is attached as
Schedule 2.20(e). Neither the Company nor any Subsidiary thereof has any
liability or obligation, fixed or contingent, for the violation of any
intellectual property rights of any other person or entity.
(f) The assets of the Company and its Subsidiaries are (i) owned by
the Company or its Subsidiaries free and clear of any Encumbrances, except for
Encumbrances which are described in the SEC Reports or which do not have a
Material Adverse Effect, (ii) in good condition and repair, ordinary wear and
tear excepted, and (iii) sufficient for the continued conduct of the business of
the Company and its Subsidiaries substantially as presently conducted and as
proposed to be conducted. Except as described in Schedule 2.20(f), none of the
Subsidiaries of the Company other than wholly owned Subsidiaries owns any assets
which are reflected in the consolidated balance sheet of the Company as of March
31, 1996 or are material to the Company and its consolidated Subsidiaries, taken
as a whole.
(g) On the Closing Date each contract to be entered into by the
Company pursuant to Sections 5.2(k), 5.2(l) and 5.2(o) (each, a "Closing
Condition Contract") (i) will be valid and binding on the respective parties
thereto and will be in full force and effect and (ii), upon consummation of the
transactions contemplated by this Agreement, will continue in full force and
effect without penalty or other adverse consequences. Neither the Company nor
any Subsidiary will be in breach of or default under any Closing Condition
Contract on the Closing Date and, to the Company's best knowledge after due
inquiry, no other party to any Closing Condition Contract will be in breach
thereof or default thereunder on the Closing Date.
2.21. Certain Other Matters. (a) The financial advisory agreement
between the Company and Allen & Co. and warrants and other rights previously
held by Allen & Co. have
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been terminated without any cost to, or liability or obligation of, the Company.
(b) The Company has entered into a letter of intent to purchase the
land used in connection with the Company's Puente Hills, California facility on
terms previously disclosed in writing to the Purchaser.
(c) The Company has, or prior to the Closing will have, completed
the acquisition of all of the partnership interests not currently owned by the
Company in National Entertainment Funding, L.P. ("NEF"). The total additional
consideration to be paid by the Company in the NEF acquisition is the issuance
of the 9.1% debentures in an amount not to exceed $11,422,422.
(d) The acquisition from Brass Ring II, L.L.C. of certain
partnership interests has been, or prior to the Closing will be, completed and
the total consideration paid or payable by the Company therein is $1.5 million
(which has already been paid) plus 325,000 shares of Common Stock, all of which
shares will be issued prior to the Closing.
(e) Scott and Julia Demerau have irrevocably undertaken to vote or
cause to be voted all shares of Common Stock beneficially owned by them or
either of them in favor of the Shareholder Approval contemplated by Section
4.16.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser acknowledges that the Company was induced to enter
into, and entered into, this Agreement relying upon the representations,
warranties and covenants of the Purchaser set forth in this Agreement.
Accordingly, the Purchaser represents and warrants to, and covenants with, the
Company, with respect to itself, as follows:
3.1. Organization. The Purchaser (i) is duly organized, validly
existing, in good standing and otherwise authorized to transact business under
the laws of its jurisdiction of organization, (ii) has all requisite partnership
or limited liability company power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and (iii) is
duly qualified or licensed and otherwise authorized to transact business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or license necessary,
except to the extent that the failure by such entity to be so organized,
existing, in good standing or otherwise authorized, qualified or licensed could
not reasonably be expected to have a material adverse effect on the ability of
such entity to perform its respective obligations hereunder.
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3.2. Authority; Binding Effect; Etc. Such entity has the requisite
partnership or limited liability company power and authority to execute and
deliver the Transaction Documents, to perform its respective obligations
thereunder and to consummate the transactions contemplated thereby. The
execution and delivery of the Transaction Documents by such entity, the
performance by it of its respective obligations thereunder and the consummation
by it of the transactions contemplated thereby have been duly and validly
authorized. This Agreement has been duly and validly executed and delivered by
it and constitutes the valid and binding agreement of it, enforceable against it
in accordance with its terms.
3.3. No Violation. Neither the negotiation, execution or delivery of
the Transaction Documents by such entity nor the performance by such entity of
its obligations thereunder nor the consummation by such entity of the
transactions contemplated thereby has or will (a) constitute a breach or
violation under such entity's constituent documents, (b) constitute a breach,
violation or default (or be an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
result in the creation of any Encumbrance upon any of such entity's properties
or assets under, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument to which such entity is a party or
by which entity of any of its properties or assets are bound, or (c) constitute
a violation of any order, writ, injunction, decree, statute, rule or regulation
of any court or governmental authority applicable to it or any of its properties
or assets, in each case except for such breaches, violations, defaults,
terminations or Encumbrances that could not reasonably be expected to have a
material adverse effect on the ability of such entity to perform its respective
obligations hereunder (including without limitation any post-Closing
obligations).
3.4. Consents and Approvals. No authorization, consent or approval
of, or filing with, any court or any public body or authority and no consent or
approval of any third party or parties is necessary by such entity for the
consummation by it of the transactions contemplated by this agreement except for
such authorizations, consents, approvals and filings (i) made or obtained prior
to the Closing Date, or those not required to be made or obtained until on or
after the Closing Date, (ii) required under the Exchange Act or the HSR Act, or
(iii) set forth in Schedule 3.4.
3.5. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of such entity.
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3.6. Funds. The Purchaser has available to it sufficient funds to
consummate the transactions contemplated hereby to be consummated by it.
3.7. Investment Intent. The Purchaser is purchasing the Shares and
Warrant to be purchased by it for its own account and for investment purposes,
and does not intend to redistribute the Shares or the Warrant (except as
contemplated herein or in a transaction or transactions exempt from registration
under the federal and state securities laws or pursuant to an effective
registration statement under such laws).
3.8. Investor Sophistication. The Purchaser has such knowledge and
experience in financial business matters that it is capable of evaluating the
merits and risks of an investment in the Shares and the Warrant.
3.9 Certain Agreements. As of the date hereof, neither the Purchaser
nor any of its Affiliates is a party to any legally enforceable agreement
(written or oral) with any officer or director of the Company nor any
understanding relating to the voting of any voting security of the Company
issued or to be issued by the Company.
IV. ADDITIONAL AGREEMENTS
4.1. Conduct of Business Prior to the Closing. The Company covenants
and agrees that between the date hereof and the Closing Date, neither the
Company nor any Subsidiary will conduct its business other than in the ordinary
course and consistent with the Company's and such Subsidiary's past practice.
Without limiting the generality or effect of the foregoing and except as herein
expressly provided to the contrary, between the date hereof and the Closing Date
the Company will, and will cause each Subsidiary to:
(a)(i) use its best efforts to preserve intact its business
organizations, (ii) use its best efforts to keep available the services of the
employees of the Company and each Subsidiary (other than by increasing
compensation of employees), (iii) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Company and each Subsidiary and their respective
assets, (iv) use its best efforts to preserve its current relationships with
persons with which it has significant business relationships, and (v) pay its
Indebtedness punctually when and as the same shall become due and payable and
perform and observe, in all material respects, its duties and obligations under
the Material Contracts.
(b) not (i) engage in any practice, take any action, fail to take
any action or enter into any transaction which could cause any representation or
warranty of the Company to be untrue
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or result in a breach of any covenant made by the Company in this Agreement,
(ii) except as contemplated by Purchaser's Interim Credit Facility, create,
incur or assume any Indebtedness of any kind otherwise than in the ordinary
courses of the business of the Company not to exceed $25,000 in any one instance
or $150,000 in the aggregate, (iii) make any investments in, or acquisitions of,
any person or entity, (iv) purchase or acquire, other than in the ordinary
course of business, any business, property or assets of any person or entity
(other than the acquisition of the land in Charlotte, North Carolina now owned
by M.M.E. of Charlotte, Inc. for cash consideration of $800,000 or less,
pursuant to documentation satisfactory to Purchaser, and its counsel in their
reasonable discretion), (v) create, assume or incur any mortgage, pledge,
security interest or other Encumbrance in respect of any of its properties or
assets, nor suffer to exist any such mortgage, pledge, security interest or
other Encumbrance, except for those disclosed in Schedules 2.14 and 2.20(a), (b)
and (c), (vi) sell, assign, lease (as lessor) or otherwise transfer or dispose
of any of its properties or assets, other than in the ordinary course of
business consistent with past practice, or any facility, whether by sale of
stock or assets, merger or otherwise, (vii) consolidate with or merge into or
with any person or entity or enter into or undertake any plan of consolidation
or merger with any person or entity, (viii) except for the issuance of the
Shares or Common Stock issuable upon conversion, exchange or exercise of
Convertible Debt, the Outstanding Preferred Stock or Existing Options and
Warrants, issue (whether by way of dividend or otherwise), sell or grant to any
person or persons, commit or otherwise obligate to issue, sell or grant to any
person, firm or corporation, (A) any shares of its capital stock of any class,
(B) any securities convertible into or exchangeable for or carrying any rights
to acquire from the Company or its Subsidiaries any shares of its capital stock
of any class, or (C) any options, warrants or any other rights to acquire from
the Company or its Subsidiaries any shares of capital stock of any class, (ix)
declare or pay any dividends of any kind on any shares of its capital stock of
any class except regular dividends on Outstanding Preferred Stock, (x) except as
contemplated by Purchaser's Interim Credit Facility, make any payments of any
kind on account of the purchase or other acquisition or redemption or other
retirement of any shares of its capital stock of any class or any options or
warrants to purchase any such shares, (xi) make any other distributions of any
kind in respect of any shares of its capital stock of any class or in respect of
any such options or warrants, (xii) commit or otherwise obligate itself to make,
any capital expenditure, capital addition or capital improvement, other than
these commitments or obligations disclosed as Material Contracts in Schedule
2.20(a), (xiii) modify or amend its governing documents, (xiv) hire or promote
any officer or grant any increase in the remuneration payable to directors,
officers, employees, agents, consultants or advisors, other than such increases
(other than with respect to (A) officers and directors, or (B) agents,
consultants or advisors that are Affiliates of the Company or of
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any director or officer of the Company) made in the ordinary course of business
consistent with past practice, (xv) enter into, modify or amend any Benefit
Plans, or other fringe benefit plan, trust agreement or arrangement, or any
employment agreement, compensation agreement, consulting agreement or other
similar agreement or contract, (xvi) modify or amend any Material Contract or
instrument or agreement with respect to any Indebtedness, (xvii) settle,
compromise or agree to settle or compromise any claim in excess of $25,000
against any person or entity, or (xviii) commence, join or otherwise participate
in any action, suit or proceeding seeking to enjoin, invalidate, be awarded
damages as a result of, rescind or otherwise avoid any of the Transaction
Documents or any of the actions contemplated thereby except, and solely to the
extent, based upon a breach thereof by the Purchaser.
4.2. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Company will, and will cause the
Subsidiaries and each of the Company's and the Subsidiaries' officers,
directors, employees, agents, representatives, accountants and counsel to: (i)
afford the officers, employees and authorized agents, accountants, counsel,
financing sources and representatives of the Purchaser reasonable access, during
normal business hours and without unreasonable interference with business
operations, to the offices, properties, other facilities, books and records of
the Company and each Subsidiary and to those officers, directors, employees,
agents, accountants and counsel of the Company and of each Subsidiary who have
any knowledge relating to the Company or any Subsidiary and (ii) furnish to the
officers, employees and authorized agents, accountants, counsel, financing
sources and representatives of the Purchaser, such additional financial and
operating data and other information regarding the assets, properties and
goodwill of the Company and the Subsidiaries (or legible copies thereof) as the
Purchaser may from time to time reasonably request.
(b) No investigation pursuant to this Agreement will affect any
representation, warranty or covenant in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
4.3. Confidentiality. All information obtained by the Purchaser
pursuant to Section 4.2 will be kept confidential in accordance with the
separate confidentiality agreement between an affiliate of the Purchaser and the
Company governing information received by the Purchaser (the "Confidentiality
Agreement"). At the Closing, the Confidentiality Agreement will be deemed to
have terminated without further action by the parties thereto.
4.4. Other Authorizations; Notices and Consents. (a) Each party
hereto will use its best efforts to obtain (or in the case of the Company to
cause the Subsidiaries to obtain) all authorizations, consents, orders,
licenses, permits and approvals
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of all governmental authorities and officials and third parties that may be or
become necessary (i) for its execution and delivery of, and the performance of
its obligations pursuant to, this Agreement and the other documents contemplated
hereby and (ii) to permit the continued operations of the business of the
Company and its Subsidiaries, and in each case the parties hereto will cooperate
fully with each other in promptly seeking to obtain all such authorizations,
consents, orders and approvals.
(b) The Company will and will cause the Subsidiaries to use all best
efforts to give such notices to third parties and use all best efforts to obtain
such third party consents, licenses or permits as the Purchaser may reasonably
deem necessary or desirable in connection with the transactions contemplated by
this Agreement.
(c) The Purchaser will cooperate and use reasonable best efforts to
assist the Company in giving such notices and obtaining such consents; provided,
however, that the Purchaser will not have an obligation to give any guarantee or
other consideration of any nature in connection with any such notice or consent
or to consent to any change in the terms of any agreement or arrangement which
the Purchaser may reasonably deem adverse to its interests or those of the
Company.
4.5. No Solicitation or Negotiation. The Company agrees that between
the date of this Agreement and the earlier of (a) the Closing and (b) the
termination of this Agreement, the Company will not, and will not authorize or
permit any Subsidiary, or any Affiliate, officer, director or employee of, or
any financial adviser, accountant or other representative retained by, the
Company or any Subsidiary (collectively, the "Representatives"), to, directly or
indirectly, solicit or encourage any inquiries or proposals for (or which may
reasonably be expected to lead to), or engage in discussions or negotiations
with or provide any information to any person or entity (other than a
Representative of the Company or the Purchaser) in connection with, (i) the
acquisition of any stock, assets or business of the Company or any Subsidiary,
(ii) any merger or consolidation involving the Company or any Subsidiary, or
(iii) any recapitalization or restructuring of the Company or any Subsidiary, in
each case, regardless of whether a third party is involved, provided, however,
that the foregoing will not prohibit the Company from providing information to
any person or entity to the extent that the Board determines in good faith,
after consultation with outside counsel as to legal matters, that its fiduciary
duties require it to do so, provided that prior to providing such information
(i) the Company notifies and reasonably consults with the Purchaser in
connection therewith and (ii) such person or entity has entered into a customary
confidentiality agreement reasonably acceptable to the Board. The Company
immediately will cease and cause to be terminated all existing discussions,
conversations, negotiations and other communications with any persons conducted
heretofore with respect
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to any of the foregoing, except as required hereby or expressly permitted
pursuant to the immediately preceding sentence. The Company will notify the
Purchaser, in writing, promptly (but in any event no later than one business
day) after any such proposal or offer or any inquiry or other contact with any
person with respect thereto, is made and will, in any such notice to the
Purchaser, (A) indicate in reasonable detail the identity of the person, firm,
corporation or other entity making such proposal, offer, inquiry or contact and
the terms and conditions of such proposal, offer, inquiry or other contact and
(B) include all written materials received with respect thereto. The Company
agrees not to, and to cause each Subsidiary not to, without the prior written
consent of the Purchaser, release any person, firm, corporation or other entity
from, or waive any provision of, and confidentiality agreement to which the
Company or any Subsidiary is a party.
4.6. Public Announcements. The Purchaser and the Company will agree
as to the form and content of any press releases or public statements with
respect to this Agreement and the transactions contemplated hereby before
issuing, or permitting any agent or Affiliate to issue any such release or
statement; provided, however, that nothing contained herein will prevent either
party from making any such public disclosure or announcement as its counsel
shall advise to be required to comply with law; provided, further however, that
such party will use reasonable efforts to assure that, if reasonable in the
circumstances, the other party will have the opportunity to review any
disclosure or announcement prior to release.
4.7. Use of Proceeds. The Company will use the proceeds of the
transactions contemplated hereby (i) to pay the Company's expenses reasonably
incurred in connection with the negotiation of this Agreement and the other
documents contemplated hereby, and the consummation of the transactions
contemplated hereby and thereby, (ii) to pay the expenses of the Purchaser as
contemplated by Section 8.1, and (iv) as otherwise specified in Schedule 4.7, as
modified by the Distribution Instructions agreed to by the parties.
4.8. Board of Directors, Etc. The Company will cause the Board to be
reconstituted as of the Closing in order to be comprised of 14 directors, up to
six of whom will be designated by the Purchaser (prior to or after the Closing)
and the balance of whom will be designated by the Company, all as specified on
Schedule 4.8. A majority of the directors not designated by the Purchaser must
be neither officers nor employees of the Company nor Affiliates of the
Purchaser. Following the Closing, the Agreement in the form of Exhibit D (the
"Standstill Agreement") will apply in respect of the composition of the Board
and all committees thereof, provided, however, that in no event will the Board
consist of fewer than seven or more than 14 members so long as designees of the
Purchaser are members thereof.
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4.9. Registration Rights. The Purchaser and its transferees will be
entitled to the registration of all shares of and rights to acquire shares of
capital stock of the Company held by them under the Securities Act and the
so-called state Blue Sky laws upon request, which rights will be evidenced by a
registration rights as contemplated by the Registration Rights Agreement in the
form of Exhibit E (the "Registration Rights Agreement").
