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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 5, 1996
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Mountasia Entertainment International, Inc.
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(Exact name of registrant as specified in its charter)
Georgia 0-22458 58-1949379
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202-4182
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 442-6640
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ITEM 5. OTHER EVENTS.
Mountasia Entertainment International, Inc. (the "Company") has
entered into an Investment Agreement (the "Investment Agreement") dated June 5,
1996 with MEI Holdings, L.P., a Delaware limited partnership (the "Purchaser").
Under the Investment Agreement, the Company has agreed to sell to the Purchaser
for $40.0 million (i) a number of newly issued shares of the Company's Common
Stock equal to 44.44% of the Company's Common Stock outstanding immediately
following the closing of the transactions contemplated by the Investment
Agreement (the "Closing"), and (ii) a warrant (the "Warrant") allowing the
Purchaser to acquire (without payment of further consideration) additional
Common Stock to adjust for any post-Closing issuances of Common Stock under
existing commitments below 130% of the per-share investment price as of
the Closing. The Investment Agreement provides that if the Company seeks
additional equity capital within 18 months after the closing, it will use its
best efforts to raise such equity capital through one or more rights offerings
to holders of the Common Stock. Subject to applicable limitations in a
separate Standstill Agreement (a copy of which is attached as Exhibit D to the
Investment Agreement and is incorporated herein by reference), 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 all shares of the Common Stock not
purchased by distributees of rights. This commitment of Purchaser with
respect to rights offerings is limited to $30 Million.
The Closing is subject to various conditions, including the following:
(i) The repurchase from the holders thereof of all of the
Company's issued and outstanding Class D Preferred Stock of the
Company for the stated value thereof plus accumulated and unpaid
dividends, or for such other consideration as the Purchaser may
approve;
(ii) The confirmation from certain employees and option
holders that the transaction and related matters will not trigger
their rights under severance, option and other agreements;
(iii) The consummation of the transactions contemplated by
an existing agreement of the Company to purchase certain interests in
National Entertainment Funding, L.P.;
(iv) The reconstitution of the Company's Board of
Directors (as described below) to include representatives of the
Purchaser (one of whom would be designated as the Chairman of the
Board);
(v) The absence of any material adverse change in the
business, financial condition, results of operations or prospects of
the Company and its subsidiaries taken as a whole;
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(vi) The adoption of the management equity program
described below in substitution for the Company's existing management
equity plan and options thereunder;
(vii) The termination of certain financial advisory
agreements and of certain other arrangements relating to financings;
(viii) The reacquisition of the Company's domestic
intellectual property rights for not more than $2.1 million and the
confirmation that the Company has reacquired its international
intellectual property rights;
(ix) The completion (prior to July 1, 1996) to the
satisfaction of the Purchaser of its confirmatory due diligence
review, including in respect of the Purchaser's assumptions as to
financial, operational and legal matters);
(x) The amendment to the Company's By-laws as set forth
in Exhibit C to the Investment Agreement (including without limitation
changes with respect to the taking of action by written consent by the
Company's shareholders); and
(xi) The completion of the closing on or before July 24,
1996, subject to extension to not later than August 15, 1996 in the
event of litigation regarding the transaction.
Reference is made to Section 5.2 of the Investment Agreement (a copy of which
is filed as Exhibit 2 and is incorporated herein by reference) with respect to
the foregoing and other conditions to the Closing.
As a result of the foregoing conditions and other matters, including
matters which may be beyond the control of the Purchaser and the Company, there
can be no assurance as to whether, or the terms upon which, the transactions
contemplated by the Investment Agreement will be consummated.
The Investment Agreement also contains various provisions relating to
the conduct of the Company's business prior to the closing (sec. 4.1), the
Purchaser's access to information (sec. 4.2), limitations on the Company's
ability to solicit or negotiate other offers (sec. 4.5), indemnification
(sec. 4.12 & Article VI), termination (Article VII) and expenses (sec. 8.1),
all of which are incorporated herein by reference to the Investment Agreement
attached as Exhibit 2.
As an accommodation to the Company, MEI Financings, L.P., a Delaware
partnership affiliated with the Purchaser (the "Lender"), provided to the
Company a commitment letter pursuant to which the Lender agreed to provide an
aggregate of up to $33.0 Million under two multi-draw term loan facilities to
the Company. At the Closing, any portion of such financing may be forgiven to
pay the purchase price in lieu of cash. A copy of the foregoing commitment is
attached as Exhibit B to the Investment Agreement hereto and is incorporated
herein by reference.
Pursuant to the Investment Agreement, subject to the Closing, the
Purchaser has obtained the right to designate up to six members of the Company's
Board of Directors (which would be increased to 14 members), including the
Chairman of the Board. Pursuant to a Standstill Agreement to be entered into
at the Closing, the Purchaser will agree not to acquire beneficial ownership of
any company securities if after such acquisition the Purchaser would
beneficially own 50% or more of the Common Stock unless such acquisition has
received the prior approval of the members of the Board of Directors not
affiliated with the Purchaser or employed by the Company or any of its
Subsidiaries. A copy of the Standstill Agreement is attached as Exhibit D to
the Investment Agreement and is incorporated herein by reference.
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In addition, the Company has amended the Rights Agreement between the
Company and Continental Stock Transfer & Trust Company dated April 24, 1996
to add as an "Exempt Person" under that Agreement any person, or a transferee
thereof or of any such transferee, who acquires from the Company beneficial
ownership of 20% or more of the outstanding Common Stock subject to the terms
of an agreement approved by a majority of the members of the Company's Board of
Directors who are not either an Affiliate or an Associate (as defined in the
Rights Agreement) of such person.
In light of the Investment Agreement, the Company has terminated and
withdrawn the exchange offer dated March 29, 1996, as amended, without the
purchase of any Common Stock tendered for exchange pursuant thereto. The
Exchange Agent has been instructed to promptly return all shares of such Common
Stock tendered to the holders thereof.