4.10. Further Action. Each of the parties hereto will use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such document and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby and thereby.
4.11. Third-Party Claims. Without limiting any other provision
hereof, if an action, suit or proceeding contemplated by Section 5.2(b) hereof
has been commenced or threatened against the Company or any of its Subsidiaries,
officers or directors, the Company will afford the Purchaser the right to
participate in the defense thereof.
4.12. Indemnification. (a) Notwithstanding any other provision
hereof, the Company will indemnify and hold harmless each of the Purchaser and
its Affiliates and Associates and their respective partners, officers,
directors, employees, attorneys, advisors and agents controlling and any person
or entity controlling, controlled by or under common control with any of the
foregoing within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, including without limitation The Hampstead
Group, L.L.C. and its Affiliates and Associates (collectively, the "Indemnified
Parties"), from and against all losses, claims, liabilities, damages, costs
(including without limitation costs of preparation and attorneys' fees and
charges) and expenses (including without limitation expenses incurred in
connection with investigating, preparing or defending any action, claim or
proceeding, whether or not in connection with pending or threatened litigation
in which any Indemnified Party is a party) or actions in respect thereof arising
out of any actual or threatened claim against such Indemnified Party by a person
or entity related to or arising out of or in connection with this Agreement, the
Warrant, the Credit Agreement, the Standstill Agreement or any other Transaction
Document or any actions taken by any Indemnified Party pursuant hereto or
thereto or in connection with the transactions contemplated hereby or thereby
(whether or not the transactions contemplated hereby or thereby are consummated)
(collectively, "Transactional Losses"); provided, however, that the Company will
not be liable to any Indemnified Party for any Transactional Losses to the
extent, but only to the extent, that it is finally judicially determined by a
court of competent jurisdiction (which
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determination is not subject to appeal) that such Transactional Losses resulted
primarily from (i) such Indemnified Party's material breach of this Agreement or
(ii) a misstatement or omission contained in a report filed by such Indemnified
Party pursuant to the Exchange Act unless such misstatement or omission relates
to information furnished or confirmed by or on behalf of the Company. The
indemnification provisions of this Section 4.12 are expressly intended to cover
Transactional Losses relating to an Indemnified Party's own negligence. The
Company will promptly reimburse each Indemnified Party for all such
Transactional Losses as they are incurred. The rights of any Indemnified Party
hereunder will not be exclusive of the rights of any Indemnified Party under any
other agreement or instrument to which the Company is a party. Nothing in such
other agreement or instrument will be interpreted as limiting or otherwise
adversely affecting an Indemnified Party's rights hereunder and nothing in this
Agreement will be interpreted as limiting or otherwise adversely affecting the
Indemnified Party's rights under any such other agreement or instrument,
provided, however, that no Indemnified Party will be entitled hereunder to
recover more than its indemnified Transactional Losses. Without limiting the
generality or effect of any provision in this Agreement, the Company will
indemnify and hold harmless each Indemnified Party from and against all losses,
claims, liabilities, damages, costs (including without limitation costs of
preparation and attorneys' fees and charges) and expenses (including without
limitation expenses incurred in connection with investigating, preparing or
defending any action, claim or proceeding, whether or not in connection with
pending or threatened litigation in which any Indemnified Party is a party) or
actions in respect thereof arising out of any actual or threatened claim against
such Indemnified Party by Durham Capital Corporation or any affiliate, associate
or other party in respect of any matter referred to in the Durham Capital
Corporation lawsuit filed on or about June 26, 1996 (even if actions or
omissions by an Indemnified Party caused any such Transactional Losses).
(b) If the foregoing indemnity is unavailable to any Indemnified
Party or insufficient to hold any Indemnified Party harmless, then the Company
will contribute to the amount paid or payable by such Indemnified Party as a
result of such Transactional Loss in such proportion as is appropriate to
reflect the relative fault of the Company, on the one hand, and such Indemnified
Party, on the other, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and any Indemnified Party, on
the other, will be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, the Company or such Indemnified
Party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a
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party as a result of any Transactional Losses will be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
action, suit or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this paragraph were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above. No person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(c) The provisions of this Section 4.12 will survive notwithstanding
any termination hereof or the Closing of any of the transactions contemplated
hereby.
(d) The indemnity, contribution and expense reimbursement obligation
of the Company in this Agreement will be in addition to any liability the
Company may otherwise have. The obligations of the Company to each Indemnified
Party will be separate obligations, and the liability of the Company to any
Indemnified Party will not be extinguished solely because any other Indemnified
Party is not entitled to indemnity or contribution hereunder.
4.13. Board Attendance, Etc. (a) From the date hereof to the
Closing, the Company will notify the Purchaser at least 48 hours (or, if
shorter, when a general notice is given pursuant to the By-Laws) in advance of
every meeting of the Board (or any committee thereof) and will permit a
representative of the Purchaser to attend, as an observer, such meeting
(including, at the option of the Purchaser, by telephone); provided, however,
that (i) if, in the opinion of the Chairman of the Board of the Company, the
Board is required to deliberate as to a matter involving an actual and material
conflict of interest between Purchaser, on the one hand, and the Company on the
other hand, the Chairman may exclude such observer from that portion of any
meeting relating to such matter but only if no action is taken with respect to
any other matter during such observer's absence, and (ii) the Purchaser will not
be deemed to have such a conflict of interest in respect of a proposal by
another person or entity to acquire control of the Company, whether by merger,
consolidation or otherwise (a "Third-Party Takeover Bid") unless and until the
Purchaser informs the Company that it or any of its Affiliates has determined to
make a proposal to acquire control of the Company, whether by tender or exchange
offer, by merger, consolidation or otherwise (a "Purchaser Takeover Bid").
(b) In the event that, prior to the Closing Date, the Board
determines in good faith, based upon the advice of outside counsel as to legal
matters, that its fiduciary duties require it to consider a Third-Party Takeover
Bid, then the Company will immediately notify the Purchaser thereof and afford
the Purchaser a reasonable opportunity (not less than five business days) to
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consider whether to make a Purchaser Takeover Bid in response thereto. If the
Purchaser (or an Affiliate thereof) submits a Purchaser Takeover Bid that
provides substantially equivalent or higher value to the shareholders of the
Company (other than the Purchaser and its Affiliates) than a Third-Party
Takeover Bid which the Board otherwise proposes to authorize the Company to
accept, the Company will, unless prohibited by Law, accept the Purchaser's
Takeover Bid without any subsequent rounds of bidding and the Purchaser's
Takeover Bid will not be terminable by the Company in the event of a subsequent
Third Party Takeover Bid.
(c) Notwithstanding any other term or provision hereof, nothing in
this Section 4.13 will affect the parties' respective obligations in respect of
the purchase and sale of the Shares and Warrant provided for herein whether or
not a Third- Party Takeover Bid shall have been made.
4.14. Listing. Without limiting the generality or effect of any
other provision hereof, the Company will use its best efforts to cause the
Shares and the Warrant Shares to be eligible for trading on the NASDAQ National
Market System, the American Stock Exchange or such other exchange as the Board
may determine to be appropriate.
4.15. Certain Rights Offerings. In the event that the Company
determines to seek to raise additional equity capital during the 18-month period
immediately following the Closing, the Company agrees that it will use its best
efforts to raise such equity capital through the exercise of the Company's
rights under Section 1.2 or one or more rights offerings to the holders of
Common Stock. Subject to the limitations of the Standstill Agreement (if
applicable), in any such rights offering, the Purchaser will exercise all rights
to purchase Common Stock distributed to it and, if the rights offered are not
assignable, the Purchaser will purchase from the Company, on the same terms as
those governing the rights offering, all shares of Common Stock not purchased by
distributees of rights, provided, however, that the Purchaser will not be
obligated to pay more than $30.0 million pursuant to this Section 4.15.
4.16. Shareholder Approval. The Company will use its best efforts to
secure Shareholder Approval as promptly as practicable and in any event within
180 calendar days after the Closing Date, and the Board of Directors (in
accordance with its resolutions adopted prior hereto) will recommend that the
Company's shareholders give such approval. "Shareholder Approval" means the
approval, by the holders of a majority of the Company's outstanding shares
having the right to vote generally on matters submitted to the Company's
security holders for a vote, of:
(a) the ratification of this Agreement and all documents and
transactions contemplated hereby including
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without limitation the issuance of Common Stock pursuant to the Sale
Option and the Purchase Option;
(b) any other matter necessary or appropriate for the Purchaser to
exercise its rights under this Agreement or any document contemplated
hereby or to exercise its rights of share ownership; and
(c) any other matter reasonably requested by the Purchaser.
If the shareholders fail to approve any of the foregoing matters as contemplated
above, the Company, if requested by the Purchaser, will use its best efforts to
obtain Shareholder Approval at any annual meeting of shareholders held prior to
December 31, 1999.
4.17. Securities Law Filings. As promptly as practicable but not
later than 45 calendar days after the Closing Date, the Company and, if
applicable, the officers and directors of the Company will make such filings
with the SEC, or make amendments to existing filings, as the Purchaser may
reasonably request.
4.18. Purchaser Option to Purchase Outstanding Converts. In the
event that the Company receives notice that any of the 9.0%, 9.1% or 10%
debentures outstanding immediately prior to the Closing Date (the "Outstanding
Converts") is to be converted and the Company has the option to redeem the
Outstanding Converts, the Company shall immediately notify in writing the
Purchaser thereof, and if the Purchaser so directs in writing prior to the
expiration of the time permitted for the Company to redeem such Outstanding
Converts, the Company will redeem the Outstanding Converts to be converted and
simultaneously therewith issue securities having identical terms, except that
such securities will not be subject to redemption, to the Purchaser in exchange
for the Purchaser's payment of the redemption price therefor. If the Purchaser
or any of its Affiliates otherwise purchases any Outstanding Converts, then
without further action the Company will be deemed to have waived the redemption
rights relating to the Outstanding Converts so purchased. If Shareholder
Approval is not obtained, the Outstanding Converts owned by Purchaser will be
deemed to be convertible into Series F Preferred unless and until Shareholder
Approval is obtained.
4.19. Debenture Payments. From the date hereof until Purchaser and
its Affiliates no longer own 20% or more of the outstanding Common Stock, when
and to the extent permitted by the terms of the Outstanding Converts, the
Company will satisfy all payment obligations (other than interest) under the
Outstanding Converts by issuing the Company's Common Stock and will not redeem
any Outstanding Converts presented for conversion unless in either such case the
Purchaser has consented thereto.
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4.20. Certain Limitations. During the period, if any, between the
date on which the Purchaser and its Affiliates acquire a majority of the
outstanding Common Stock and the date of the adjournment of the first
shareholder meeting for the election of directors after such acquisition, the
Company will not issue any voting securities or securities convertible into or
exchangeable for voting securities other than pursuant to binding obligations
entered into prior to the first such date otherwise than in breach of this
Agreement.
V. CONDITIONS TO CLOSING
5.1. Conditions to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, at or prior to the Closing, or each of the following
conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall have been true
and correct when made and shall be true and correct in all material respects
(other than those qualified by material adverse effect, which shall be true and
correct in all respects) as of the Closing, with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date (which shall be true and correct as of the other date),
and the covenants and agreements contained in this Agreement to be complied with
by the Purchaser as of or before the Closing Date shall have been complied with
in all material respects.
(b) Injunctions. No injunction or order shall have been entered and
continue to be in effect in any action, suit or proceeding commenced by or
before any governmental authority against the Company enjoining, restraining or
materially and adversely altering the transactions contemplated hereby.
(c) Incumbency Certificate of the Purchaser. The Company shall have
received a certificate of the Purchaser certifying the names and signatures of
the persons authorized to sign this Agreement and the other documents to be
delivered hereunder on their behalf.
(d) Consents and Approvals. The Company shall have received, in form
and substance satisfactory to it in its reasonable good faith determination, all
authorizations, consents, orders and approvals set forth in Schedule 2.13.
(e) Closing. The Closing shall have occurred on or before August 30,
1996 (the "Outside Date"). (Notwithstanding the foregoing, if an action, suit or
proceeding contemplated by Section 5.2(b) hereof (a "Transaction Action") is
commenced prior to, and is continuing on, any date that would otherwise be the
Outside Date and the Purchaser does not nonetheless, elect to waive the
condition in Section 5.2(b), the term "Outside Date"
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<PAGE> 31
will mean the fifth business day following the date such Transaction Action is
settled or finally judicially determined or no longer renders it impossible or
unlawful to consummate the transactions contemplated thereby; provided, however,
that the Outside Date may not be so extended beyond September 13, 1996 without
the consent of all of the parties.)
(f) Deliveries. All items set forth in Section 1.4(a) hereof shall
have been delivered to the Company and the Purchaser shall have duly executed
and delivered to the Company a copy of the Standstill Agreement.
5.2. Conditions to Obligations of the Purchaser. The obligations of
the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Company contained in this Agreement shall have been true
and correct when made and shall be true and correct in all material respects
(other than those qualified by Material Adverse Effect, which shall be true and
correct in all respects) as of the Closing with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date (which shall be true and correct as of the other date),
and the covenants and agreements contained in this Agreement to be complied with
by the Company as of or before the Closing Date shall have been complied with in
all material respects.
(b) Litigation. No action, suit or proceeding shall have been
commenced or threatened by or before any court or other governmental authority
against the Purchaser, the Company or any of their respective Affiliates,
seeking to restrain or materially and adversely alter the transactions
contemplated hereby or by the other documents contemplated hereby, which in the
reasonable good faith determination of the Purchaser is likely to render it
impossible or unlawful to consummate the transactions contemplated hereby or
thereby or which could have a Material Adverse Effect or otherwise render
inadvisable, in the opinion of the Purchaser, the consummation of the
transactions contemplated hereby or thereby; provided, however, that the
provisions of this Section 5.2(b) will not apply if the Purchaser has directly
or indirectly initiated any such action.
(c) Resolutions of the Company. The Purchaser shall have received a
true and complete copy, certified by the secretary or an Assistant Secretary of
the Company, of the resolutions duly and validly adopted by the Board dated at
least one day prior to Closing evidencing its authorization of the execution and
delivery of this Agreement, as amended, the consummation of the transactions
contemplated hereby, the reconstitution of the Board as contemplated hereby, the
amendment
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to the By-Laws of the Company contemplated hereby and the Board's approval of
the acquisition of the Shares, the Warrant and the Series F Preferred by the
Purchaser pursuant to Sections 14-2-1111 and 14-2-1132 of the GBCC.
(d) Incumbency Certificate of the Company. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of the Company
certifying the names and signatures of the officers of the Company authorized to
sign this Agreement and the other documents to be delivered hereunder.
(e) Consents and Approvals. The Purchaser and the Company shall have
received, each in form and substance satisfactory to the Purchaser in its
reasonable good faith determination, all authorizations, consents, orders,
permits, licenses and approvals of all governmental authorities and officials
and all third party consents required for consummation of the transactions
contemplated hereby.
(f) Organizational Documents. The Purchaser shall have received a
copy of (i) the Articles of Incorporation, as amended to date (or similar
organizational documents), including the Articles of Amendment of the Company
and of each active Subsidiary, certified by the secretary of state of the
jurisdiction in which each such entity is incorporated or organized, as of a
date not earlier that 15 calendar days prior to the date of the Closing and
accompanied by a certificate of the Secretary or Assistant Secretary of each
such entity, dated as of the day of the Closing, stating that no amendments have
been made to such Articles of Incorporation (or similar organizational
documents) since such date, and (ii) the By-Laws (or similar organizational
documents) of the Company and of each active Subsidiary, certified by the
Secretary or Assistant Secretary of each such entity and amended as contemplated
herein.
(g) Good Standing; Qualification to do Business. The Purchaser shall
have received long-form good standing (or equivalent) certificates for the
Company and for each active Subsidiary from the Secretary of State of such
jurisdictions reasonably requested by the Purchaser, in each case dated as of a
date not earlier that 15 calendar days prior to the day of the Closing.
(h) No Material Adverse Effect. Since December 31, 1995, no event or
events (other than those described on Schedule 2.6) shall have occurred with
respect to the Company or any Subsidiary, or be reasonably likely to occur with
respect to any thereof, which could reasonably be expected to have a Material
Adverse Effect.
(i) Closing. The Closing shall have occurred on or before the
Outside Date.
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(j) Deliveries. All items set forth in Section 1.4(b) hereof shall
have been delivered to the Purchaser, the Company shall have duly executed and
delivered to the Purchaser a copy of the Standstill Agreement and the
Registration Rights Agreement and the Company and the officers of the Company
named in the letter agreement in the form of Exhibit F shall have duly executed
such letter agreement and delivered a copy thereof to the Purchaser.
(k) Other Matters. The Company shall have taken the actions referred
to in Schedule 5.2(k), including without limitation reacquiring all of the
properties and rights designated thereon as "Domestic IP Rights" with the result
that the Company shall be the sole owner thereof prior to the Closing. In
connection therewith, (i) the Company's total expenditures and other obligations
in respect of the reacquisition of the properties and rights designated on
Schedule 5.2(k) as the "Domestic IP Rights" shall not exceed $2.0 million and
(ii) such action and the actions taken in respect of the reacquisition of the
properties and rights designated on Schedule 5.2(k) as "Nondomestic IP Rights"
shall be satisfactory to the Purchaser and its counsel in their reasonable
discretion.
(l) Management Equity. The Board shall have taken the actions
described on Schedule 5.2(l) with respect to management equity incentives.
(m) Articles of Amendment for Series F Preferred. The Company shall
have filed with the Secretary of State of the State of Georgia the appropriate
documents to amend its Articles of Incorporation to authorize the issuance of
the Series F Preferred and Purchaser shall have received a copy of the Articles
of Amendment of the Company authorizing such issuance certified by the Secretary
of State of the State of Georgia.
(n) Rights Plan. The Rights Plan Amendment shall continue to be in
effect and since the date hereof the Board shall not have taken or authorized
the Company to take any action affecting the capitalization of the Company
except as contemplated in Schedule 5.2(n).
(o) Third Party Registration Rights. The Company shall have obtained
the consents of the holders of existing registration rights to the Company's
grant of registration rights to Purchaser under the Registration Rights
Agreement (if such consent is required under the existing agreements providing
such registration rights in order to grant registration rights as contemplated
by the Registration Rights Agreement) and to future sellers of assets and
businesses to the Company.
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VI. INDEMNIFICATION
6.1. Indemnification of the Purchaser. (a) Right of Indemnification.
Subject to the terms of this Article VI, the Company covenants and agrees to
indemnify and hold harmless each Indemnified Party from and against any loss,
damage or expense, including without limitation reasonable attorneys' and
accountants' fees and charges (each such individual occurrence is hereinafter
referred to as a "Loss" and collectively, as "Losses") suffered by any
Indemnified Party, directly or indirectly, as a result of any inaccuracy in or
breach of any of the representations, warranties, covenants or agreements made
by the Company hereunder or in any other document contemplated hereby or any
inaccuracy or misrepresentation by the Company or any Subsidiary in a document,
certificate or affidavit delivered by the Company at the Closing or in any
thereof. The rights of any Indemnified Party hereunder will not be exclusive of
the rights of any Indemnified Party under any other agreement or instrument to
which the Company is a party and nothing in this Article VI will limit the
rights and obligations of the parties under Section 1.5, provided, however, that
to the extent that an adjustment has been finally settled under Section 1.5, the
Purchaser will not be entitled to recover under this Section 6.1. Nothing in
such other agreement or instrument will be interpreted as limiting or otherwise
adversely affecting an Indemnified Party's rights hereunder and nothing in this
Agreement will be interpreted as limiting or otherwise adversely affecting the
Indemnified Party's rights under any such other agreement or instrument,
provided, however, that no Indemnified Party will be entitled hereunder to
recover more than its indemnified Loss.
(b) Threshold. No Indemnified Party will be entitled to
indemnification pursuant to this Section 6.1 with respect to any claims in
respect of breaches of representations and warranties until the aggregate amount
of all Losses (other than Transactional Losses) suffered by Indemnified Parties
in the aggregate exceeds $100,000 (the "Threshold"), whereupon Indemnified
Parties will be entitled to indemnification pursuant to this Section 6.1 from
the Company for the full amount of all such Losses (other than Transactional
Losses) suffered by Indemnified Parties (regardless of the Threshold) up to an
aggregate total amount of the Purchase Price (the "Cap"). The foregoing
provision of this Section 6.1(b) notwithstanding, the Threshold and the Cap will
not apply with respect to any Loss or Losses relating directly or indirectly to
claims of any nature whatsoever (i) relating to, resulting from or arising out
of any breach of any covenant or agreement hereunder or in any other document
contemplated hereby or (ii) against any Indemnified Party or Parties made by or
on behalf of any director or officer of the Company or any of its Subsidiaries.
6.2. Procedure for Claims. (a) Notice of Claim. After obtaining
knowledge of any claim or demand which has given rise to, or could reasonably
give rise to, a claim for
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indemnification under this Article VI (referred to herein as an "Indemnification
Claim"), and Indemnified Party will be required to give written notice to the
Company of such Indemnification Claim ("Notice of Claim"). A Notice of Claim
will be given with respect to all Indemnification Claims, whether or not the
Threshold has been reached; provided, however, that the failure to give Notice
of Claim to the Company will not relieve the Company from any lability that it
may have to an Indemnified Party hereunder to the extent that the Company is not
prejudiced by such failure. No Indemnified Party will be entitled to give a
Notice of Claim with respect to any actual or alleged breach of any
representation or warranty herein after December 31, 1997. The Notice of Claim
will be required to set forth the amount (or a reasonable estimate) of the Loss
or Losses suffered, or which may be suffered, by an Indemnified Party as a
result of such Indemnification Claim, whether or not the Threshold has been
reached, and a brief description of the facts giving rise to such
Indemnification Claim. The Indemnified Party will furnish to the Company such
information (in reasonable detail) it may have with respect to such
Indemnification Claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same).
(b) Third Party Claim. (i) If the claim or demand set forth in the
Notice of Claim is a claim or demand asserted by a third party (a "Third Party
Claim"), the Company will have 15 calendar days after the date of receipt by the
Company of the Notice of Claim (the "Notice Date") to notify the Indemnified
Parties in writing of the election by the Company to defend the Third Party
Claim on behalf of the Indemnified Parties, provided, however, that the Company
will be entitled to assume the defense of any such Third Party Claim only if it
unconditionally and irrevocably undertakes to indemnify all Indemnified Parties
in respect thereof.
(ii) If the Company elects to defend a Third Party Claim on behalf
of the Indemnified Parties, the Indemnified Parties will make available to the
Company and their agents and representatives all records and other materials in
their possession which are reasonably required in the defense of the Third Party
Claim and the Company will pay all expenses payable in connection with the
defense of the Third Party Claim as they are incurred.
(iii) In no event may the Company settle or compromise any Third
Party Claim without the Indemnified Parties' consent, which may not be
unreasonably withheld, provided, however, that if a settlement is presented by
the Company to the Indemnified Parties for approval and the Indemnified Parties
withhold their consent thereto, then any amount by which the final Losses
(including reasonable attorneys' fees and charges) resulting from the resolution
of the matter exceeds the rejected settlement amount, plus attorneys' fees
incurred to such date, will be
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excluded from the amount covered by the indemnification provided for in this
Agreement and shall be borne by the Indemnified Parties.
(iv) If the Company elects to defend a Third Party Claim, the
Indemnified Parties will have the right to participate in the defense of the
Third Party Claim, at the Indemnified Parties' expense (and without the right to
indemnification for such expense under this Agreement), provided, however, that
the reasonable fees and expenses of counsel retained by the Indemnified Parties
will be at the expense of the Company if (A) the use of the counsel chosen by
the Company to represent the Indemnified Parties would present such counsel with
a conflict of interest; (B) the parties to such proceeding include both
Indemnified parties and the Company and there may be legal defenses available to
Indemnified Parties which are different from or additional to those available by
the Company; (C) within 10 calendar days after being advised by the Company of
the identity of counsel to be retained to represent Indemnified Parties, they
shall have objected to the retention of such counsel for valid reasons (which
shall be stated in a written notice to the Company), and the Company shall not
have retained different counsel satisfactory to the Indemnified Parties; or (D)
the Company shall have authorized the Indemnified Parties to retain a single
separate counsel at the expense of the Company, such authorization to be made by
the directors who are not designees of the Purchaser or its Affiliates.
(v) If the Company does not elect to defend a Third Party Claim, or
does not defend a Third Party Claim in good faith, the Indemnified Parties will
have the right, in addition to any other right or remedy it may have hereunder,
at the sole and exclusive expense of the Company, to defend such Third Party
Claim.
(c) Cooperation in Defense. The Indemnified Parties will cooperate
with the Company in the defense of a Third Party Claim and make reasonably
available the facts relating to the Third Party Claim. Subject to the foregoing,
(i) no Indemnified Party will have any obligation to participate in the defense
of or to defend any Third Party Claim and (ii) no Indemnified Parties' defense
of or their participation in the defense of any Third Party Claim will in any
way diminish or lessen their right to indemnification as provided in this
Agreement.
6.3. Indemnification of the Company. The Purchaser will indemnify
and hold harmless the Company and its current and future officers, directors,
employees and agents from and against damage or expense (including without
limitation reasonable attorneys' and accountants' fees and charges) suffered by
any of them as a result of any inaccuracy in or breach of any of the
representations, warranties or covenants may by the Purchaser hereunder. The
procedures for and limits on indemnification in respect of the obligations of
the Purchaser under this Section
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6.2 will be the same as those set forth in Section 6.1(b) and 6.2 with the
exception of the time limits set forth in the third sentence of Section 6.2(a).
VII. TERMINATION AND WAIVER
7.1. Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by the Purchaser if, between the date hereof and the Closing;
(i) an event or condition occurs that has resulted in or that could reasonably
be expected to result in an Material Adverse Effect, (ii) any representation or
warranty of the Company contained in this Agreement shall not have been true and
correct in all material respects when made, (iii) the Company shall not have
substantially complied with any covenant or agreement to be complied with by it
and contained in this Agreement, or (iv) the Company or any Subsidiary makes a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Company or any Subsidiary seeking to adjudicate any
of them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any law relating to bankruptcy, insolvency or reorganization;
provided, however, that in the case of events described in clause (ii) or (iii)
of this sentence, the Purchaser may not terminate this Agreement pursuant to
this Section 7.1(a) unless the Purchaser shall have notified the Company of its
intention to do so and given the Company the opportunity to cure any breach of
this Agreement (if and to the extent curable) during the period commencing with
the date of such notice and ending on the earlier of (A) August 30, 1996 and (B)
ten business days after the date of such notice;
(b) by the Company if, between the date hereof and the Closing: (i)
any representation or warranty of the Purchaser contained in this Agreement
shall not have been true and correct in all material respects when made or (ii)
the Purchaser shall not have substantially complied with any covenant or
agreement to be complied with by any of them contained in this Agreement;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 7.1(b) unless the Company shall have notified the Purchaser of its
intention to do so and given the Purchaser the opportunity to cure any breach of
this Agreement (if and to the extent curable) during the period commencing with
the date of such notice and ending on the earlier of (A) August 30, 1996 and (B)
ten business days after the date of such notice;
(c) by any of the Company or the Purchaser if the Closing shall not
have occurred by the Outside Date; provided, however, that the right to
terminate this Agreement under this Section 7.1(c) will not be available to any
party whose failure
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to fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the Closing to occur on or prior to such
date;
(d) by any of the Purchaser or the Company in the event that any
government authority shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Company and the Purchaser.
7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement will forthwith become void
and there will be no liability on the part of any party hereto except that (a)
Sections 1.2, 4.3, 4.12, 6.1 and 8.1 and Article VI will remain in full force
and effect and (b) nothing herein will relieve any party from liability for any
breach of this Agreement.
7.3. Waiver. Any party to this Agreement may (a) extend the time for
the performance of any of the obligations or other acts of any other party, (b)
waive any inaccuracies in the representations and warranties of any other party
contained herein or in any document delivered by any other party pursuant
hereto, or (c) waive compliance with any of the agreements or condition of the
other party contained herein. Any such extension or waiver will be valid only if
set forth in an instrument in writing signed by the party to be bound thereby.
Any waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or conditions of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights. After the Closing, this Agreement may be waived or amended by
the Company only with the approval of a majority of the members of the Board not
designated for election by the Purchaser.
VIII. GENERAL PROVISIONS
8.1. Expenses. Without limiting the generality or effect of any
other provision hereof, including without limitation Section 6.1 or any
agreement or instrument contemplated hereby, including without limitation
Purchaser's Interim Financing Facility Agreement, if (a) the Closing occurs, (b)
the Closing does not occur and the Company has breached any of its
representations, warranties, covenants or agreements herein, or (c) the Company
incurs any Indebtedness, or the Purchaser or an Affiliate thereof advances any
funds or acquires any Indebtedness, pursuant to the Purchaser's Interim
Financing
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<PAGE> 39
Facility Agreement, the Company will, upon request by the Purchaser, promptly
reimburse the Purchaser for all out-of-pocket fees, costs and expenses,
including without limitation legal, accounting, financing, inspection and
appraisal fees and charges, relating to this Agreement, the other documents
contemplated hereby and thereby and the transactions contemplated hereby and
thereby (collectively "Expenses") and filing fees under the HSR Act (including
in respect of any subsequent acquisition of securities), regardless of whether
such transactions are consummated. If the Closing does not occur and the Company
has not breached any of its representations, warranties, covenants or agreements
herein, the Company will have the right, upon notice to the Purchaser (the
"Stock Payment Notice"), to satisfy its obligation to make the reimbursement
payments provided for in this Section 8.1 by issuing shares of Common Stock to
the Purchaser valued based on the average NASDAQ closing price therefor for the
20 trading days prior to the date hereof, and will use its best efforts promptly
to cause such shares of Common Stock to be registered for resale and eligible
for trading on the NASDAQ; provided, however, that in the event that the
Purchaser notifies the Company within five business days of receipt of the Stock
Payment Notice that it has elected to do so, the amounts otherwise payable in
Common Stock will be added to the Indebtedness outstanding under Purchaser's
Interim Credit Facility.
8.2. Notices. All notices, requests, claims, demands and other
communications hereunder must be in writing and will be given or made (and will
be deemed to have been duly given or made upon receipt) by delivery in person,
by courier services, by cable, by fax, by telegram, by telex or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 8.2):
(a) if to the Company:
Mountasia Entertainment International, Inc.
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30202-4128
Attention: Chief Executive Officer
Fax: (770) 442-6655
with a copy to:
Rogers & Hardin
2700 Cain Tower
229 Peachtree Street
Atlanta, Georgia 30303
Attention: Edward J. Hardin
Fax: (404) 525-2224
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<PAGE> 40
(b) If to the Purchaser:
MEI Holdings, L.P.
4200 Texas Commerce Tower
Dallas, Texas 75201
Attention: Daniel A. Decker
Fax: (214) 220-4949
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek, Esq.
Fax: (212) 755-7306
8.3. Headings. The descriptive headings contained in this Agreement
are for convenience of reference only and will not affect in any way the meaning
or interpretation of this Agreement.
8.4. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect as long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provisions
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement to effect the original intent
of the parties as closely as possible in an acceptable manner in order that the
transaction contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.5. Entire Agreement. This Agreement and the other agreements and
instruments referenced herein (including all Exhibits and Schedules referenced
herein or therein) constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, between the Company and the Purchaser with
respect to the subject matter hereof and thereof.
8.6. Assignment. This Agreement may not be assigned by operation of
law or otherwise (other than an assignment to a Related Person of the Purchaser)
without the express written consent of the non-assigning party or parties (which
consent may be granted or withheld in the sole discretion of such parties).
"Related Person" of the Purchaser means any Affiliate of the Purchaser or any
investment fund, investment account or investment entity whose investment
manager, investment advisor or principal thereof, is such Purchaser, an
Affiliate of such Purchaser or an investment manager, investment advisor or
principal of such Purchaser or Affiliate.
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<PAGE> 41
8.7. No Third Party Beneficiaries. This Agreement will be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and, except as provided herein with respect to Indemnified Parties (who
are intended third-party beneficiaries hereof), nothing herein, express or
implied, is intended to or will confer upon any other person any legal or
equitable right, benefit or remedy of any mature whatsoever under or by reason
of this Agreement.
8.8. Amendment. This Agreement may not be amended or modified except
(a) by an instrument in writing signed by, or on behalf of, the Company and the
Purchaser or (b) by a waiver in accordance with Section 7.3.
8.9. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof.
8.10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together will constitute one and the same agreement.
8.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties will be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
8.12. Survival of Representations, Warranties and Agreements. The
representations and warranties in this Agreement will survive for the time
periods set forth in Section 6.2.
8.13. Miscellaneous. As used in this Agreement, (i) references to
Sections , Articles, Exhibits and Schedules are to Sections , Articles, Exhibits
and Schedules of or to this Agreement, (ii) terms used herein with initial
capital letters have the meanings ascribed to them herein, (iii) the terms
"Affiliate" and "Associate" have the meanings ascribed to those terms in Rule
405 under the Securities Act, (iv) the word "or" is disjunctive but not
exclusive, (v) no provision hereof will be interpreted in favor of or against
any party by reason of which party drafted such provision or this Agreement as
an entirety, and (vi) terms used herein which are defined in GAAP have the
meanings ascribed to them therein.
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<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above by their respective officers thereto
duly authorized.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By: /s/ L. Scott Demerau
____________________________
Name: L. Scott Demerau
____________________________
Title: Chief Executive Officer
____________________________
MEI HOLDINGS, L.P.
By: MEI GenPar, L.P., its
general partner
By: HH GenPar Partners,
its general partner
and co-manager
By: Hampstead Associates,
Inc.,
its general partner and
co-manager
By: /s/ Daniel A. Decker
____________________________
Name: Daniel A. Decker
____________________________
Title: Executive Vice President
____________________________
42
<PAGE> 1
EXHIBIT 2
WARRANT FOR SHARES OF COMMON STOCK
OF
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
(a Georgia corporation)
This certifies that MEI Holdings, L.P., a Delaware limited
partnership ("MEI" and together with its permitted successors and assigns, the
"Holder"), is entitled to receive the number of shares of Common Stock, without
par value (the "Common Stock"), of Mountasia Entertainment International, Inc.,
a Georgia corporation (the "Corporation"), specified by the provisions and upon
the terms and conditions hereinafter set forth. This Warrant is granted pursuant
to the Amended and Restated Investment Agreement, by and between the Corporation
and MEI, dated June 5, 1996, as amended ("Investment Agreement").