The management equity program referred to in clause (vi) above would
provide for the reservation of approximately 2.25 million shares of Common
Stock for employee incentive programs. As of the Closing, the Company would
set up to 1.2 million shares (the "Initial Management Shares") at the per share
price paid by the Purchaser at the Closing to key employees designated by the
Compensation Committee of the Board (after reasonable consultation with the
Purchaser). Any such designee will be required to surrender all options held
by him/her in order to receive any Initial Management Shares. To fund the
purchase of the Initial Management Shares, the Company would make available to
employees a five-year recourse loan bearing interest at 8.5% per annum secured
by the stock being purchased. If an employee's employment with the Company
were terminated within five years of the Closing, the entire balance due under
such employee's financing would become due and payable and the Company would
have the right to repurchase all of such employee's Initial Management Shares
(plus accrued interest at 8.5% per annum) which have not "vested" according to
a five year schedule (in which no vesting occurs during the first two years).
Pursuant to agreements to be entered into at the Closing, each of L.
Scott Demerau and Julla Demerau will agree with the Company that they will not
sell the Common Stock beneficially owned by them prior to June 30, 1998 except
in certain circumstances. Such circumstances are set forth in the Management
Lock-up Agreement a copy of which is attached as Exhibit F to the Investment
Agreement and incorporated herein by reference.
Attached hereto as Exhibits and hereby incorporated herein by
reference are a conformed copy of the Investment Agreement between the Company
and the Purchaser, with certain exhibits and schedules thereto, and a press
release announcing the Investment Agreement and related transactions. The
foregoing description of the Investment Agreement and related documents does
not purport to be complete and is qualified in its entirety by reference to
such Exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
EXHIBIT 2 Investment Agreement
EXHIBIT A Warrant
EXHIBIT B Financing Commitment Letter
EXHIBIT C By-Law Amendments
EXHIBIT D Standstill Agreement
EXHIBIT E Registration Rights Agreement
EXHIBIT F Certain Management Agreements
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EXHIBIT 99 Press release
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
By: /s/ Gregory N. Waters
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Name: Gregory N. Waters
Title: Chief Financial Officer
Dated: June 19, 1996.
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EXHIBIT INDEX
EXHIBIT 2 Investment Agreement
EXHIBIT A Warrant
EXHIBIT B Financial Commitment Letter
EXHIBIT C By-Law Amendments
EXHIBIT D Standstill Agreement
EXHIBIT E Registration Rights Agreement
EXHIBIT F Management Lock-up Agreements
EXHIBIT 99 Press Release
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EXHIBIT 2
INVESTMENT AGREEMENT
Investment Agreement, dated as of June 5, 1996, 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
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 44.44% 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) Subject to Section 1.1(c), 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").
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 account of the Company designated by the
Company by written notice to the Purchaser at least five calendar days prior to
the Closing Date. Notwithstanding the foregoing, if the Purchaser makes
available to the Company any financing under the Interim Financing Facility
Commitment, then upon notice by the Purchaser up to the entire principal amount
thereof (plus accrued and unpaid interest thereon) may be forgiven by the
Purchaser in lieu of cash to pay a portion of the Purchase Price. If the
Closing occurs, any such election must be made prior to Closing; if this
Agreement is terminated, any such election must be made by September 1, 1996.
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1.3. Closing. The closing (the "Closing") of the purchase and
sale of the Securities will take place at the offices of Jones, Day, Reavis &
Pogue ("JDR&P"), 599 Lexington Avenue, New York, New York, at 10:00 a.m. local
time on July 2, 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) 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
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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.
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 standing or otherwise
authorized to transact business under the laws of the jurisdiction of its
organization, (ii) 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
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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.
(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
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prices of the Company's securities or changes in the Company's capitalization.
2.3. Validity of Shares, Etc. Each of the Shares and the
Warrant Shares 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 and upon exercise of the Warrant, from time to time,
as the case may be, the Purchaser will acquire good and valid title to the
relevant Shares and Warrant Shares, 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 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 any
subsequent transactions involving the Purchaser 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
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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 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
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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, 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.
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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) 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.
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(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
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
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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 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.
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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 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
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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.
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.
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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 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
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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;
(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; and
(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.
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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 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
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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.
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.
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
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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.
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.
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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 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, (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,
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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 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
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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 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
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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 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.
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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.
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.
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
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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 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.
(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
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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 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").
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(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 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 NASDAQ or, if
NASDAQ fails or declines to approve the Shares or the Warrant Shares to be so
eligible for trading or otherwise acts so that the Common Stock is not so
eligible for such trading (whether prior to or after the Closing), to cause all
of the Company's Common Stock, including the Shares and the Warrant Shares, to
be listed for trading on 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 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.
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V. CONDITIONS TO CLOSING
5.1. Closing 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 July 24, 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" 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 August
15, 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
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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, the consummation of the
transactions contemplated hereby, the reconstitution of the Board as
contemplated hereby, the amendment to the By-Laws of the Company contemplated
hereby and the Board's approval of the acquisition of the Shares and the
Warrant 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.
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(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.
(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
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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) Foothill. The commitment letter, as amended, for up
to $25 million of financing from Foothill Capital Corporation ("Foothill") to
the Company shall have been terminated or expired and the Company shall have no
liability or obligation (except for the obligation to indemnify Foothill on the
terms and subject to the conditions thereof) thereunder which shall not have
been previously discharged or satisfied in full on terms acceptable to the
Purchaser in its sole discretion.
(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) Due Diligence. Without limiting the generality or
effect of any other provision hereof, the Purchaser shall have completed its
due diligence review of the matters referred to in Schedule 5.2(o) to its
satisfaction, provided, however, that (i) in the event that the Purchaser
notifies the Company on or prior to July 1, 1996 that it is not so satisfied,
the parties will negotiate in good faith with respect to possible amendments
hereto in light of the matters as to which the Purchaser is not so satisfied
(neither the Purchaser nor the Company being liable to the other in the event
that they are unable to agree as to any such amendment) and (ii) if the
Purchaser does not give any such notice to the Company on or prior to July 1,
1996, then without further action this condition will be deemed to have been
waived.
(p) 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).