1. PURPOSE. Pursuant to the Investment Agreement, MEI has received a 45.45%
equity interest in the Corporation in exchange for its $40,000,000 investment,
which interest will increase up to 56.64% proportionately with any further
investment up to an aggregate of $22,700,000 (assuming an increase by $2,700,000
pursuant to Exhibit G to the Investment Agreement) (or up to 58.15% if the
Corporation's shareholders do not approve the Investment Agreement within 180
days) and will increase further as a result of any valuation adjustments which
are made. The purpose of this Warrant is to protect the Holder against (a) any
dilution of such percentage interest (as the same may be increased from time to
time pursuant to Sections 1.1(d) or 1.5 of the Investment Agreement or this
Warrant) due to the conversion or deemed conversion of the Outstanding Converts
(as defined below) and (b) certain dilution due to the exercise of outstanding
warrants and other securities at prices below $3.75. The Purchaser's equity
interest in the Corporation may be represented by shares of Series F Preferred
Stock, as well as shares of Common Stock. In making the anti-dilution
calculations required by this Agreement, outstanding shares of Series F
Preferred Stock are treated as the number of shares of Common Stock into which
they would be convertible assuming any condition thereto had been satisfied.
2. AUTOMATIC EXERCISE. Upon the occurrence of any Dilutive Issuance (as
defined in Section 3 below), the rights represented by this Warrant will be
deemed automatically exercised, and the Corporation will issue to the Holder
shares of Common Stock and Series F Preferred Stock of the Corporation as
provided below, without any notice being given, any further consideration paid
or other action being taken by the Holder. The Holder will be treated for all
purposes as the holder of
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<PAGE> 2
record of the shares issued as a result of any such automatic exercise,
commencing as of the close of business on the date of the Dilutive Issuance
causing such automatic exercise, and, within ten calendar days after such date,
certificates representing such shares will be delivered by the Corporation to
the Holder. The Corporation represents and warrants that, as of the date hereof,
Schedule A hereto contains a true and complete list of all Outstanding Converts
and Subject Securities (as defined in Section 3 below).
3. CERTAIN DEFINITIONS. As used in this Warrant:
"Common Stock" means Common Stock, no par value, of the Company.
"Consideration" shall mean the amount of any cash, other property (valued
at its current fair market value), principal amount of indebtedness, liquidation
value of preferred or senior securities, or other consideration to be paid or
surrendered to the Corporation in connection with any Dilutive Issuance.
"Dilutive Issuance" shall mean the issuance of shares of Common Stock upon
any conversion, exchange or exercise of (i) any of the Subject Securities for
Consideration below the Trigger Price or for no consideration or (ii) any of the
Outstanding Converts for any Consideration (whether above or below the Trigger
Price) or for no consideration. The Outstanding Converts (if not previously
converted) shall be deemed to have been converted on the earlier of (i) payment
or redemption of such Outstanding Converts or (ii) August 7, 1997 (any such
conversion, a "Deemed Conversion"), provided, however, that the market price
used in any formula for computing the number of shares of Common Stock in any
Deemed Conversion will equal the average reported closing price for Common Stock
on the NASDAQ Stock Market or the principal securities exchange on which it is
then traded for the month of July 1997 or, if not regularly quoted on the NASDAQ
Stock Market or any successor quotation system or traded on an exchange, the
daily average of the midpoint between the reported daily low ask and high bid
prices for such month.
"Outstanding Converts" shall mean the Company's 10% Convertible
Subordinated Debentures, 9% Convertible Subordinated Debentures, and 9.1%
Convertible Subordinated Debentures, each as and if outstanding on the date
hereof.
"Special Options" means the option of the Corporation to require MEI to
purchase (the "Sale Option"), and the option of MEI to require the Corporation
to sell to it (the "Purchase Option"), Common Stock or Series F Preferred Stock
pursuant to the terms of Exhibit G to the Investment Agreement.
2
<PAGE> 3
"Series F Preferred Stock" means Series F Preferred Stock, no par value, of
the Company.
"Subject Security" shall mean any security (including without limitation
any warrant, option or other right) outstanding on the date hereof that is
convertible or exchangeable or exercisable, as the case may be, into Common
Stock of the Company, but such term does not include the Outstanding Converts or
this Warrant.
"Trigger Price" shall have the meaning set forth in Section 4(a)(ii).
4. NUMBER OF SHARES. (a) Upon any Dilutive Issuance pursuant to a Subject
Security, subject to paragraph 4(c) below, the Corporation will issue to the
Holder the number of shares of Common Stock ("New 4(a) Shares") determined by
the application of the following formula:
TC TC Holder Shares
New 4(a) Shares = (-------- - -------) X ------------------
SP Trigger Outstanding Shares
Price
in which:
TC = the total amount of Consideration received by
the Corporation for such Dilutive Issuance;
SP = the Consideration per share received by the
Corporation for such Dilutive Issuance;
Trigger
Price = subject to adjustment pursuant to Section 5
hereof, $3.75;
Holder
Shares = subject to adjustment pursuant to Section 5
hereof, the sum of (i) the number of shares
of Common Stock acquired by the Holder
through the date immediately prior to the
record date of such Dilutive Issuance and
(ii) ten times the number of shares of Series
F Preferred Stock acquired by the Holder
through the date immediately prior to the
record date of such Dilutive Issuance, which
in either case were issued pursuant to (a)
Sections 1.1(a), 1.1(d) or 1.5 of the
Investment Agreement, (b) this Warrant, or
(c) any stock split, stock dividend or other
distribution on any shares described above;
and
3
<PAGE> 4
Outstanding
Shares = the sum of (i) the total number of shares
of Common Stock issued and outstanding on
the date immediately prior to the record
date of such Dilutive Issuance and (ii) ten
times the total number of shares of Series
F Preferred Stock issued and outstanding on
such date.
(b) Upon any Dilutive Issuance pursuant to any Outstanding Convert, subject
to paragraph 4(c) below, the Corporation will issue to the Holder the number of
shares of Common Stock ("New 4(b) Shares") determined by the application of the
following formula:
PI
New 4(b) Shares = SI x ------
1 - PI
in which:
SI = the total number of shares issued in such Dilutive
Issuance;
PI = the number of Holder Shares (as defined in Section 4(a))
divided by the number of Outstanding Shares (as defined in
Section 4(a)).
(c) (i) Notwithstanding the foregoing, if the Holder owns any shares of
Series F Preferred Stock which are not yet convertible into Common Stock
("Existing Non-Convertible Series F"), then, with respect to such shares, the
Corporation will issue to the Holder that number of shares of Series F Preferred
Stock ("New Series F") which is one-tenth of the number of Common Shares the
Holder would have received if such Existing Non-Convertible Series F Preferred
Stock had been converted into Common Stock prior to the Dilutive Issuance
("Underlying Common"). Such New Series F shares will be issued in lieu of a
number of Common Shares equal to the Underlying Common which would otherwise be
issued pursuant to paragraphs 4(a) or 4(b) above.
(ii) This Warrant shall not be interpreted so as to require a negative
adjustment such that any shares issued to the Holder be surrendered or any other
action adverse to the Holder be taken.
(iii) Notwithstanding any other provision hereof, if any Outstanding
Convert as to which a Deemed Conversion occurs remains outstanding on August 7,
1998 (excluding any Outstanding Converts owned by the Holder or any of its
affiliates (such Outstanding Convert, a "Still Outstanding Convert")), the
Holder will (A) have the right to deem the principal amount of (and any other
amounts owed on) the Still Outstanding Convert to be an Assumption Loss for
purposes of Section 1.5 of, and Schedule 1.5 to, the Investment Agreement, and
(B) be issued an additional number of shares of Common Stock as equals (1) the
number of
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<PAGE> 5
shares of Common Stock as the Holder would have received under such Section 1.5
and Schedule 1.5 as a result of an Adjustment thereunder had the Deemed
Conversion not occurred minus (2) the number of shares of Common Stock issued
in respect of such Still Outstanding Convert as a result of the Deemed
Conversion.
(iv) Notwithstanding anything to the contrary in Section 4.19 of the
Investment Agreement, between August 8, 1997 and August 6, 1998, the Company
may redeem or prepay all or part of the Outstanding Converts as to which there
has been a Deemed Conversion with the proceeds of the issuance (other than an
issuance pursuant to Section 1.1(d) of the Investment Agreement) of its Common
Stock (but not the issuance of securities convertible or exchangeable for
Common Stock or options, warrants or other rights to purchase its Common
Stock), provided that (A) no Outstanding Convert may be so redeemed or prepaid
with the proceeds of the issuance of Common Stock by the Company pursuant to
this Section 4(c)(iv) if (1) the net proceeds to the Company per share so
issued (after underwriters' fees and commissions, attorneys', accountants and
other professional fees and expenses and other costs and expenses related to
such issuance, the "Net Proceeds") would be less than the Purchaser's
Effective Price (as defined below) or (2) the Board determines that such
issuance could interfere with the Company's ability to take full advantage of
business opportunities that otherwise may be available to the Company and (B)
if there is such an issuance of Common Stock at a price which is less than the
Deemed Conversion Price, then the Purchaser will be entitled to such additional
shares of Common Stock as equals the excess of (1) the number of shares the
Purchaser would have received had the still Outstanding Converts redeemed or
prepaid with proceeds of such issuance ("4(c) Converts") been deemed to have
converted at a price equal to the Net Proceeds per share of such issuance over
(2) the number of shares the Purchaser actually received pursuant to Section
4(b) of this Warrant by reason of the Deemed Conversion of 4(c) Converts. For
purposes of this Section 4(c)(iv) only, "Purchaser's Effective Price" means the
Purchaser's effective purchase price per share of Common Stock after taking
into account any shares of Common Stock issued pursuant to this Warrant and
the shares of Common Stock issued with respect to any Adjustments pursuant to
Section 1.5 of and Schedule 1.5 to the Investment Agreement (including any
shares Common Stock that would be issued pursuant to Section 4(c)(iii) of this
Warrant with respect to the 4(c) Converts if the 4(c) Converts had not been
redeemed by the proceeds of a 4(c) Issuance), increased by 30% on each
anniversary of the Closing Date.
5. ADJUSTMENTS. The Trigger Price, the number of Holder Shares and the
number and kind of shares receivable pursuant to this Warrant ("Warrant Shares")
will be subject to adjustment as follows:
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<PAGE> 6
(a) If the Corporation (i) pays a dividend or makes a distribution on
the Common Stock in shares of Common Stock or Series F Preferred Stock or shares
of the capital stock other than Common Stock or Series F Preferred Stock, (ii)
subdivides the outstanding shares of Common Stock or Series F Preferred Stock
into a greater number of shares of Common Stock or Series F Preferred Stock,
(iii) combines the outstanding shares of Common Stock or Series F Preferred
Stock into a smaller number of shares of Common Stock or Series F Preferred
Stock, or (iv) issues any shares of its capital stock in a reclassification of
the Common Stock or Series F Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, immediately after the
Determination Date (as defined below) with respect to such dividend,
distribution, subdivision, combination or issuance in a reclassification, the
number and kind of shares issuable hereunder upon exercise of this Warrant after
a subsequent Dilutive Issuance will be proportionately adjusted so that after
such time the Holder will be entitled to receive following any Dilutive Issuance
a number of shares of Common Stock or Series F Preferred Stock recomputed to
give effect to such dividend, distribution, subdivision, combination or
issuance.
(b) For purposes of this Warrant, "Determination Date" means (i) with
respect to any dividend, distribution or issuance, the date fixed for the
determination of the holders of shares of Common Stock or Series F Preferred
Stock entitled to receive such dividend, distribution or issuance, or if a
dividend or distribution is paid or made or issuance is made without fixing a
date, the date of such dividend, distribution or issuance and (ii) with respect
to any subdivision, combination or reclassification, the effective date thereof.
(c) In the event that at any time, as a result of an adjustment made
pursuant to this Section 5, the Holder becomes entitled to acquire upon a
Dilutive Issuance any securities of the Corporation other than Common Stock or
Series F Preferred Stock, thereafter the number of such other securities so
purchasable upon exercise of this Warrant will be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Section 5.
(d) Whenever the kind or number of securities receivable upon exercise
of this Warrant is adjusted pursuant to any of the provisions of this Section 5,
the Corporation will promptly, and in any event within 10 calendar days after
the occurrence of the event giving rise to such adjustment, give notice to the
Holder of such adjustment or adjustments setting forth the changes in the
Trigger Price and in the number of Holder Shares, a brief statement of the facts
requiring such adjustments and the computations upon which such adjustments are
based. Unless the Holder objects thereto within 20 calendar days after receipt
of
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<PAGE> 7
such notice, such determination will be final. If the Holder does so object, the
parties will discuss in good faith the items in dispute. If such items in
dispute are not so resolved, the matter will be referred for determination by
Deloitte & Touche (or, if such firm is unable or unwilling so to act, another
professional firm mutually acceptable to the Holder and the Corporation), which
firm's determination thereof will be final. The fees and expenses of such firm
will be borne by the Corporation.
(e) In case of any consolidation of the Corporation with or merger of
the Corporation into another corporation or in case of any sale, transfer or
lease to another corporation of all or substantially all the property of the
Corporation, the Corporation or such successor or purchasing corporation, as the
case may be, will execute an agreement providing that the Holder will have the
right thereafter to receive the kind and amount of shares and other securities
and property that it would have been entitled to receive immediately after the
occurrence of such consolidation, merger, sale, transfer or lease had this
Warrant been exercised immediately prior to such action. Such agreement will
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 5. The provisions of this
Section 5 will similarly apply to successive consolidations, mergers, sales,
transfers or leases.
(f) Whether or not any adjustments in the number or kind of
shares issuable upon the exercise of this Warrant has been made,
this Warrant (and any substitutes or replacements herefor) may
continue to express the same provisions as are initially stated
in this Warrant.
6. COVENANTS. (a) All shares of Common Stock or Series F Preferred
Stock which may be issued by the Corporation pursuant of this Warrant in
accordance with its terms will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges of the Corporation with
respect to the issue thereof.
(b) During the term of this Warrant, the Corporation will at all
times have authorized and reserved for issuance to the Holder a sufficient
number of shares of its Common Stock or Series F Preferred Stock to provide for
the automatic exercise of this Warrant.
(c) The Corporation will not, by amendment of its Articles of
Incorporation or through reorganization, consolidation, merger, dissolution,
issue or sale of securities, sale of assets or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith perform such terms and take all
such action as may be reasonably necessary to protect the Holder against
impairment.
7. Fractional Shares. No fractional shares of Common Stock or Series
F Preferred Stock will be issued in connection with any issuance upon exercise
of this Warrant.
8. Term. This Warrant will expire upon the earlier of (a) such time
as the Holder no longer owns any shares of Common Stock or Series F Preferred
Stock and (b) such time when no Subject Securities or Outstanding Converts are
any longer outstanding.
9. Notice of Dilutive Issuances. The Corporation will notify Holder
in writing promptly upon receipt of any notice initiating a Dilutive Issuance,
which notice shall set forth the (a) identity of such person giving such notice,
(b) the number of shares of Common Stock or Series F Preferred Stock to be
issued pursuant to this Warrant by reason of such Dilutive Issuance, and (c) in
reasonable detail, the calculations underlying such result.
10. No Shareholder Rights. The Holder hereof, solely by virtue of
this Warrant, will not be entitled to any rights of a shareholder of the
Corporation.
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<PAGE> 8
11. Transfers. This Warrant may be transferred in whole, but not in
part, by MEI Holdings, L.P. and by any subsequent holder of this Warrant. The
Holder, by acceptance hereof, agrees that this Warrant and the shares of Common
Stock or Series F Preferred Stock issued or issuable upon exercise of this
Warrant may not be offered or sold except in compliance with the Securities Act
of 1933, as amended, and any applicable state securities laws, provided,
however, that nothing herein will limit the applicability of any provision to
the Registration Rights Agreement, dated the date hereof, between the Company
and MEI. The Holder consents to the Corporation's making a notation on its
records in order to implement such restriction on transferability.
12. Loss or Destruction. Upon receipt by the Corporation of evidence
satisfactory to it (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of this Warrant and (in the
case of loss, theft or destruction) of indemnity satisfactory to it (in the
exercise of reasonable discretion), and (in the case of mutilation) upon
surrender and cancellation thereof the Corporation will execute and deliver in
lieu hereof a new Warrant.
13. Governmental Approvals. The Corporation will use its best
efforts to take all action which may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental agencies and
authorities and filings required, which may be or become required in connection
with the issuance and delivery of this Warrant, and the issuance and delivery of
the Common Stock or Series F Preferred Stock issued or deliverable upon exercise
of this Warrant.
14. Successors and Assigns. All the covenants and provisions of this
Warrant will bind and inure to the benefit of Holder and the Corporation and
their respective successors and assigns.