(q) Securities Law Filings. The Company and, if
applicable, the officers and directors of the Company shall have
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made such filings and taken such actions as the Purchaser reasonably requires
to ensure that the Company and its officers and directors are in compliance
with the filing requirements of the Exchange Act, including without limitation
any remedial filings or actions reasonably necessary to cure any previous
Exchange Act compliance deficiencies.
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.
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.
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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 indemnification under this Article IV
(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 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
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the resolution of the matter exceeds the rejected settlement amount, plus
attorneys' fees incurred to such date, will be 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
32
<PAGE> 33
hereunder. The procedures for and limits on indemnification in respect of the
obligations of the Purchaser under this Section 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) July 24, 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)
July 24, 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,
33
<PAGE> 34
however, that the right to terminate this Agreement under this Section 7.1(c)
will not be available to any party whose failure 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
34
<PAGE> 35
Purchaser or an Affiliate thereof advances any funds or acquires any
Indebtedness, pursuant to the Purchaser's Interim Financing 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
35
<PAGE> 36
(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.
36
<PAGE> 37
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.
37
<PAGE> 38
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/
-------------------------------
Name:
------------------------------
Title:
-----------------------------
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/
-------------------------------
Name:
------------------------------
Title:
-----------------------------
38
<PAGE> 39
EXHIBIT A
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 (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
Investment Agreement, by and between the Corporation and the Holder, dated June
5, 1996 ("Investment Agreement").
1. Automatic Exercise. The right represented by this
Warrant will be deemed automatically exercised under the occurrence of any
Dilutive Issuance (as defined in Section 2 below) without any notice being
given or other action being taken by the Holder. The Holder will not be
required to pay any consideration in connection with any such automatic
exercise of this Warrant (other than that paid prior to the date hereof). The
Corporation covenants that Holder will become treated for all purposes as the
holder of 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 that, within ten calendar days
after such date, certificates causing of Common Stock will be delivered by the
Corporation to the Holder.
2. Exercisability; Number of Shares. (a) This Warrant
will be deemed to have been exercised by the Holder upon any conversion or
exchange of any security outstanding on the date hereof, or any exercise of any
warrant, option or other right outstanding on the date hereof (other than this
Warrant), for a Consideration (as defined below) of less than the Trigger Price
as defined below). All such convertible or exchangeable securities, warrants,
options or rights are hereinafter called the "Subject Securities" and each such
issuance in accordance with the terms thereof for a consideration below the
Trigger Price is hereinafter called a "Dilutive Issuance". As used herein,
"Consideration" includes 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 such conversion, exchange
or exercise. The Corporation represents and warrants that, as of the date
hereof, Schedule A hereto contains a true and complete list of all Subject
Securities.
1
<PAGE> 40
(b) The number of shares which the Holder shall receive
("New Shares") in connection with any Dilutive Issuance will be determined by
the application of the following formula:
<TABLE>
<S> <C> <C>
New Shares = ( TC - TC ) X Holder Shares
--------- -------- --------------------
SP Trigger Price Outstanding Shares
</TABLE>
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 = 130% of the amount equal to (i) $40,000,000 divided
by (ii) the number of shares of Common Stock
purchased by the Holder pursuant to the Investment
Agreement at the closing thereunder.
Holder Shares = the total number of shares of Common Stock owned by
the Holder immediately after the closing under the
Investment Agreement, plus (i) the total number of
shares of Common Stock issued pursuant to this
Warrant and (ii) all shares of Common Stock received
by Holder in any stock split, stock dividend or other
distribution on any such shares; and
Outstanding = the number of shares of Common Stock issued
Shares and outstanding on the date immediately prior to the
record date of such Dilutive Issuance.
3. 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:
(a) If the Corporation (i) pays a dividend or
makes a distribution on the Common Stock in shares of Common
Stock or shares of the capital stock other than Common Stock,
(ii) subdivides the outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combines the
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (iv) issues any shares of its
capital stock in a reclassification of the Common 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 equitably adjusted so that after
such time the Holder will be entitled to receive following any
Dilutive Shares a number of shares of Common Stock recomputed
properly to give effect to such dividend, distribution,
subdivision, combination or issuance.
2
<PAGE> 41
(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 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 3, a holder of
this Warrant becomes entitled to acquire upon a Dilutive
Issuance any securities of the Corporation other than Common
Stock, thereafter the number of such other securities so
purchasable upon exercise of each 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 3.
(d) Whenever the kind or number of securities
receivable upon exercise of the Warrants is adjusted pursuant
to any of the provisions of this Section 3, 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 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 3. The provisions of this Section 3 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
3
<PAGE> 42
any substitutes or replacements herefor) may continue to
express the same provisions as are initially stated in this
Warrant.
4. Covenants. (a) All shares of Common 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 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.
5. Fractional Shares. No fractional shares of Common
Stock will be issued in connection with any issuance upon exercise of this
Warrant.
6. Term. This Warrant will expire upon the earlier of
(a) such time as the Holder no longer owns any shares of Common Stock and (b)
such time when no Subject Securities are any longer outstanding.
7. 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 identity of such person
giving such notice, the TC and SP with respect to such Dilutive Issuance and
the number of shares of Common Stock to be issued pursuant to this Warrant by
reason thereof.
8. 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.
9. 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 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. The Holder consents to the
Corporation's making a notation on its records in order to implement such
restriction on transferability.
10. 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)
4
<PAGE> 43
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.
11. 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 issued or deliverable upon exercise of this
Warrant.
12. 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.
13. 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):
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
5
<PAGE> 44
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.
14. Amendment. This agreement may be amended only by an
instrument in writing signed by the Corporation and the Holder.
15. 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.
16. 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 ___ day of ___________, 1996.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Attest:
- ----------------------------------
Name:
-----------------------------
Title:
----------------------------
6
<PAGE> 45
SCHEDULE A
(to be updated prior
to issuance of Warrant)
SUBJECT SECURITIES
Preferred Stock
<TABLE>
CLASS A PREFERRED NONVOTING STOCK
- ---------------------------------
<S> <C>
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.")