15. Notices. All notices and other communications given pursuant to
this Warrant will be in writing and will be deemed to have been given when faxed
or personally delivered or when mailed by prepaid registered, certified or
express mail, return receipt requested. Notices should be addressed as follows:
(a) If to the Corporation, then to:
Mountasia Entertainment International, Inc.
5895 Woodward Parkway
Suite 220, Alpharetta, Georgia 30202-4182
Attention: Chief Executive Office
Fax: (770) 442-6655
With a copy to (which will not constitute notice):
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<PAGE> 9
Rogers & Hardin
2700 Cain Tower
229 Peachtree Street
Atlanta, Georgia 30303
Attention: Edward J. Hardin
Fax: (404) 525-2224
(b) If to the holder then to:
MEI Holdings, L.P.
4200 Texas Commerce Tower
Dallas, TX 75201
Attention: Daniel A. Decker
Fax: (214) 220-4949
With a copy to (which will not constitute notice):
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek, Esq.
Fax: (212) 755-7306
Such addresses for notices may be charged by any party by notice to the other
party pursuant to this section.
16. Amendment. This agreement may be amended only by
an instrument in writing signed by the Corporation and the
Holder.
17. Governing Law. This Warrant will be construed and
enforced in accordance with and governed by the laws of the State
of Delaware without regard to the conflict of laws provisions of
such state.
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<PAGE> 10
18. Further Assurances. The parties hereto agree to
execute such other documents, instruments or affidavits, and to
perform such other acts, as may be necessary or desirable to
carry out the purpose of this agreement.
Dated as of this 28th day of August, 1996.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By: /s/ L. Scott Demerau
___________________________________
Name: L. Scott Demerau
_________________________________
Title: Chief Executive Officer
________________________________
Attest:
_____________________________
Name:________________________
Title:_______________________
10
<PAGE> 11
SCHEDULE A TO THE WARRANT
-------------------------
OUTSTANDING CONVERTS AND SUBJECT SECURITIES
-------------------------------------------
Preferred Stock
---------------
CLASS A PREFERRED STOCK
- -----------------------
Shares authorized: 2,000
Shares outstanding: None
Voting Rights: None unless required by Georgia law
Dividend Rights: None
Liquidation Preference: Prior to common stock, on parity
with any class hereafter created
that is specifically ranked on
parity with Class A ("Parity
Securities")
Liquidation Value: $10,000 plus 8% per annum since
date of issuance
Conversion:
At Holder's Option: at any time according to this
formula
[(.08)(N/365)(10,000)] plus 10,000
----------------------------------
Conversion Price
N = number of days between issuance
and conversion
Conversion Price = the lesser of (x)
$8.15625 or (y) 85% of the average
closing bid price for the five days
preceding the conversion date
At Company's Option: After August 31, 1996, upon 15 days
prior written notice at the
Conversion Price set forth above.
(No forced conversion right if
Company "makes any planned press
release either (a) on the effective
date of conversion or (b) prior to
the close of trading on the
following business day.")
Automatic Conversation: None
<PAGE> 12
Redemption: The Company has the right to redeem
all or part of the shares submitted
for conversion
Redemption Price: [(.08)(N/365)(10,000)] x Closing Bid Price
-----------------
Conversion Price
CLASS B PREFERRED STOCK
- -----------------------
Shares authorized: 2,000
Shares outstanding: None
Voting Rights: None unless required by Georgia law
Dividend Rights: None
Liquidation Preference: Prior to common stock, on parity
with Class A preferred and any
class hereafter created that is
specifically ranked on parity with
Class D ("Parity Securities")
Liquidation Value: $10,000 per share plus 8% per annum
from date of issuance
Conversion:
At Holder's Option: Beginning on April 16, 1996 based
on this formula:
[(.08)(N/365)(10,000)] plus 10,000
----------------------------------
Conversion Price
N = the number of days between the
date of issuance and the date of
conversion
Conversion Price = the
lesser of (x) $5.125 or (y)
85% of the average closing
bid price for the five
trading days immediately
preceding the conversion
date
At Company's Option: None
Automatic Conversion: On January 11, 1998 at the
Conversion Price
Redemption: The Company has the right to redeem
all or part of the shares submitted
for conversion
<PAGE> 13
Redemption Price: [(.08)(N/365)(10,000)] x Closing Bid Price
-----------------
Conversion Price
CLASS C PREFERRED STOCK
- -----------------------
Shares authorized: 1,000
Shares outstanding: None
Voting Rights: None
Dividend Rights: 13% cumulative payable quarterly in
cash out of legally available funds
Liquidation Preference: Prior to common stock, on parity
with Class A, B, and C preferred
and any class hereafter created
that is specifically ranked on
parity with Class D
Liquidation Value: $1,000 plus 10% per annum since
date of issuance
Conversion:
At Holder's Option: Beginning 40 days after issuance
according to this formula:
[(.10)(N/365)(1,000)] plus 1,000
--------------------------------
Conversion Price
N = the number of shares of Class C
preferred for which the conversion
is being elected
Conversion Price = the closing bid
price on the date of purchase of
the Class C preferred
At Company's Option: None
Automatic Conversion: Two years after date of issuance
Redemption: Right to redeem all or part of
Class C preferred at any time
during the 90 day period beginning
six months following the purchase
of Class C preferred.
Redemption Price: The original purchase price plus
accrued dividends
Put Right: On the first anniversary of the
holder's purchase at the original
<PAGE> 14
purchase price plus accrued
dividends
CLASS D PREFERRED STOCK
- -----------------------
Shares authorized: 20,000
Shares outstanding: None
Voting Rights: None except as required under
Georgia law
Dividend Rights: 4% cumulative, payable semi-
annually in (at the Company's
option) cash or common stock at a
conversion price equal to the
lesser of $6.00 per share or the
average of the closing bid prices
for the five trading days prior to
payment
Only entitled to receive when
declared by the Board out of
legally available assets
In the event of a conversion, the
holder is entitled to the prorated
portion of the annual dividend
Liquidation Preference: Prior to common stock, on parity
with Class A, B, and C preferred
and any class hereafter created
that is specifically ranked on
parity with Class D ("Parity
Securities")
Liquidation Value: $1,000 per share
Conversion:
At Holder's Option: Beginning 60 days after issuance
N x 1000
----------------
Conversion Price
N = the number of shares of Class D
Preferred Stock for which the
conversion is being elected
Conversion Price = the lesser of (x)
$6.00 or (y) the average closing bid
price for the five trading days
preceding the
<PAGE> 15
conversion (the "Market
Price"), provided however
that the Conversion Price
cannot be less than 70% of
the Market Price
At Company's Option: None
Automatic Conversion: Two years after the date of
issuance at the Conversion Price
Redemption: If the Conversion Price is less
than $3.00 per share, the Company
has the right to redeem all or part
of the share submitted for
conversion
Redemption Price: (N x 1,000) x Closing Price
-------------
Conversion Price
CLASS E PREFERRED STOCK
- -----------------------
Shares authorized: 3,500,000
Shares outstanding: None
Voting Rights: None unless required by Georgia
law, provided, however, that in the
event of a failure to pay six
quarterly dividends, the holders of
the Class E preferred have the
right to elect one director
Dividend Rights: 10% cumulative payable quarterly
Liquidation Preference: Parity with other classes of
preferred stock
Liquidation Value: $12 per share
Conversion:
At Holder's Option: At any time at $8.00 per share
At Company's Option: If the trading price of the
Company's stock exceeds $10 for 15
days, the Company can force
conversion at the $8.00
Automatic Conversion: None
Redemption (mandatory): On the fifth anniversary of
issuance at $12.00 per share
payable, at the option of the
<PAGE> 16
Company, in cash, Common Stock, or some
combination of cash and stock.
Notice: The Company has withdrawn its
previously announced exchange offer
relating to the Class E Preferred
Stock.
SERIES F PREFERRED STOCK
- ------------------------
Shares authorized: 700,000
Shares outstanding: None
Voting Rights, Dividend Rights, Liquidation Preference and Conversion features
as described in Annex 1 to Exhibit G of the Investment Agreement.
<PAGE> 17
Convertible Debt:
- -----------------
<TABLE>
<CAPTION>
Current
Balance
-----------
<S> <C>
9% Convertible Subordinated Debenture $5,650,000
10% Convertible Subordinated Debenture (new) $6,961,882
9.1% Convertible Subordinated Debenture $11,422,422
</TABLE>
Existing Warrants:
- ------------------
<TABLE>
<CAPTION>
# of Shares Exercise Expiration
Issuable Price per share Date
----------- --------------- ----------
<S> <C> <C> <C>
**Swartz 82,069 $8.70 Sep-00
**Swartz 111,034 $8.70 Sep-00
Commonwealth 11/93 * 425,750 $9.30 Nov-98
Malibu Grand Prix 3/94 * 61,461 $9.76 Mar-99
Kerr Worthy/Capital Trust (NEF) * 228,194 $6.04 Jul-04
Commonwealth 11/94 * 93,902 $4.93 Nov-99
Malibu Grand Prix 11/94 * 225,001 $10.67 Nov-99
Ralph C. DiIorio 21,945 $5.47 Aug-98
Langland Bay (NEF) * 18,739 $6.54 Jul-04
Feltman (various individuals) 15,050 $5.50 Feb-01
-----------
1,283,145
<FN>
* CONTAINS ANTI-DILUTION ADJUSTMENTS
** IN CONNECTION WITH AN EXCHANGE OFFER IN DECEMBER, 1995, THE COMPANY AGREED
TO REDUCE TO $5.125 THE EXERCISE PRICE ON A PORTION OF THE SHARES SUBJECT
TO THIS WARRANT. THE COMPANY AND THE WARRANTHOLDER DISAGREE AS TO THE
TERMS OF THEIR AGREEMENT. THE COMPANY REPRESENTS THAT NO MORE THAN 38,138
SHARES OF THE SHARES SUBJECT TO THE 82,069 WARRANT AND NO MORE THAN 41,617
SHARES OF THE SHARES SUBJECT TO THE 111,034 WARRANT MAY BE ACQUIRED FOR
$5.125 AND THE BALANCE OF THE SHARES SUBJECT TO EACH WARRANT HAVE AN
EXERCISE PRICE OF $8.70. FURTHER, CONTRARY TO THE WARRANTHOLDERS'
ASSERTION, THE COMPANY REPRESENTS IT IS NOT OBLIGATED TO INCREASE THE
SHARES SUBJECT TO THE WARRANTS.
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
# of Shares Exercise Expiration
Existing Options: Issuable Price per share Date
- ----------------- ----------- --------------- ----------
<S> <C> <C> <C>
Mountasia Incentive Stock Option Plan 99,600 $8.00 Oct-98
Mountasia Incentive Stock Option Plan 9,900 $7.25 - $8.13 Aug-Dec-03
L. Scott Demerau 29,260 $4.78 Mar-98
Julia E. Demerau 29,260 $4.78 Mar-98
Judith E. Demerau 29,260 $4.78 Mar-98
Ervin E. Lewis, Sr. (Director Options) 25,000 $7.53 Jan-05
William M. Kearns (Director Options) 25,000 $7.76 Jan-05
Bert W. Wasserman (Director Options) 25,000 $7.76 Jan-05
Steven A. Cunningham (Director Options) 25,000 $7.53 Jan-05
Non-employee Stock Option Plan 3,000 $7.36 - $10.875 Jan-05
Non-employee Stock Option Plan 70,000 $7.53 Jan-06
L. Scott Demerau 350,000 $7.00* Jan-06
Julia E. Demerau 150,000 $7.00* Jan-06
Greg Waters 100,000 $9.00 Oct-05
Ken Grissom 10,000 $9.00 Jul-05
Ken Grissom 12,500 $12.50 Jul-05
-----------
992,780
<FN>
* Option Price is adjusted to 125% of 30 day average market price following
latest stock price in first 6 months of grant.
Pursuant to the 1993 Non-Employee Director Stock Option Plan, provision is
made for the issuance of an option to acquire 5,000 shares for each eligible
director on the day immediately following an Annual Meeting. Five directors
are entitled to such issuances for 1996 but the options have not been
issued. The exercise price pursuant to the plan is the mean between the
closing high bid and low asked quotations of the Company's stock on the
NASDAQ National Market System for the 20 consecutive trading days ending on
the date of the annual meeting.
</TABLE>
<PAGE> 1
EXHIBIT 5
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT, dated as of August 28, 1996, among
Mountasia Entertainment International, Inc., a Georgia corporation (the
"COMPANY"), and MEI Holdings, L.P., a Delaware
limited partnership (the "PURCHASER").
RECITALS
A. The Company and the Purchaser have entered into an
Investment Agreement dated June 5, 1996, as amended (the "INVESTMENT
AGREEMENT"), pursuant to which, among other things, on the terms and subject to
the conditions thereof, Purchaser will acquire certain shares of Common Stock,
no par value, of the Company ("COMMON STOCK").
B. Upon the closing of the purchase and sale of Common Stock
pursuant to the Investment Agreement (the "CLOSING"), the Company and the
Purchaser will enter into a Warrant Agreement in the form attached as Exhibit A
to the Investment Agreement (the "WARRANT AGREEMENT").
C. Pursuant to the Investment Agreement, after the Closing,
the Company will have the right (the "SALE OPTION") to require the Purchaser to
purchase, and the Purchaser will have the right (the "PURCHASE OPTION") to
request the Company to sell to it, additional shares of Common Stock or shares
of Series F Preferred Stock, no par value, of the Company ("SERIES F PREFERRED
STOCK").
D. The Company and the Purchaser desire to make certain
provisions in respect of their relationship during the next ten years.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:
I. DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere
herein, as used herein, the following terms have the following meanings when
used herein with initial capital letters:
(a) "AFFILIATE" of any Person means any other Person,
that, directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; and for the
purposes of this definition only "control" (including the terms "controlling",
"controlled by" and "under common control with") means the
<PAGE> 2
possession, direct or indirect, of the power to direct or cause the direction of
the management, policies or activities of a Person whether through the ownership
of securities, by contract or agency or otherwise.
(b) A Person will be deemed the "BENEFICIAL OWNER"
of, and will be deemed to "BENEFICIALLY OWN", and will be deemed to have
"BENEFICIAL OWNERSHIP" of:
(i) any securities that such Person or any
of such Person's Affiliates is deemed to "beneficially own" within the
meaning of Rule 13d-3 under the Exchange Act, as in effect on the date
of this Agreement; and
(ii) any securities (the "underlying
securities") that such Person or any of such Person's Affiliates or
Associates has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (written or oral), or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise (it being understood that such Person will also
be deemed to be the beneficial owner of the securities convertible into
or exchangeable for the underlying securities),
provided, that a Person will not be deemed to beneficially own shares of Common
Stock receivable upon the exercise of the Warrant unless and until there have
occurred all events necessary to permit the Person to receive such shares.
(c) "BOARD" means the Board of Directors of the
Company.
(d) "BOARD APPROVAL" means the approval of a majority
of the members of the Board who (a) are not employees of the Company or any of
its Affiliates and (b) have not been designated for election to the Board by the
Purchaser pursuant to the terms of Article III hereof.
(e) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
(f) "PERSON" means an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
without limitation a government or political subdivision or an agency or
instrumentality thereof.
(g) "PERMITTED ACQUISITION" means any acquisition of
securities pursuant to the Investment Agreement, including without limitation
pursuant to the Warrant, the Sale Option, the Purchase Option, or the conversion
of the Series F Preferred Stock.
2
<PAGE> 3
(h) "RESTRICTED SECURITIES" means any Voting
Securities and any other securities convertible into, exchangeable for or
exercisable for Voting Securities (whether immediately or otherwise), except any
securities acquired pursuant to a Permitted Acquisition.
(i) "SECURITIES ACT" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(j) "TOTAL VOTING POWER" means, at any time, the
aggregate number of votes which may then be cast by all holders of outstanding
Voting Securities in the election of directors of the Company.
(k) "VOTING SECURITIES" means the Common Stock and
all other securities of the Company entitled to vote in the election of
directors of the Company, except to the extent such voting rights are dependent
upon the non-payment of dividends, events of default or bankruptcy or other
events not in the ordinary course of business.
II. COVENANTS OF SHAREHOLDERS
2.1. ACQUISITION OF RESTRICTED SECURITIES. Without prior Board
Approval, the Purchaser will not purchase or otherwise acquire beneficial
ownership of any Restricted Securities if after such acquisition the Purchaser
would have, in the aggregate, beneficial ownership of 50% or more of the Total
Voting Power, provided, however, that the foregoing restriction will not apply
to any acquisition of Restricted Securities (i) pursuant to a rights offering
made to all holders of Common Stock by the Company (including without limitation
any standby underwriting or similar arrangements relating thereto) pursuant to
Board Approval or (ii) otherwise permitted hereunder or under the Investment
Agreement.
2.2. OTHER RESTRICTIONS. Without prior Board Approval,
except as otherwise permitted hereunder, the Purchaser will not
do any of the following:
(a) solicit proxies from other shareholders of the Company, in
opposition to a recommendation of the Board, for any matter to be
considered at any meeting of the shareholders of the Company except as
permitted by this Agreement;
(b) form, join or participate in or encourage the formation of
a "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
with respect to any Voting Securities of the Company, other than a
group consisting solely of Affiliates of the Purchaser; and
3
<PAGE> 4
(c) deposit any Voting Securities of the Company into a voting
trust or subject any such Voting Securities to any arrangement or
agreement with respect to the voting thereof, other than any such
trust, arrangement or agreement (i) the only parties to, or
beneficiaries of, which are Affiliates of the Purchaser; and (ii) the
terms of which do not require or expressly permit any party thereto to
act in a manner inconsistent with this Agreement.