</TABLE>
7
<PAGE> 46
<TABLE>
<S> <C>
Automatic Conversation: None
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: 430
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
</TABLE>
8
<PAGE> 47
<TABLE>
<S> <C>
Redemption Price: [(.08)(N/365)(10,000)] x Closing Bid Price
-----------------
Conversion Price
CLASS C PREFERRED STOCK
- -----------------------
Shares authorized: 1,000
Shares outstanding: 500
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 purchase
price plus accrued dividends
</TABLE>
9
<PAGE> 48
<TABLE>
<S> <C>
CLASS D PREFERRED STOCK
- -----------------------
Shares authorized: 20,000
Shares outstanding: 5937
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 conversion (the "Market Price"),
provided however that the Conversion Price cannot be less than 70% of the
Market Price
At Company's Option: None
</TABLE>
10
<PAGE> 49
<TABLE>
<S> <C>
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 Company, in cash, Common Stock, or some combination of cash and
stock
Listing: The Company intends to apply for listing of the Class E preferred on the
Nasdaq
</TABLE>
11
<PAGE> 50
Convertible Debt and Existing Options and Warrants
Convertible Debt:
- ----------------
<TABLE>
<CAPTION>
Current
Balance
--------------
<S> <C>
Cole Young World-Convertible Mortgage Note $2,170,000
9% Convertible Subordinated Debenture $5,650,000
10% Convertible Subordinated Debenture $4,184,289
</TABLE>
Existing Warrants:
- -----------------
<TABLE>
<CAPTION>
# of Shares Exercise Expiration
Outstanding Price per share Date
------------------- ------------------- -------------------
<S> <C> <C> <C>
Schwartz (Fee for 10% sub-debt 2/95) 38,138 $ 5.13 Sep-00
Schwartz (Fee for 10% sub-debt 12/95) 43,931 $ 8.70 Sep-00
Schwartz (Class A 2/96) 69,517 $ 8.70 Sep-00
Schwartz (Class A 2/96) 41,617 $ 5.13 Sep-00
Allen & Co. (Financial Advisor Fee) 180,000 $ 9.00 Jun-05
Allen & Co. (Financial Advisor Fee) 270,000 $12.25 Jun-05
Commonwealth 11/93 * 425,750 $ 9.30 Nov-98
Malibu Grand Prix 3/94 * 61,461 $ 9.76 Mar-99
Kerr Worthy (Capital Trust) * 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
Langland Bay (NEF) * 18,739 $ 6.54 1,658
Furman Selz 150,000 $ 6.25 Nov-05
Feltman 15,800 $ 5.50 Feb-01
-----------
1,861,950
* MOUNTASIA TO DESCRIBE ANTI-DILUTION ADJUSTMENTS
</TABLE>
12
<PAGE> 51
<TABLE>
<CAPTION>
# of Shares Exercise Expiration
Existing Options: Outstanding Price per share Date
---------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Mountasia Incentive Stock Option Plan 106,400 $ 8.00
Mountasia Incentive Stock Option Plan 32,400 $7.25 - $12.50 Mar-98
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
Ralph C. Dilorio 21,945 $ 5.47 Jan-05
Ervin E. Lewis, Sr. (Director Options) 25,000 $ 7.53 Jan-05
William M. Kearns (Director Options) 25,000 $ 7.53 Jan-05
Bert W. Wasserman (Director Options) 25,000 $ 7.53
Steven A. Cunningham (Director Options) 25,000 $ 7.53 Jan-05
Non-employee Stock Option Plan 3,000 Market 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
-----------
1,044,025
</TABLE>
13
<PAGE> 52
EXHIBIT B
MEI FINANCINGS, L.P.
4200 Texas Commerce Tower
Dallas, Texas 75201
June 5, 1996
Mountasia Entertainment International, Inc.
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30202
Attention: Mr. Scott Demerau
Chief Executive Officer
Re: Financing Commitment
Ladies and Gentlemen:
Mountasia Entertainment International, Inc. (the "Borrower")
has requested MEI Financings, L.P. (the "Lender") to provide an aggregate of up
to $33,000,000 under two multi-draw term loan facilities (collectively, the
"Facility") to the Borrower which would provide, in part, for the purchase by
the Lender from NationsBank of the outstanding indebtedness of the Borrower and
of its affiliate, National Entertainment Funding, L.P. ("NEF"), to NationsBank
in an aggregate amount specified in the Statement of Terms and Conditions (the
"Term Sheet") attached as Annex A to this letter.
Lender is pleased to advise you that it is willing to provide
the Facility on the principal terms and conditions set forth in the Term Sheet.
The parties acknowledge that Lender is making such commitment solely as an
accommodation to Borrower in connection with ongoing discussions of a possible
substantial equity investment in Borrower (the "Proposed Equity Investment") by
MEI Holdings, L.P. ("MEIH").
Upon your execution and delivery of this letter, the Lender
shall deposit into the MEIF Escrow Closing Subaccount (as defined in the Escrow
Subaccount Agreement, dated as of June 5, 1996 (the "Escrow Agreement"), among
you, the Lender and Jones, Day, Reavis & Pogue) $11,842,862.98 in immediately
available funds to be released to you as Term Loans (as defined in the Term
Sheet) or otherwise applied in accordance with (and subject to the conditions
set forth in) the terms of the Escrow Agreement and this letter.
<PAGE> 53
You agree to assist the Lender, promptly upon request, with
all information deemed necessary by it to complete the documentation for the
Facility.
You represent and warrant and covenant that all information
which has been or is hereafter made available to MEIH or the Lender by you or
any of your representatives in connection with the transactions contemplated
hereby is and will be complete and correct in all material respects and does
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which
such statements are made and that there is no fact or circumstance, the
existence of which could have a material adverse effect on the financial or
other condition, business, operations or prospects of the Borrower or NEF, that
has not been fully disclosed to MEIH or the Lender prior to the execution and
delivery of this letter and each other Debt Financing Document (as defined
below). You agree to supplement the information referred to above from time to
time promptly so that the representations and warranties in the preceding
sentence remain correct (including with respect to information hereafter made
available).
The Lender's commitment is subject to the conditions precedent
described in the Term Sheet. Subject to the terms hereof (including the Term
Sheet) and the Escrow Agreement, funds for the NationsBank Purposes (as defined
in the Term Sheet) will be available to the Borrower immediately after the
execution of and the closing of the transactions under documentation relating
thereto with NationsBank and execution of the Investment Agreement.
The Borrower agrees, as a condition to this commitment and
MEIH's and the Lender's respective obligations under the Facility and the Debt
Financing Documents, if any, that (i) at the Lender's request, it will accept
any refinancing of the Facility from any third party that is on terms that, in
the aggregate, are not materially less favorable than those governing the
proposed Foothill debt financing (including Warrants) and will pay to any
proposed refinancing entity normal commitment fees other customary in
financings of that type not to exceed 2% of the maximum amount of the
refinancing facility and other customary up-front fees, (ii) the NationsBank
debt will be consolidated under the Facility and will, together with all other
obligations under the Facility, be collateralized on the terms set forth in the
Term Sheet, (iii) if MEIH does not close on its equity investment under the
Investment Agreement (as defined in the Term Sheet) for any reason other than a
default by MEIH, the Borrower will immediately proceed to use its best efforts
to refinance the Facility, (iv) if the Borrower agrees to accept from any
person or entity (other than MEIH or any affiliate), an equity investment, (1)
all amounts owing under the Facility will become due and payable in full upon
closing of such investment proposal and all commitments to lend under the
Facility will terminate upon acceptance of any such proposal and (2) Lender
will assign the Facility and any related documents to any person or entity
designated by Borrower upon payment to Lender of all such amounts, (v) Borrower
will negotiate in good faith to reach definitive Debt Financing Documents, and
(vi) Borrower will reimburse any refinancing entity or proposed refinancing
entity for all of their respective out-of-pocket
2
<PAGE> 54
costs and expenses in connection with the Facility and any refinancing thereof,
and provide such entity with an indemnification with respect to any third party
claims and expenses related to the foregoing no less favorable to such entity
than the indemnification provisions set forth hereinafter in this letter; and
default in any of the foregoing, or in any representation, warranty or other
agreement contained elsewhere in this letter, will constitute a default under
the Facility.
The Borrower agrees to pay on demand (i) all costs and
expenses of MEIH and the Lender in connection with the preparation, execution,
delivery, administration, modification and amendment of this letter and all
agreements and documents relating to the Facility (all of the foregoing,
collectively, the "Debt Financing Documents") (including, without limitation,
(A) all due diligence, collateral review, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of
counsel, accountants and other professional advisors to MEIH or the Lender with
respect thereto, with respect to advising MEIH or the Lender as to its rights
and responsibilities, or the perfection, protection or preservation of rights
or interests, under the Debt Financing Documents, with respect to negotiations
with the Borrower or NEF or any of their respective affiliates (all of the
foregoing, collectively, the "Loan Parties") or with other creditors of any
Loan Party arising out of any default or any events or circumstances that may
give rise to a default and with respect to presenting claims in or otherwise
participating in or monitoring any bankruptcy, insolvency or other similar
proceeding involving creditors' rights generally and any proceeding ancillary
thereto) and (ii) all costs and expenses of MEIH and the Lender in connection
with the enforcement of the Debt Financing Documents, whether in any action,
suit or litigation, or any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally (including, without limitation, the
reasonable fees and expenses of counsel for MEIH and the Lender with respect
thereto). In addition, the Borrower will pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of the Debt Financing Documents and agrees to save MEIH and the Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or failure to pay such taxes.
The Borrower agrees to indemnify and hold harmless MEIH and
the Lender and each of their respective affiliates and their respective
officers, directors, partners, employees, agents and advisors (each, an
"Indemnified Party") from and against any and all claims, damages, losses
(including, without limitation, economic and investment losses), liabilities
and expenses (including, without limitation, reasonable fees and expenses of
counsel and any loss of investment under any Debt Financing Document or the
Proposed Equity Investment or any agreements relating thereto) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with, (i) the Facility, the actual
or proposed use of the proceeds of the loans thereunder, the Debt Financing
Documents, the Proposed Equity Investment referred to above or any agreements
relating thereto, or any of the transactions contemplated hereby
3
<PAGE> 55
or thereby, including, without limitation, any acquisition or proposed
acquisition by the Borrower or any of its subsidiaries or other affiliates of
all or any portion of the stock or the assets of any person or entity or (ii)
the actual or alleged presence of hazardous materials on any property of the
Borrower or NEF or any of their respective subsidiaries or other affiliates or
any investigation, litigation or proceeding, under or relating to any
environmental law or regulation, relating in any way to the Borrower or NEF or
any of their respective subsidiaries or other affiliates, in each case whether
or not such investigation, litigation or proceeding is brought by or against
any Indemnified Party or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby or by any of the other Debt
Financing Documents or such Proposed Equity Financing are consummated, except
to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
primarily resulted from such Indemnified Party's gross negligence or willful
misconduct or (iii) any investigation, litigation or proceeding brought or
commenced against the Borrower or NEF or any subsidiary or other affiliate
thereof by any person or entity (including without limitation any governmental
authority) other than MEIH or the Lender relating to any negligent act or
omission, or any violation of any law, rule or regulation, by the Borrower or
NEF or any subsidiary or other affiliate thereof or any shareholder, officer,
director, employee or affiliate thereof and any losses or liabilities of the
Borrower or NEF or any subsidiary or other affiliate thereof arising from or
related to the foregoing. The Borrower also agrees not to assert any claim
against MEIH or the Lender or any of their subsidiaries or other affiliates, or
any of their respective officers, directors, partners, employees, attorneys and
agents, or any affiliate of any thereof, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or
otherwise relating to the Facility, the actual or proposed use of the proceeds
of the loans thereunder, or the Debt Financing Documents, or the Proposed
Equity Investment or any agreement relating thereto, or any of the transactions
contemplated hereby or thereby.