2.3. NO BREACH. The Purchaser will not be deemed to have
breached the terms of Section 2.1 above if Voting Securities beneficially owned
by it exceed the percentage limitation set forth in Section 2.1 due to any
reduction in Total Voting Power or the Purchaser's acquisition of Common Stock
pursuant to a Permitted Acquisition.
III. COVENANTS OF COMPANY
3.1. DIRECTORS AND VOTING. (a) The Board, at each meeting of
stockholders of the Company at which directors are elected, will nominate for
election as directors of the Company such number of persons determined in
accordance with Section 3.1(d) who shall each be designated by the Purchaser.
The Company will solicit proxies from its stockholders for such nominees and
vote all management proxies in favor of such nominees, except for such proxies
that specifically indicate to the contrary.
(b) If any director of the Company designated by the Purchaser
ceases to be a director of the Company, the Board will promptly upon the request
the Purchaser elect a person designated by the Purchaser to replace such
director.
(c) If the total number of seats on the Board (including any
vacant seats) is increased at any time between meetings of stockholders of the
Company at which directors are elected, the Board will elect persons designated
by the Purchaser to fill such additional seats so that after such election the
total number of persons on the Board designated by the Purchaser at least equals
the number determined in accordance with Section 3.1(d).
(d) The number of persons designated by the Purchaser that
must be nominated by the Board for election as directors of the Company as
provided herein will be sufficient so that the number of Board designees of the
Purchaser relative to the number of directors constituting the whole Board is
proportional (rounded up to the next highest number) to the Purchaser's then-
beneficial ownership of outstanding Voting Securities in relation to the then
Total Voting Power; provided, however, that (i) so long as the Purchaser has
beneficial ownership of more than 10% of the outstanding Voting Securities, in
no event will the number
4
<PAGE> 5
of such persons be less than two, (ii) in no event will the Company be obligated
to take any action hereunder that would result in the number of directors
elected pursuant to the Purchaser's designation exceeding more than one less
than a majority of the total number of directors, unless the Common Stock
beneficially owned by Purchaser exceeds the percentage limitation set forth in
Section 2.1 due to a Permitted Acquisition, and (iii) so long as the number of
members of the Board is between seven and 14, the number will not exceed 40%
(rounded up to the next highest number) of the total number of directors.
Notwithstanding any other provision hereof, if Purchaser would be entitled to
designate a marjority of the members of the Board pursuant to Section 3.1, any
such designation will be subject to compliance by the Company with Section 14(f)
of the Exchange Act, if applicable, as to such number of designees which would
make all such designees a majority, the Company hereby agreeing to use its best
efforts to effect such compliance at the earliest practicable date.
(e) At all times after the date hereof at which the Purchaser
has beneficial ownership of more than 10% of the Total Voting Power, the Board
shall ensure that at least one director designated by the Purchaser is a member
of each committee of the Board. Provision will be made by the Company so that
each committee member may designate another director to act as his alternate on
such committee. Such an alternate, in the absence of the director who designated
him, may vote and participate in the activities of the committee as if he were a
member thereof.
3.2. NON-SOLICITATION. So long as the Purchaser shall have
beneficial ownership of more than 10.0% of the Total Voting Power, the Company
will not take any action to solicit, promote or arrange for, or (except as
required by law) assist in, the acquisition by any person, entity or group,
together with all persons and entities controlling, controlled, by or under
common control or in a group with it, of 10.0% or more of the Total Voting Power
or of all or any significant part of the assets of the Company; provided,
however, that the Company will be free to respond to and authorize negotiations
with respect to a proposed transaction initiated by a third party and not
solicited by the Company subsequent to the date hereof to the extent required by
the fiduciary duties of the Board.
5
<PAGE> 6
IV. TERMINATION
4.1. TERMINATION. This Agreement will terminate, and be of no
further force or effect, upon the earliest to occur of the following dates or
events:
(a) the tenth anniversary of the date of this
Agreement;
(b) notice that the Purchaser has determined to terminate this
Agreement effective as of a date stated in such notice, at any time following
the announcement by any person, entity or group (other than the Purchaser) that
it intends to commence a tender offer for or otherwise acquire Voting Securities
if, after the completion of such proposed tender offer or acquisition, such
person, entity or group, together with all persons and entities controlling,
controlled by or under common control (or in a group with it), would own 10.0%
or more of the Total Voting Power;
(c) notice that the Purchaser has determined to terminate this
Agreement effective as of a date stated in such notice, at any time following
the acquisition by any person, entity or group of 10% or more of the Total
Voting Power or the filing by any person, entity or group (other than the
Purchaser) of any document with a governmental agency (including without
limitation a Schedule 13D with the Securities and Exchange Commission or a
notification under the Hart-Scott-Rodino Antitrust Improvement Act) to the
effect that such person, entity or group intends or contemplates acquiring
Voting Securities, if after the completion of such proposed acquisition such
person, entity or group, together with all persons and entities controlling,
controlled by or under common control or in a group with it, would own 10% or
more of the Total Voting Power;
(d) notice that the Purchaser has determined to terminate this
Agreement effective as of a date stated in such notice, at any time following
the execution, approval by the Board of Directors of the Company or announcement
of an agreement, agreement in principle or proposal (whether or not subject to
approval by the Board of Directors of the Company or other corporate action)
that provides for or involves (i) the merger of the Company with or into any
other entity, or (ii) the sale of all or any significant part of the assets of
the Company, (iii) the reorganization or liquidation of the Company or (iv) any
similar transaction or event that is subject to approval by the stockholders of
the Company;
(e) notice that the Purchaser has determined to terminate this
Agreement effective as of a date stated in such notice at any time following the
failure by the Board or the Company to observe any of the provisions of Article
III hereof
6
<PAGE> 7
which breach has continued for at least five calendar days after
notice thereof to the company from the Purchaser;
(f) the failure of the shareholders of the Company to elect
any director designated under this Agreement by the Purchaser or the removal of
any such recommended director from the Board or the failure of the Board to
replace any director designated by the Purchaser with a person designated by the
Purchaser; or the failure of the Board of Directors of the Company to effect
without unreasonable delay and maintain the committee appointments required
under Section 3.1(e); and
(g) the written agreement of the parties to terminate this
Agreement.
4.2. EFFECT OF PERMITTED ACQUISITION RESULTING IN BENEFICIAL
OWNERSHIP OF MORE THAN 50% TOTAL VOTING POWER. At such time as the Total Voting
Power beneficially owned by Purchaser first exceeds the percentage limitation
set forth in Section 2.1 due to a Permitted Acquisition, Article II of this
Agreement will terminate and the provisions thereof shall be void and of no
further force and effect. All other provisions of this Agreement shall continue
in full force and effect for the term hereof until such time as the conclusion
of the next shareholder meeting for the election of directors at which directors
are elected.
V. MISCELLANEOUS
5.1. SPECIFIC PERFORMANCE. The parties agree that any breach
by any of them of any provision of this Agreement would irreparably injure the
Company or the Purchaser, as the case may be, and that money damages would be an
inadequate remedy therefor. Accordingly, the parties agree that the other
parties will be entitled to one or more injunctions enjoining any such breach
and requiring specific performance of this Agreement and consent to the entry
thereof, in addition to any other remedy to which such other parties are
entitled at law or in equity, provided, however, that in the event the Company
breaches or is unable to perform (even if legally excused therefrom) Section
3.1, the obligations of the Purchaser under Article II hereof will terminate
without further action but the Company will have no liability for damages as a
result thereof.
5.2. NOTICES. All notices, requests and other communications
to either party hereunder will be in writing (including telecopy or similar
writing) and will be given,
7
<PAGE> 8
if to the Company, to:
Mountasia Entertainment International, Inc.
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30202-4128
Attention: Chief Executive Officer
Fax: (770) 442-6655
with a copy to:
Rogers & Hardin
2700 Cain Tower
229 Peachtree Street
Atlanta, Georgia 30303
Attention: Edward J. Hardin
Fax: (404) 525-2224
If to any member of the Purchaser, to:
MEI Holdings, L.P.
4200 Texas Commerce Tower
Dallas, Texas 75201
Attention: Daniel A. Decker
Fax: (214) 220-4949
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek, Esq.
Fax: (212) 755-7306
or such other address or telecopier number as such party may hereafter specify
for the purpose by notice to the other party hereto. Each such notice, request
or other communication shall be effective when delivered at the address
specified in this Section 5.2.
5.3. AMENDMENTS: NO WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the parties hereto, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder will operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided will be cumulative and not exclusive of any rights or
remedies provided by law.
8
<PAGE> 9
5.4. EXPENSES. Except as otherwise provided herein or in the
Investment Agreement, all costs and expenses incurred in connection with this
Agreement will be paid by the party incurring such cost or expense.
5.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided, however, that none of the parties
may assign, delegate or otherwise transfer any of their rights or obligations
under this Agreement without the written consent of the other parties hereto,
except that the Purchaser may assign delegate or otherwise transfer any of its
rights hereunder to any of its Affiliates which commits to the Company in
writing to be bound by the terms hereof (but no such transfer shall relieve the
Purchaser of its obligations hereunder). Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
5.6. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which will be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement will become effective when each party hereto will have received a
counterpart hereof signed by the other party hereto.
5.7. ENTIRE AGREEMENT. This Agreement, the Investment
Agreement and the documents contemplated thereby (and all exhibits thereto)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect thereto.
No representation, inducement, promise, understanding, condition or warranty not
set forth herein or therein has been made or relied upon by any of the parties
hereto.
5.8. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By: /s/ L. Scott Demerau
____________________________
Name: L. Scott Demerau
____________________________
Title: Chief Executive Officer
____________________________
MEI HOLDINGS, L.P.
By: MEI GenPar, L.P., its
general partner
By: HH GenPar Partners, its
general partner and
co-manager
By: Hampstead Associates, Inc.,
its general partner and co-
manager
By: /s/ Daniel A. Decker
____________________________
Name: Daniel A. Decker
____________________________
Title: Executive Vice President
____________________________
10
<PAGE> 1
EXHIBIT 6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made
and entered into as of August 28, 1996, by and among Mountasia Entertainment
International, Inc., a Georgia corporation (the "Company") and MEI Holdings,
L.P. a Delaware limited partnership (the "Purchaser").
RECITALS
The parties hereto have entered into, or are equity owners in
entities that have entered into, other agreements which contemplate, among other
things, the execution and delivery of this Agreement by the parties hereto.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the following meanings:
(a) Advice: As defined in Section 6 hereof.
(b) Common Stock: The Common Stock, without par value, of the Company.
(c) Demand Notice: As defined in Section 3 hereof.
(d) Demand Registration: As defined in Section 3 hereof.
(e) Losses: As defined in Section 8 hereof.
(f) Other Equity Securities: Any shares of capital stock of the Company
and any other securities issued by the Company that are exercisable to purchase,
convertible into, or exchangeable for shares of capital stock of the Company
that are owned by any party hereto (other than the Company) or any affiliate of
any party hereto (other than the Company), whether acquired prior to, on or
after the date hereof.
(g) Piggyback Registration: As defined in Section 4 hereof.
(h) Prospectus: The prospectus included in any Registration Statement
(including without limitation a prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements
<PAGE> 2
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
(i) Registrable Securities: The Shares, and all Other Equity
Securities, upon the respective original issuance thereof, and at all times
subsequent thereto, until, in the case of any such security, (i) it is
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering it, (ii) it is saleable by the holder
thereof pursuant to Rule 144(k), or (iii) it is distributed to the public
pursuant to Rule 144.
(j) Registration Expenses: As defined in Section 7 hereof.
(k) Registration Statement: Any registration statement of the Company
under the Securities Act that covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
(l) Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
(m) SEC: The Securities and Exchange Commission.
(n) Securities Act: The Securities Act of 1933, as amended.
(o) Shares: All shares of Common Stock acquired by the Purchaser or its
designee pursuant to the Investment Agreement, dated as of June 5, 1996, among
the Company and Purchaser.
(p) Special Counsel: As defined in Section 7(b) hereof.
(q) Underwritten registration or underwritten offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
2. Holders of Registrable Securities. Whenever a number or percentage
of Registrable Securities is to be determined hereunder, each then-outstanding
Other Equity Security that is exercisable to purchase, convertible into, or
exchangeable for shares of capital stock of the Company will be deemed to be
equal to the number of shares of Common Stock for which such Other Equity
Security is then convertible.
3. Demand Registration. (a) Requests for Registration. At any time and
from time to time after the date hereof, the holders of Registrable Securities
constituting at least 10% of the total number of Registrable Securities then
outstanding will have the right by written notice delivered to the Company (a
"Demand Notice"), to require the Company to register (a "Demand Registration")
under and in accordance with the provisions of the Securities Act the number of
Registrable Securities requested to be so registered (but not less than 5% of
the total number of Registrable Securities then outstanding); provided, however,
that no Demand Notice may be given prior to four months after the effective date
of the immediately
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<PAGE> 3
preceding Demand Registration. The holders of Registrable Securities will be
permitted to withdraw Registrable Securities from a Piggyback Registration at
any time prior to the effective date of such Piggyback Registration provided the
remaining number of Registrable Securities subject to a Demand Notice is at
least 5% of the total number of Registrable Securities then outstanding.
The number of Demand Registrations pursuant to this Section
3(a) shall not exceed five; provided, however, that in determining the number of
Demand Registrations to which the holders of Registrable Securities are entitled
there shall be excluded (1) any Demand Registration that is an underwritten
registration if the managing underwriter or underwriters have advised the
holders of Registrable Securities that the total number of Registrable
Securities requested to be included therein exceeds the number of Registrable
Securities that can be sold in such offering in accordance with the provisions
of this Agreement without materially and adversely affecting the success of such
offering, (2) any Demand Registration that does not become effective or is not
maintained effective for the period required pursuant to Section 3(b) hereof,
unless in the case of this clause (2) such Demand Registration does not become
effective after being filed by the Company solely by reason of the refusal to
proceed by the holders of Registrable Securities unless (i) the refusal to
proceed is based upon the advice of counsel relating to a matter with respect to
the Company, or (ii) the holders of the Registrable Securities elect to pay all
Registration Expenses in connection with such Demand Registration and (3) any
Demand Registration in connection with which any other stockholder of the
Company exercises a right of first refusal which it may otherwise have and
purchases all the stock registered and to be sold pursuant to the Demand
Registration.
(b) Filing and Effectiveness. The Company will file a Registration
Statement relating to any Demand Registration within 60 calendar days, and will
use its best efforts to cause the same to be declared effective by the SEC
within 120 calendar days, of the date on which the holders of Registrable
Securities first give the Demand Notice required by Section 3(a) hereof with
respect to such Demand Registration.
All requests made pursuant to this Section 3 will specify the
number of Registrable Securities to be registered and will also specify the
intended methods of disposition thereof; provided, that if the holder demanding
such registration specifies one particular type of underwritten offering, such
method of disposition shall be such type of underwritten offering or a series of
such underwritten offerings (as such demanding holders of Registrable Securities
may elect) during the period during which the Registration Statement is
effective.
If any Demand Registration is requested to be effected as a
"shelf" registration by the holders of Registrable Securities demanding such
Demand Registration, the Company will keep the Registration Statement filed in
respect thereof effective for a period of up to 12 months from the date on which
the SEC declares such Registration Statement effective (subject to extension
pursuant to Sections 5 and 6 hereof) or such shorter period that will terminate
when all Registrable Securities covered by such Registration Statement have been
sold pursuant to such Registration Statement.
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<PAGE> 4
Within ten calendar days after receipt of such Demand Notice,
the Company will serve written notice thereof (the "Notice") to all other
holders of Registrable Securities and will, subject to the provisions of Section
3(c) hereof, include in such registration all Registrable Securities with
respect to which the Company receives written requests for inclusion therein
within 20 calendar days after the receipt of the Notice by the applicable
holder.
(c) Priority on Demand Registration. If any of the Registrable
Securities registered pursuant to a Demand Registration are to be sold in one or
more firm commitment underwritten offerings, the Company may also provide
written notice to holders of its equity securities (other than Registrable
Securities), if any, who have piggyback registration rights with respect thereto
and will permit all such holders who request to be included in the Demand
Registration to include any or all equity securities held by such holders in
such Demand Registration on the same terms and conditions as the Registrable
Securities. Notwithstanding the foregoing, if the managing underwriter or
underwriters of the offering to which such Demand Registration relates advises
the holders of Registrable Securities that the total amount of Registrable
Securities and securities that such equity security holders intend to include in
such Demand Registration is in the aggregate such as to materially and adversely
affect the success of such offering, then (i) first, the amount of securities to
be offered for the account of the holders of such other equity securities will
be reduced, to zero if necessary (pro rata among such holders on the basis of
the amount of such other securities to be included therein by each such holder),
and (ii) second, the number of Registrable Securities included in such Demand
Registration will, if necessary, be reduced and there will be included in such
firm commitment underwritten offering only the number of Registrable Securities
that, in the opinion of such managing underwriter or underwriters, can be sold
without materially and adversely affecting the success of such offering,
allocated pro rata among the holders of Registrable Securities on the basis of
the amount of Registrable Securities to be included therein by each such holder.