Without prejudice to the survival of any other agreement of
the Borrower hereunder or under any other Debt Financing Document or any other
agreement between MEIH and/or the Lender and the Borrower and/or NEF or any
other person or entity, the agreements and obligations of the Borrower
contained in the preceding two paragraphs will survive the payment in full of,
and/or the conversion to equity of, principal, interest and all other amounts
payable under any of the other Debt Financing Documents and any termination of
this letter or any other Debt Financing Document or any commitment hereunder or
under any other Debt Financing Document, and the Borrower shall remain bound
thereby.
This letter is delivered to you on the understanding that
neither this letter nor any of its terms or substance shall be disclosed
without our prior written consent, directly or indirectly, to any other person
except to your employees, agents and advisers who are directly involved in the
consideration of this matter or to NationsBank or as disclosure may be
compelled in a judicial or administrative proceeding or as otherwise required
by law.
4
<PAGE> 56
If you are in agreement with the foregoing, please sign and
return to MEIH the enclosed copies of this letter no later than 5:00 p.m., New
York time, on June 12, 1996. This offer shall terminate at such time unless
prior there to we shall have received signed copies of such letter.
We look forward to working with you on this transaction.
Very truly yours,
MEI FINANCINGS, L.P.
By: MEI Financings GenPar, L.P. a Delaware
limited partnership, general partner
By: HH GenPar Partners, a Texas general
partnership, general partner
By: Hampstead Associates, Inc.,
a Texas corporation, general
partner and co-manager
By:
-------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By:
----------------------------
Name: Scott Demerau
Title: Chief Executive Officer
5
<PAGE> 57
Annex A
Statement of Terms and Conditions
I. Amount and Terms of Facility
Borrower: Mountasia Entertainment International, Inc.
(the "Borrower")
Lender: MEI Financings, L.P. (the "Lender")
Type of Facilities: Multi-draw, non-revolving term loan
facilities (the "Facilities")
Amount of Facilities: $33,000,000 in aggregate amount,
available pursuant to two separate facilities
as follows:
(1) Basic Facility - The aggregate
amount of Term Loans (defined below)
drawable under the Basic Facility is
$23,500,000. The aggregate amount
of Term Loans drawable under the
Basic Facility for Basic Purposes is
$18,000,000.
(2) Conversion Facility - The aggregate
amount of Term Loans drawable under
the Conversion Facility is
$9,500,000.
Availability: Loans (the "Term Loans") will be available
under the Facilities in one or more drawings
to be made prior to February 28, 1997 (the
"Expiration Date").
Maturity: The Term Loans will be repayable in a single
payment due January 2, 1998 (such date, or
the date to which the maturity of the Term
Loans may be extended as provided below, the
"Maturity Date"). The Maturity Date may be
extended for one six-month period on the
condition that (i) the Borrower has used its
best efforts to refinance the Term Loans
outstanding under the Facility during the
period preceding any such extension but has
failed to do so, (ii) on the date of any such
extension and after giving effect thereto no
default or event of default shall have
occurred and be continuing and (iii) the
Borrower has paid the Extension Fee of 25
basis points on the outstanding principal
amount of the Term Loans for such extension.
Purposes: The Facilities will be available for the
following purposes subject to the limitations
set forth hereinafter:
<PAGE> 58
"NationsBank Purposes" means the following:
(1) Acquisition (at par) by the Lender
of debt outstanding under the
Borrower's $13,000,000 and
$10,000,000 NationsBank facilities
in an aggregate amount not to exceed
$8,500,000 plus accrued and unpaid
interest and fees and all other
amounts owing under such facilities.
(2) Acquisition (at par) by the Lender
of the note held by NationsBank
under the $5,000,000 facility with
National Entertainment Funding, L.P.
("NEF") in an aggregate amount not
to exceed $2,800,000 plus accrued
and unpaid interest and fees and all
other amounts owing under such
facility.
"Basic Purposes" means the following:
(1) The NationsBank Purposes.
(2) To fund the redemption of up to 30%
of (x) the outstanding shares of the
Borrower's Class B Preferred Stock
and (y) the outstanding principal
amount of the Borrower's 10%
Convertible Subordinated Debentures,
in an aggregate amount (including in
the case of clause (y) principal and
accrued unpaid interest) under this
item (2) not to exceed $3,000,000.
(3) The refinancing (at par) of the Note
issued by the Borrower in connection
with the Borrower's acquisition of
the Houston, Texas Katy Freeway
Family Entertainment Center in an
aggregate amount (including
principal and accrued unpaid
interest) not to exceed $1,909,000.
(4) To repurchase up to 200,000 shares
of the Borrower's common stock from
a previous holder of the Borrower's
Class B Preferred Stock at the then
current market price for such common
stock, such repurchase to be made as
promptly as practicable.
(5) General working capital purposes in
an amount not to exceed the lesser
of (a) $1,800,000 and (b) an amount
equal to the excess of (x)
$18,000,000 over (y) the aggregate
principal amount of Term Loans drawn
for the purposes set forth in
clauses (1), (2), (3) and (4) above.
2
<PAGE> 59
"Conversion Purposes" means payments in
respect of redemptions of (a) the outstanding
shares of the Borrower's Class B Preferred
Stock in excess of payments made pursuant to
subclause (x) of clause (2) under "Basic
Purposes" above, (b) the outstanding shares
of the Borrower's Class D Preferred Stock,
(c) the outstanding shares of the Borrower's
Class C Preferred Stock and (d) the
outstanding principal amount of the
Borrower's 10% Convertible Subordinated
Debentures in excess of payments made
pursuant to subclause (y) of clause (2) under
"Basic Purposes" above, in the case of
clauses (a) through (d) above, inclusive, in
an aggregate amount up to $9,500,000, and
provided that the Conversion Facility shall
be available for the purposes set forth in
clauses (a) and (d) above only after the
Borrower shall have exhausted the
availability of the Basic Facility for the
purposes set forth in clause (2) under "Basic
Purposes."
"Expanded Purposes" means the following:
(1) Those permitted uses of proceeds
specified under Section 7.16 of the
draft form of proposed Consolidated,
Amended and Restated Loan and
Security Agreement with Foothill
Capital Corporation delivered to MEI
Holdings, L.P. ("MEIH") on June 3,
1996 and not constituting one of the
Basic Purposes or Conversion
Purposes.