(d) Postponement of Demand Registration. The Company will be entitled
to postpone the filing period (or suspend the effectiveness) of any Demand
Registration for a reasonable period of time not in excess of 90 calendar days,
if the Company determines, in the good faith exercise of its reasonable business
judgment, that such registration and offering could materially interfere with
bona fide financing plans of the Company or would require disclosure of
information, the premature disclosure of which could materially and adversely
affect the Company. If the Company postpones the filing of a Registration
Statement, it will promptly notify the holders of Registrable Securities in
writing when the events or circumstances permitting such postponement have
ended.
4. Piggyback Registration. (a) Right to Piggyback. If at any time the
Company proposes to file a registration statement under the Securities Act with
respect to an offering of any class of equity securities (other than a
registration statement (i) on Form S-4, S-8 or any successor form thereto or
(ii) filed solely in connection with an offering made solely to employees of the
Company), whether or not for its own account, then the Company will give written
notice of such proposed filing to the holders of Registrable Securities at least
30 calendar days before the anticipated filing date. Such notice will offer such
holders the opportunity to register such amount of Registrable Securities as
each such holder may request (a "Piggyback Registration"). Subject to Section
4(b) hereof, the Company will include in
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<PAGE> 5
each such Piggyback Registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein. The
holders of Registrable Securities will be permitted to withdraw all or part of
the Registrable Securities from a Piggyback Registration at any time prior to
the effective date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company will cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit holders of Registrable Securities requested to be included in the
registration for such offering to include therein all such Registrable
Securities requested to be so included on the same terms and conditions as any
similar securities, if any, of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering deliver
an opinion to the holders of Registrable Securities to the effect that the total
amount of securities which such holders, the Company and any other persons
having rights to participate in such registration propose to include in such
offering is such as to materially and adversely affect the success of such
offering, then:
(i) if such registration is a primary registration on behalf
of the Company, the amount of securities to be included therein (x) for the
account of holders of Registrable Securities on the one hand (allocated pro rata
among such holders on the basis of the Registrable Securities requested to be
included therein by each such holder), and (y) for the account of all such other
persons (exclusive of the Company), on the other hand, will be reduced (to zero
if necessary) pro rata in proportion to the respective amounts of securities
requested to be included therein to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount recommended
by such managing underwriter or underwriters; and
(ii) if such registration is an underwritten secondary
registration on behalf of holders of securities of the Company other than
Registrable Securities, the Company will include therein: (x) first, up to the
full number of securities of such persons exercising "demand" registration
rights that in the opinion of such managing underwriter or underwriters can be
sold or allocated among such holders as they may otherwise so determine, and (y)
second, the amount of Registrable Securities and securities proposed to be sold
by any other person in excess of the amount of securities such persons
exercising "demand" registration rights propose to sell that, in the opinion of
such managing underwriter or underwriters, can be sold (allocated pro rata among
the holders of such Registrable Securities and such other persons on the basis
of the dollar amount of securities requested to be included therein).
(c) Registration of Securities Other than Registrable Securities.
Without the written consent of the holders of a majority of the then-outstanding
Registrable Securities, the Company will not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject to the prior rights of
the holders of Registrable Securities set forth herein, and, if exercised, would
not otherwise conflict or be inconsistent with the provisions of, this
Agreement.
5. Restrictions on Sale by Holders of Registrable Securities. Each
holder of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 3 or Section 4 hereof, agrees
and will confirm such agreement in
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<PAGE> 6
writing, if such holder is so requested (pursuant to a timely written notice) by
the managing underwriter or underwriters in an underwritten offering, not to
effect any public sale or distribution of any of the Company's equity securities
(except as part of such underwritten offering), including a sale pursuant to
Rule 144, during the 10-calendar day period prior to, and during the 90-calendar
day period (or such longer period as any managing underwriter or underwriters
may reasonably request in connection with any underwritten public offering)
beginning on, the closing date of each underwritten offering made pursuant to
such Registration Statement. If a request is made pursuant to this Section 5,
the time period during which a Demand Registration (if a shelf registration) is
required to remain continuously effective pursuant to Section 3(b) will be
extended by 100 calendar days or such shorter period that will terminate when
all such Registrable Securities not so included have been sold pursuant to such
Registration Statement.
6. Registration Procedures. In connection with the Company's
registration obligations pursuant to Sections 3 and 4 hereof, the Company will
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution thereof, and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated or deemed to be incorporated therein by
reference) the Company will furnish to the holders of the Registrable Securities
covered by such Registration Statement, the Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review of such holders, the Special Counsel and
such underwriters, and the Company will not file any such Registration Statement
or amendment thereto or any Prospectus or any supplement thereto (including such
documents which, upon filing, would or would be incorporated or deemed to be
incorporated by reference therein) to which the holders of a majority of the
Registrable Securities covered by such Registration Statement, the Special
Counsel or the managing underwriter, if any, shall reasonably object on a timely
basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 3; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or to such
Prospectus as so supplemented.
(c) Notify the selling holders of Registrable Securities, the Special
Counsel and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such
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<PAGE> 7
notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other federal or state governmental
authority for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contained in any agreement contemplated by Section
6(n) hereof (including any underwriting agreement) cease to be true and correct,
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the occurrence of any
event which makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in a Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated or is necessary to make
the statements therein, in light of the circumstances under which they wee made,
not misleading, and (vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If requested by the managing underwriters, if any, or the holders
of a majority of the Registrable Securities being registered, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and such holder agree should
be included therein as may be required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 6(e) that are not, in the opinion of counsel for the
Company, in compliance with applicable law.
(f) Furnish to each selling holder of Registrable Securities, the
Special Counsel and each managing underwriter, if any, without charge, at least
one conformed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements (but excluding schedules, all
documents incorporated or deemed incorporated therein by reference and all
exhibits, unless requested in writing by such holder, counsel or underwriter).
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<PAGE> 8
(g) Deliver to each selling holder of Registrable Securities, the
Special Counsel and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such persons may request; and the Company hereby consents to the use of such
Prospectus or each amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register
or qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any seller or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdiction of the Registrable Securities covered by the applicable
Registration Statement; provided, however that the Company will not be required
to (i) qualify generally to do business in any jurisdiction in which it is not
then so qualified or (ii) take any action that would subject it to general
service of process in any such jurisdiction in which it is not then so subject.
(i) Cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates will not bear any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, shall request at least two business days prior to
any sale of Registrable securities to the underwriters.
(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States except as may be
required solely as a consequence of the nature of such selling holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals as may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities.
(k) Upon the occurrence of any event contemplated by Section 6(c)(vi)
or 6(c)(vii) hereof, prepare a supplement or post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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<PAGE> 9
(l) Use its best efforts to cause all Registrable Securities covered by
such Registration Statement to be, at the Company's option (i) listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed or, if no similar securities issued by the Company are then so
listed, on the New York Stock Exchange or another national securities exchange
if the securities qualify to be so listed or (ii) authorized to be quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or the National Market System of NASDAQ if the securities qualify to be so
quoted; in each case, if requested by the holders of a majority of the
Registrable Securities covered by such Registration statement or the managing
underwriters, if any.
(m) Prior to the effective date of the first Demand Registration or the
first Piggyback Registration, whichever shall occur first, (i) engage an
appropriate transfer agent and provide the transfer agent with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Securities.
(n) Enter into such agreements (including, in the event of an
underwritten offering, an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other actions in
connection therewith (including those requested by the holders of a majority of
the Registrable Securities being sold or, in the event of an underwritten
offering, those requested by the managing underwriters) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority of the Registrable
Securities being sold) addressed to such selling holder of Registrable
Securities and each of the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such holders and underwriters,
including without limitation the matters referred to in Section 6(n)(i) hereof;
(iii) use its best efforts to obtain "comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if necessary,
any other certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each selling holder of Registrable Securities and each
of the underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters in connection with
underwritten offerings; and (iv) deliver such documents and certificates as may
be requested by the holders of a majority of the Registrable Securities being
sold, the Special Counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or similar
agreement entered into by the Company. The foregoing
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<PAGE> 10
actions will be taken in connection with each closing under such underwriting or
similar agreement as and to the extent required thereunder.
(o) Make available for inspection by a representative of the holders of
Registrable Securities being sold, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by such persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquires of regulatory authorities, or (iii)
disclosure of such records, information or documents, in the opinion of counsel
to such person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Securities Act).
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
calendar days after the end of any 12-month period (or 90 calendar days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering, and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company, after the effective date of a
Registration Statement, which statements shall cover said 12-month period.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each holder of Registrable Securities will be deemed to have
agreed by virtue of its acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the occurrence of any event of the
kind described in Section 6(c)(ii), 6(c)(iii), 6(c)(v), 6(c)(vi) or 6(c)(vii)
hereof, such holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(k) hereof, or until it is advised in writing (the
"Advice) by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.
In the event the Company shall give any such notice, the time period prescribed
in Section 3(a) hereof will be extended by the number of days during the time
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<PAGE> 11
period from and including the date of the giving of such notice to and including
the date when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 6(k) hereof or (y) the Advice.
7. Registration Expenses. (a) All Registration Expenses will be borne
by the Company whether or not any of the Registration Statements become
effective. "Registration Expenses" will mean all fees and expenses incident to
the performance of or compliance with this Agreement by the Company, including,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with securities or "blue sky" laws (including without limitation fees and
disbursements of counsel for the underwriters or selling holders in connection
with "blue sky" qualifications of the Registrable Securities and determination
of the eligibility of the Registrable Securities for investment under the laws
of such jurisdictions as the managing underwriters, if any, or holders of a
majority of the Registrable Securities being sold may designate)), (ii) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the holders of a majority of the Registrable Securities included in
any Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, the Special Counsel for
the sellers of the Registrable Securities, and counsel for the underwriters (v)
fees and disbursements of all independent certified public accountants referred
to in Section 6(n)(iii) hereof (including the expenses of any special audit and
"comfort" letters required by or incident to such performance), (vi) fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of Schedule E to
the By-laws of the National Association of Securities Dealers, Inc., (vii)
Securities Act liability insurance if the Company so desires such insurance, and
(viii) fees and expenses of all other persons retained by the Company, provided,
however, that Registration Expenses will not include fees and expenses of
counsel for the holders of Registrable Securities other than as provided below
nor shall it include underwriting discounts and commissions relating to the
offer and sale of Registrable Securities, all of which shall be borne by such
holders. In addition, the Company will pay its internal expenses (including
without limitation all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on any securities exchange on which similar securities issued by
the Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company.
(b) In connection with any Demand Registration or Piggyback
Registration hereunder, the Company will reimburse the holders of the
Registrable Securities being registered in such registration for the reasonable
fees and disbursements of not more than one counsel (the "Special Counsel"),
together with appropriate local counsel, chosen by the holders of a majority of
the Registrable Securities being registered.
8. Indemnification. (a) Indemnification by the Company. The Company
will, without limitation as to time, indemnify and hold harmless, to the fullest
extent permitted by law, each holder of Registrable Securities registered
pursuant to this Agreement, the officers,
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<PAGE> 12
directors and agents and employees of each of them, each person who controls
such holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees of any
such controlling person, from and against all losses, claims, damages,
liabilities, costs (including without limitation the costs of investigation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of Prospectus or in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based solely upon
information furnished in writing to the Company by such holder expressly for use
therein; provided, however, that the Company will not be liable to any holder of
Registrable Securities to the extent that any such Losses arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus if either (A) (i) such
holder failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale by such holder of a Registrable
Security to the person asserting the claim from which such Losses arise and (ii)
the Prospectus would have completely corrected such untrue statement or alleged
untrue statement or such omission or alleged omission; or (B) such untrue
statement or alleged untrue statement, omission or alleged omission is
completely corrected in an amendment or supplement to the Prospectus previously
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, and such holder thereafter fails to deliver such
Prospectus as so amended or supplemented prior to or concurrently with the sale
of a Registrable Security to the person asserting the claim from which such
Losses arise.
The rights of any holder of Registrable Securities hereunder
will not be exclusive of the rights of any holder of Registrable Securities
under any other agreement or instrument of any holder of Registrable Securities
to which the Company is a party. Nothing in such other agreement or instrument
will be interpreted as limiting or otherwise adversely affecting a holder of
Registrable Securities hereunder and nothing in this Agreement will be
interpreted as limiting or otherwise adversely affecting the holder of
Registrable Securities' rights under any such other agreement or instrument,
provided, however, that no Indemnified Party will be entitled hereunder to
recover more than its indemnified Losses.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, such holder of Registrable Securities will furnish to the Company
in writing such information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and will severally
indemnify, to the fullest extent permitted by law, the Company, its directors
and officers, agents and employees, each person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, from and against all Losses arising out of or based upon any untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or arising out of or based upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such holder
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<PAGE> 13
to the Company expressly for use in such Registration Statement or Prospectus
and was relied upon by the Company in the preparation of such Registration
Statement, Prospectus or preliminary prospectus. In no event will the liability
of any selling holder of Registrable Securities hereunder be greater in amount
than the dollar amount of the proceeds (net of payment of all expenses) received
by such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any person shall become
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any action or
proceeding with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
the indemnifying party will not relieve the indemnifying party from any
obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such failure. All fees and expenses (including any
fees and expenses incurred in connection with investigating or preparing to
defend such action or proceeding) will be paid to the indemnified party, as
incurred, within five calendar days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder). The
indemnifying party will not consent to entry of any judgment or enter into any
settlement or otherwise seek to terminate any action or proceeding in which any
indemnified party is or could be a party and as to which indemnification or
contribution could be sought by such indemnified party under this Section 8,
unless such judgment, settlement or other termination includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance satisfactory to the
indemnified party, from all liability in respect of such claim or litigation for
which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 8
is unavailable to an indemnified party under Section 8(a) or 8(b) hereof in
respect of any Losses or is insufficient to hold such indemnified party
harmless, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, will, jointly and severally, contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses will be deemed to include any legal or other fees or expenses
incurred by such party in connection with any action or proceeding.
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<PAGE> 14
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an indemnifying
party that is a selling holder of Registrable Securities will not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities sold by such indemnifying party and distributed to
the public exceeds the amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement
obligations of the Company hereunder will be in addition to any liability the
Company may otherwise have hereunder, under the Investment Agreement or
otherwise. The provisions of this Section 8 will survive so long as Registrable
Securities remain outstanding, notwithstanding any transfer of the Registrable
Securities by any holder thereof or any termination of this Agreement.
9. Rule 144. The Company will file the reports required to be filed by
it under the Securities Act and the Exchange Act, and will cooperate with any
holder of Registrable Securities (including without limitation by making such
representations as any such holder may reasonably request), all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemptions provided by Rule 144. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such filing requirements. Notwithstanding the
foregoing, nothing in this Section 9 will be deemed to require the Company to
register any of its securities under any section of the Exchange Act.
10. Underwritten Registrations. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the holder of Registrable Securities
that gave the Demand Notice with respect to such offering; provided, that such
investment banker or manager shall be reasonably satisfactory to the Company. If
any Piggyback Registration is an underwritten offering, the Company will have
the right to select the investment banker or investment bankers and managers to
administer the offering.
11. Miscellaneous. (a) Remedies. In the event of a breach by the
Company of its obligations under this Agreement, each holder of Registrable
Securities, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it will
waive the defense that a remedy at law would be adequate.
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<PAGE> 15
(b) No Inconsistent Agreements. The Company has not, as of the date
hereof, and will not, on or after the date hereof, enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of holders of a
majority of the then-outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least 51% of the
Registrable Securities being sold by such holders; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and will be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telecopier,
or (iii) one business day after being deposited with a reputable next-day
courier, postage prepaid, to the parties as follows:
(x) if to the Company, initially at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202-4128, Telecopier Number (770)
442-6655, Attention: Chief Executive Officer, and thereafter at such
other address, notice of which is given to the holders of Registrable
Securities in accordance with the provisions of this Section 11(d);
(y) if to Purchaser, initially at 4200 Texas Commerce Tower
West, 2200 Ross Avenue, Dallas, Texas 75201, Telecopier number (214)
220-4949, Attention: Daniel A. Decker, and thereafter at such other
address, notice of which is given in accordance with the provisions of
Section 11(d); and
(z) if to any other holder of Registrable Securities, at the
most current address given by such holder to the Company in accordance
with the provisions of this Section 11(d).
(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a stock book with respect to
the Common Stock, in which all transfers of Registrable Securities of which the
Company has received notice will be recorded. The Company may deem and treat the
person in whose name Registrable Securities are registered in the stock book of
the Company as the owner thereof for all purposes, including without limitation
the giving of notices under this Agreement.
(f) Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and will inure to the benefit of each holder of any Registrable Securities. The
Company may not assign its rights
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<PAGE> 16
or obligations hereunder without the prior written consent of each holder of any
Registrable Securities. Notwithstanding the foregoing, no transferee will have
any of the rights granted under this Agreement (i) until such transferee shall
have acknowledged its rights and obligations hereunder by a signed written
statement of such transferee's acceptance of such rights and obligations or (ii)
if the transferor notifies the Company in writing on or prior to such transfer
that the transferee shall not have such rights.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein will remain in full force and effect and will in
no way be affected, impaired or invalidated, and the parties hereto will use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the registration rights granted by the Company with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such registration rights.