(2) The repayment (at par) of the
subordinated seller financing
relating to the Spartanburg, S.C.
Family Entertainment Center and
known as the "Young World of
Spartanburg Note" in an aggregate
amount (including principal and
accrued unpaid interest) not to
exceed $2,170,000.
Basic Facility Limits. Term Loans under the
Basic Facility may be drawn solely for Basic
Purposes until Borrower satisfies the Special
Covenant referred to in Part III below.
Thereafter, Term Loans under the Basic
Facility may be drawn solely for Basic
Purposes and Expanded Purposes.
Conversion Facility Limits. During the
period (the "Due Diligence Period") from the
date of execution by MEIH and the Borrower of
the definitive investment agreement (the
"Investment Agreement") governing the
Proposed Equity Investment (as defined in the
commitment letter attached hereto) through
July 1, 1996, and prior to the occurrence of
a
3
<PAGE> 60
Termination Event (as defined herein), Term
Loans under the Conversion Facility may be
drawn solely for Conversion Purposes.
Following a Termination Event, Term Loans
under the Conversion Facility may be drawn
solely for Conversion Purposes as to which
the Borrower has, prior to the Termination
Event, entered into an irrevocable
contractual commitment to fund. Upon the
Equity Closing (as defined herein), the
Conversion Facility shall automatically
terminate and no additional Term Loans may be
drawn thereunder and all Conversion Purposes
shall thereafter be funded from equity
proceeds.
II. General Provisions
Interest Rate: Prime Rate + 1%. Prime Rate to be
NationsBank's prime rate, so long as the
Lender (or any financial institution that
does not itself publish a prime rate) holds
the Term Loans, otherwise the prime rate
published by the financial institution
holding the Term Loans.
Interest Payment
Dates: Interest to be paid monthly, in arrears.
Overdue Rate: Overdue principal, interest, fees and other
amounts will bear interest at the Prime Rate
+ 3%.
Collateral: The Facility and all guaranties thereof will
be (to the same extent proposed in the
Foothill facility, and with the exceptions
agreed to in connection therewith) secured by
a perfected first priority security interest
and lien on all real and personal property
(wherever located) of the Borrower and its
direct and indirect subsidiaries and of NEF
and its direct and indirect subsidiaries, if
any, after the acquisition, if any, thereof
and prior thereto if permitted under NEF's
organizational documents.
Additionally, the Borrower's obligations
under the Note Purchase Agreement relating to
the $5,000,000 NationsBank facility with NEF
shall be cross-collateralized with all
collateral securing the Facility.
Guaranties: All obligations of the Borrower under the
Facility will be unconditionally guarantied
by each of the Borrower's direct and indirect
subsidiaries and by NEF and its direct and
indirect subsidiaries if permitted under
NEF's organizational documents.
4
<PAGE> 61
Rate Basis: 360 days for actual days elapsed.
Optional
Prepayments: Without premium or penalty.
Mandatory
Prepayments: Net proceeds of asset sales.
Funding Mechanics: Term Loans will be available pursuant to a
Notice of Borrowing given by the Borrower to
the Lender at least three Business Days prior
to the proposed borrowing date specifying the
proposed borrowing date, the amount of the
borrowing, the applicable Facility and the
permitted purpose to which the proceeds
thereof are to be applied. Proceeds of each
Term Loan (other than any Term Loan drawn for
general working capital purposes as provided
in and subject to the limitations set forth
in clause (5) under "Basic Purposes") shall
be applied to the applicable permitted
purpose within two Business Days following
the date of such loan.
III. Special Covenant
Within 10 days after the execution of the Investment Agreement by the
Borrower and MEIH, the Borrower shall (x) execute and deliver to the
Lender documentation (the "Debt Financing Documents") governing the
Facilities in form and substance satisfactory to the Lender, such
documentation (i) to be in substantially the form of the drafts of the
proposed Foothill documents delivered to the Lender prior to the date
hereof (subject to modifications necessary to reflect the change in
lender from Foothill to the Lender and the other terms set forth
herein and other technical and "clean-up" changes requested by the
Lender not materially adverse to the Borrower), (ii) to provide
collateral co-extensive with and on the same terms and conditions as
that proposed under the Foothill documents (but to include in any
event the Houston, Texas Katy Freeway Family Entertainment Center and
all other property subject to a lien securing any indebtedness
refinanced or acquired with proceeds of the Term Loans), and (iii) to
include conditions to borrowing typical for facilities of this type
and substantially the same as those in the proposed Foothill documents
delivered to the Lender prior to the date hereof (subject to
modifications necessary to reflect the change in lender from Foothill
to the Lender and the other terms set forth herein and other technical
and "clean-up" changes requested by the Lender not materially adverse
to the Borrower) and (y) deliver all such documents and instruments,
including without limitation, all such UCC financing statements, and
take all such other actions, as are necessary to provide the Lender
with a perfected first-priority lien on all such collateral, as
contemplated in the Foothill documents and hereby. The Lender agrees
to waive specified financial covenant defaults existing under the
NationsBank debt to be acquired by the Lender as provided under
"NationsBank Purposes" for the 10-day period referred to in the
preceding sentence. Pending entry into the Debt Financing
5
<PAGE> 62
Documents required pursuant to the foregoing provisions, such
NationsBank debt shall continue to be governed by the NationsBank
documents, as amended in connection herewith.
IV. Conditions to Term Loans
All Term Loans
for NationsBank
Purposes: (1) Borrower and MEIH shall have entered
into the Investment Agreement; and
(2) NationsBank and the Lender shall
have entered into, and the closing
shall have occurred under, a
Purchase and Sale Agreement in form
and substance satisfactory to the
Lender, it being understood and
agreed that the form of the draft
Purchase and Sale Agreement between
NationsBank and Foothill delivered
to MEIH prior to the date hereof is
satisfactory to the Lender.