(l) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, will be entitled
to recover reasonable attorneys' fees in addition to any other available remedy.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By: /s/ Scott Demerau
____________________________
Name: Scott Demerau
____________________________
Title: Chief Executive Officer
____________________________
MEI HOLDINGS, L.P.
By: MEI GenPar, L.P., its general partner
By: HH GenPar Partners, its general partner
and co-manager
By: Hampstead Associates, Inc., its general
partner and co-manager
By: /s/ Daniel A. Decker
____________________________
Name: Daniel A. Decker
____________________________
Title: Executive Vice President
____________________________
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<PAGE> 1
EXHIBIT 7
August 28, 1996
Mountasia Entertainment
International, Inc.
5895 Windward Parkway
Suite 220
Alpharetta, Georgia 30202-4128
Ladies and Gentlemen:
The undersigned is the beneficial owner of a substantial
number of shares of Common Stock ("Common Shares") of Mountasia Entertainment
International, Inc. (the "Company"). In connection with a substantial capital
investment in the Company, the undersigned understands that the prospective
investor has expressed concerns that there are presently no restrictions on the
ability of the undersigned, a senior executive officer of the Company, to sell
Common Shares beneficially owned by the undersigned. Accordingly, to induce such
investor to make such investment, the undersigned hereby irrevocably undertakes
not to offer for sale, agree to sell or otherwise sell or transfer any Common
Shares now or hereafter beneficially owned by him or her prior to June 30, 1998,
provided, however, that (a) the foregoing undertaking will not apply to such
sales and transfers (i) effected after involuntary termination of employment,
(ii) to a financial institution pursuant to the foreclosure on bona fide
third-party debt of any of the undersigned, (iii) by the estate or guardian of
any of the undersigned upon the death or permanent disability of any of the
undersigned, and (b) following the disposition by the prospective investor of at
least 25% of the Common Shares beneficially owned by it at the time of its
initial investment in the Company, this undertaking will terminate without
further action as to a like percentage of the undersigned's holdings of Common
Stock, or (iv) pursuant to a tender or exchange offer, merger, consolidation or
other form of business combination transaction to which the Company is a party
or its securities are subject.
/s/ Julia Demerau
_________________________________
Julia Demerau
<PAGE> 2
August 28, 1996
Mountasia Entertainment
International, Inc.
5895 Windward Parkway
Suite 220
Alpharetta, Georgia 30202-4128
Ladies and Gentlemen:
The undersigned is the beneficial owner of a substantial
number of shares of Common Stock ("Common Shares") of Mountasia Entertainment
International, Inc. (the "Company"). In connection with a substantial capital
investment in the Company, the undersigned understands that the prospective
investor has expressed concerns that there are presently no restrictions on the
ability of the undersigned, a senior executive officer of the Company, to sell
Common Shares beneficially owned by the undersigned. Accordingly, to induce such
investor to make such investment, the undersigned hereby irrevocably undertakes
not to offer for sale, agree to sell or otherwise sell or transfer any Common
Shares now or hereafter beneficially owned by him or her prior to June 30, 1998,
provided, however, that (a) the foregoing undertaking will not apply to such
sales and transfers (i) effected after involuntary termination of employment,
(ii) to a financial institution pursuant to the foreclosure on bona fide
third-party debt of any of the undersigned, (iii) by the estate or guardian of
any of the undersigned upon the death or permanent disability of any of the
undersigned, and (b) following the disposition by the prospective investor of at
least 25% of the Common Shares beneficially owned by it at the time of its
initial investment in the Company, this undertaking will terminate without
further action as to a like percentage of the undersigned's holdings of Common
Stock, or (iv) pursuant to a tender or exchange offer, merger, consolidation or
other form of business combination transaction to which the Company is a party
or its securities are subject.
/s/ L. Scott Demerau
____________________________
L. Scott Demerau
<PAGE> 1
EXHIBIT 8
EXHIBIT G
SALE OPTION AND PURCHASE OPTION TERMS
If the Closing occurs, the Company shall have the right to require the
Purchaser to purchase from the Company (the "Sale Option"), and the Purchaser
shall have the right to require the Company to sell to the Purchaser (the
"Purchase Option"), shares of the Company's capital stock for an aggregate price
not to exceed $20.0 million (subject to increase pursuant to paragraph (f)
below) (the "Aggregate Option Price"), on the following terms and conditions:
(a) The Sale Option shall be exercisable by the Company until the third
anniversary of the Closing Date, and the Purchase Option will be
exercisable by the Purchaser until the fifth anniversary of the Closing
Date, in each case by written notice given to the other party (i) if by
the Purchaser, at least ten business days prior to the consummation of
such transaction (the "Option Closing"), and (ii) if by the Company, at
least 30 calendar days prior to the Option Closing, which notice shall
specify the portion of the Aggregate Option Price to be paid, the type
and number of Company shares to be sold and purchased thereby and the
Per Share Option Price;
(b) The Company Stock to be sold and purchased upon the exercise of the
Sale Option or the Purchase Option will be (i) Common Stock or (ii) if
the Shareholder Approval has not been received prior to the Option
Closing, shares of Series F Preferred Stock having the terms and
conditions set forth in Annex 1 to this Exhibit G (the "Series F
Preferred");
(c) If Common Stock is to be received by the Purchaser, the price per
share to be paid will be $3.41 per share, subject to adjustment as
follows (as so adjusted, the "Per Share Option Price"):
(i) if the total number of shares of Common Stock outstanding
immediately prior to the Closing is higher or lower than
14,076,144, the Per Share Option Price will be proportionately
adjusted lower or higher, as the case may be; and
(ii) each time there has occurred (i) an Adjustment in
accordance with Schedule 1.5 or (ii) a Dilutive Issuance
pursuant to the Warrant, the Per Share Option Price will be
adjusted to be the same price per share paid by the Purchaser
with respect to the Purchase Price after taking into account
all Adjustments and Dilutive Issuances.
(d) If Series F Preferred is to be received by the
Purchaser, the price per share will be equal to the Per
<PAGE> 2
Share Option Price which would have applied to the Common Stock (a)
multiplied by ten and (b) reduced by 15%. The effect of such 15%
reduction will be to increase the number of shares issued, rather than
to decrease the portion of the Aggregate Option Price to be paid (the
number of such shares issued due to such increase being the "Excess
Shares"). If the Shareholder Approval is received on or before the
180th day after the Closing Date, the Purchaser shall promptly
surrender to the Company any Excess Shares issued pursuant to the
Purchase Option, together with any shares issued on account thereof
pursuant to Schedule 1.5 or the Warrant. The Excess Shares issued
pursuant to the Purchase Option will not be convertible into Common
Stock until after the 180th day;
(e) The Sale Option and the Purchase Option may each be exercised, in
whole or in part, at any time and from time to time during the exercise
terms set forth in Subparagraph (a) above;
(f) The Aggregate Option Price will be increased by $2,700,000 in the
event the Company enters into a contract to redeem $2,700,000 of the
Company's 10% Debentures, in which case $2,700,000 of the cash paid to
the Company pursuant to the exercise of the Sale Option shall be used
to fund such redemption;
(g) Each time that the Sale Option or the Purchase Option is exercised,
the remaining Aggregate Option Price shall be reduced by the amount
paid at the related Option Closing, (but without giving effect to any
reduction pursuant to paragraph (c)(ii) above), so that in no event
will the Purchaser be required to or permitted to pay more than
$20,000,000 (subject to increase pursuant to paragraph (f) above)
pursuant to the terms and conditions of this Schedule G;
(h) Except as set forth in paragraph (f) above, the cash paid to the
Company pursuant to the exercise of the Sale Option shall be used
solely to fund equity required for new acquisitions or other
income-producing capital investments approved by the Board of Directors
of the Company; and
(i) Any shares of Common Stock or Series F Preferred issued pursuant
to the Sale Option or the Purchase Option will be protected from
dilution pursuant to the Warrant and Paragraph B(4) of Schedule
1.5 in the same manner as Shares (as defined in Section 1.2).
2
<PAGE> 3
(j) The closing of any exercise of the Purchase Option or the Sale
Option will be subject to satisfaction of the filing and waiting period
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, if applicable.
3
<PAGE> 4
ANNEX 1
TO EXHIBIT G
TO THE AMENDED AND RESTATED
INVESTMENT AGREEMENT
PREFERENCES AND RIGHTS OF SERIES F PREFERRED STOCK
OF
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
2.6 Class F Preferred Stock. The voting powers, preferences and
relative, participating, optional and other special rights of the shares of
Series F Preferred Stock, and the qualifications, limitations or restrictions
thereof, are as follows:
2.6.1 Designation and Amount. The shares of such series shall
be designated as "Series F Preferred Stock" and the number of shares
constituting such series shall be 700,000.
2.6.2 Dividends and Distributions. (a) Except as set forth in
the next succeeding sentence, subject to the prior and superior rights of the
holders of any shares of any other series or class of Preferred Stock issued
from time to time the express terms of which make the shares of such other
Preferred Stock prior and superior to the shares of Series F Preferred Stock
with respect to dividends or other distributions or upon liquidation,
dissolution or winding-up ("Senior Preferred Stock"), the holders of shares of
Series F Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors of the Corporation (the "Board") out of funds legally
available for the purpose, dividends or other distributions payable or
distributable on the date on which dividends or other distributions are so
payable or distributable on or in respect of Common Stock (each such date being
referred to herein as a "Dividend Payment Date"), in an amount per share
(rounded to the nearest cent) of Series F Preferred Stock equal to ten times the
aggregate per share amount of all cash dividends, and ten times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions), declared on the Common Stock since the immediately preceding
Dividend Payment Date, or, with respect to the first Dividend Payment Date,
since the first issuance of any shares of Series F Preferred Stock.
Notwithstanding the preceding sentence, subject to the prior and superior rights
of the holders of Senior Preferred Stock, in the event the Corporation shall
declare any dividend or other distribution on shares of Common Stock payable in
shares of Common Stock or any other stock of the Corporation having the right to
vote in the election of directors on a regular basis ("Other Voting Stock"),
then (i) in each such case where shares of Common Stock would have been payable,
each holder of shares of Series F Preferred Stock shall be entitled to receive a
number of additional shares of Series F Preferred Stock equal to one-tenth
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the number of shares of Common Stock such holder would have received if all of
such holder's shares of Series F Preferred Stock had been converted into Common
Stock in accordance with Section 8 below, as of the record date specified in
Section 2(d) below, and (ii) in each such case where shares of Other Voting
Stock would have been payable, each holder of shares of Series F Preferred Stock
shall be entitled to receive such number of shares of any series or class of the
Corporation's stock as shall provide such holder all the relative rights,
preferences and powers, except voting rights, that the holder would have
received as a holder of Common Stock if all of such holder's shares of Series F
Preferred Stock had been converted into Common Stock in accordance with Section
8 below (assuming for this purpose that the conditions thereto had been
satisfied), as of the record date specified in Section 2(d) below.
(b) Subject to the prior and superior rights of
the holders of any shares of Senior Preferred Stock, if the Corporation
subdivides the outstanding shares of Common Stock into a greater number of
shares or combines the outstanding shares of Common Stock into a greater number
of shares, then in each case the outstanding shares of Series F Preferred Stock
shall also be subdivided or combined in the same proportion, so that each share
of Series F Preferred Stock continues to be entitled to ten times the amount of
dividends and distributions as each share of Common Stock.
(c) The Corporation shall declare a dividend or
distribution on or in respect of, or a subdivision or combination of, the Series
F Preferred Stock as provided in paragraph (a) or (b) above simultaneously with
its declaration of any dividend or distribution on or in respect of, or a
subdivision or combination of, the Common Stock.
(d) The Board may fix a record date for the
determination of holders of shares of Series F Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be the same as the record date for dividends or distributions on or
in respect of Common Stock.
2.7 Voting Rights. Except as set forth herein or otherwise provided by
law, holders of Series F Preferred Stock shall have no voting rights and their
consent shall not be required for taking any corporate action.
2.8 Reacquired Shares. Any shares of Series F Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board,
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subject to the conditions and restrictions on issuance set forth herein.
2.9 Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, the
holders of shares of Series F Preferred Stock shall receive an amount equal to
accrued and unpaid dividends and distributions thereon to the date of such
payment and an aggregate amount per share, equal to ten times the aggregate
amount to be distributed per share to holders of shares of Common Stock.
2.10 Recapitalization, Consolidation, Merger, etc. In case the
Corporation shall enter into any recapitalization, consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series F Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share (subject
to the provision for adjustment hereinafter set forth) equal to ten times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged.
2.11 Rights Offerings. If the Corporation shall offer for subscription
prorata to the holders of its Common Stock any additional shares of stock of any
class or any other right, then, in each such case, the Corporation shall give to
the holders of shares of Series F Preferred Stock the same notice and same
opportunity to participate in said subscription offering, as if the shares of
Series F Preferred Stock had theretofore been converted into Common Stock,
provided, however, that if (a) the offer involves any right to acquire shares of
Common Stock or any Other Voting Stock and (b) the shares of Series F Preferred
Stock are not then convertible into Common Stock in accordance with Section 8
below, then (x) if the offer involves Common Stock the Corporation shall give
the holders of the shares of Series F Preferred Stock the right to acquire one
tenth of a share of Series F Preferred Stock for each share of Common Stock such
holder would otherwise have had the right to acquire at a price per share which
would have applied to the Common Stock (a) multiplied by ten and (b) reduced by
15%; and (y) if the offer involves Other Voting Stock, the Corporation shall
give the holders of the shares of Series F Preferred Stock the right to acquire
such number of shares of any series or class of the Corporation's stock at such
price and on such other terms as shall provide such holder all the relative
rights, preferences and powers, except voting rights, that the holder would have
received if all of such holder's shares of Series F Preferred Stock had been
converted into Common Stock in accordance with Section 8 below (assuming for
this purpose that the conditions thereto had been satisfied).
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2.12 Conversion. The holders of Series F Preferred Stock shall have the
right to convert all or a portion of their shares of Series F Preferred Stock
into ten shares of Common Stock at any time after the Corporation's shareholders
entitled to vote thereon have approved the issuance of shares of Common Stock
pursuant to Section 4.16 of the Amended and Restated Investment Agreement, dated
June 5, 1996, as amended, by and between the Corporation and MEI Holdings, Inc.
("MEIH").
(b) Regardless of whether the shareholder
approval referred to in 8(a) above has been obtained, the holders of shares of
Series F Preferred Stock will have the right at any time to convert all or a
portion of such shares of Series F Preferred Stock into ten shares of Common
Stock under any of the following circumstances: (i) so long as the shares of
Series F Preferred Stock to be so converted are beneficially owned by a person,
entity or "group" within the meaning of Section 13(d) of the Securities Exchange
Act of 1934 (the "Exchange Act"), as amended (collectively, a "Person"), other
than, and which (if a "group") does not include, MEIH or any "affiliate" (within
the meaning of Rule 12b-2 under the Exchange Act) of MEIH (collectively, the
"MEIH Group"), unless, as of the time of transfer of the shares of Series F
Preferred Stock by any member of the MEIH Group to any Person who or which is
not a member of the MEIH Group, both (A) the restrictions set forth in Section
2.1 of the Standstill Agreement dated August 23, 1996 between the Company and
MEI continue to apply to limit ownership by MEI to less than a majority of the
Total Voting Power (as that term is defined in the Standstill Agreement) and (B)
such Person, after giving effect to such transfer, would be the "beneficial
owner" (as defined in Rule 13d-e under the Exchange Act, as in effect on the
Issuance Date) of a majority of the shares of capital stock of the Corporation
entitled to vote generally in the election of members of the Board (any such
shareholder, a "Controlling Shareholder"), (ii) by any member of the MEIH Group,
so long as after giving effect to such conversion, the MEIH Group, taken as a
whole, would not be a Controlling Shareholder, or (iii) with the approval of a
majority of the members of the Board who are not designated for election to the
Board by, or employed by any member of the MEIH Group or employed by the
Corporation or any subsidiary of the Corporation.
(c) The Corporation shall at all times reserve
and keep available, free from liens, charges and security interest and not
subject to any preemptive rights, for issuance upon conversion of the shares of
Series F Preferred Stock, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Series F Common Stock, and shall take all action
required to increase the authorized number of shares of Common Stock if
necessary to permit the conversion of all outstanding shares of Series F
Preferred Stock.
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<PAGE> 8
2.13 No Redemption. The shares of Series F Preferred Stock
shall not be redeemable.
2.14 Ranking. The Series F Preferred Stock shall rank junior to all
Senior Preferred which may be issued from time to time as to the payment of
dividends or other distributions or upon liquidation, dissolution or winding-up,
unless the terms of any such series shall provide otherwise.
2.15 Amendment. The Articles of Incorporation of the Corporation may
not be further amended in any manner, nor may the Corporation take any other
action, which would alter or change the powers, preferences or special rights of
the Series F Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series F Preferred Stock, voting separately as a class.
2.16 Fractional Shares. Series F Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series F Preferred
Stock.
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