All Term Loans other
than for NationsBank
Purposes: (1) Borrower and MEIH shall have entered
into the Investment Agreement;
(2) Satisfaction of Special Covenant
(above); and
(3) Satisfaction of conditions precedent
set forth in the Debt Financing
Documents (per clause (x)(iii) of
Special Covenant above);
provided, however, that, upon satisfaction of
the conditions applicable to the availability
of Term Loans for NationsBank Purposes but
prior to the satisfaction of the foregoing
conditions applicable to the availability of
Term Loans other than for NationsBank
Purposes, Term Loans shall be available under
the Conversion Facility solely for the
purpose of funding unsolicited redemptions of
shares of the Borrower's Class C and Class D
Preferred Stock that are, in each case, made
on the last day permitted for such
redemptions under the terms of the
instruments providing for the designation of
such securities.
V. Representations and Warranties, Covenants and Events of Default.
Representations
and Warranties: As provided in the Foothill documentation and
herein.
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<PAGE> 63
Affirmative
Covenants: As provided in the Foothill documentation and
herein.
Negative
Covenants: As provided in the Foothill documentation.
Financial
Covenants: As provided in the Foothill documentation (to
be adjusted appropriately at the Lender's
request to reflect the equity infusion
pursuant to the Investment Agreement and the
extension of credit under the Facilities in
an aggregate principal amount in excess of
$23.5 million).
Events of
Default: As provided in the Foothill documentation and
herein.
VI. Certain Other Provisions.
Conversion to Equity
at Closing of Equity
Investment: Principal: Upon the closing of the Proposed
Equity Investment as contemplated by the
Investment Agreement (the "Equity Closing"),
the Lender may, at its option, elect to
convert to common equity of the Borrower at a
conversion price of 0.1111% of the total
common shares of the Borrower per $100,000 of
principal converted (the "Conversion Price")
all or any portion of the aggregate principal
amount of Term Loans outstanding under the
Facilities as of the date of the Equity
Closing. At the time of any such conversion,
the amount of any accrued and unpaid interest
in respect of the principal amount so
converted shall become due and payable.
Unfunded Commitments: Upon the Equity
Closing, the Lender may, at its option, elect
to reduce or terminate any or all of the then
unfunded commitments under the Facilities.
Conversion to Equity
at Termination of
Investment Agreement: If, prior to the Equity Closing, MEIH shall
notify the Borrower of its election to
terminate the Investment Agreement or if the
Investment Agreement shall otherwise
terminate in accordance with its terms (each,
a "Termination Event"), the Lender may, at
its option, (x) within 10 days after such
Termination Event, elect to convert to common
equity of the Borrower at the
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<PAGE> 64
Conversion Price all or any portion of the
aggregate principal amount of Term Loans
outstanding under the Conversion Facility as
of the Termination Event and (y) within 10
days of the making of each Term Loan under
the Conversion Facility following a
Termination Event, elect to convert to common
equity of the Borrower at the Conversion
Price all or any portion of the principal
amount of such Term Loan. At the time of any
such conversion, the amount of any accrued
and unpaid interest in respect of the
principal amount so converted shall become
due and payable.
Anti-Dilution: Any conversion of Term Loans to equity
securities as provided above shall be made
pursuant to documentation providing
anti-dilution protections satisfactory in
form and substance to the Lender and
consistent with those in the Investment
Agreement.
Governing Law: State of New York.
Indemnities
and
Reimbursements: The Borrower will reimburse and indemnify and
hold harmless the Lender and its partners,
directors, officers, employees and agents for
and against any loss, liability, cost or
expense incurred in respect of the financing
contemplated hereby or the use of proceeds
hereunder.
No Commitments: No purchase by the Lender of any debt of the
Borrower outstanding under any NationsBank
facility shall result in the acquisition or
assumption by the Lender of any commitment or
other obligation to extend credit to the
Borrower or any other person under any such
facility except as provided herein.
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<PAGE> 65
EXHIBIT C
By-Law Changes
The Company's By-Laws will be amended as follows as of the
Closing:
1. Action by Consent. Section 2.6 will be amended by
inserting immediately after the words "without a meeting" the following phrase:
"(including without limitation any action permitted by Section 3.8 hereof)."
2. Notice of Action by Consent. Section 2.10 will be deleted
in its entirety.
3. Removal of Director. Section 3.8 will be amended by
inserting the following phrase at the end thereof: "and provided further that
any action which shareholders are permitted by this Section to take at a
meeting may also be taken by written consent in accordance with Section 2.6
above."
4. Number of Directors. The phrase "and no more than nine
(9) members" will be deleted and replaced by the phrase "and no more than 14
directors."
5. Committees. (a) Section 3.7 will be amended by changing
the phrase "three or more Directors" to read "three directors."
(b) The second sentence of Section 3.7 will be amended
and restated in its entirety as follows. "The Board of Directors may designate
one or more other directors to act as alternate directors on any such committee
and, in the absence of the director as to whom such other director is
designated as an alternate, such alternate directors (in the order designated
by the Board of Directors) may vote and otherwise act as if such alternate
directors were members of the committee designated as such by the Board of
Directors."
(c) The fifth sentence of Section 3.7 will be amended by
inserting the following phrase at the end thereof: "provided, however, that
any committee which has the power to exercise any authority of the Board of
Directors may determine its action only with the approval of each member of the
committee (or such person's designated alternate)."
6. Indemnification. Article VII will be deleted and restated
in its entirety as follows:
<PAGE> 66
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. The Company shall indemnify
any individual who was, is, or is threatened to be made a named defendant or
respondent to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether formal or
informal because he is or was a director, officer, employee or agent of the
Company or an individual who, while a director, officer, employee or agent of
the Company, is or was serving at the Company's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
against liability incurred in the proceeding if he acted in a manner he believed
in good faith to be in or not opposed to the best interests of the Company and,
in the case of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful. The termination of a proceeding by judgment, order,
settlement, conviction, or a plea of nolo contendere or its equivalent, is not,
of itself, determinative that the director, officer, employee or agent of the
Company did not meet the standard of conduct set forth in the immediately
preceding sentence. No indemnification, however, shall be made in favor of any
director in connection with a proceeding by or in the right of the Company in
which the director was adjudged liable to the Company or in connection with any
other proceeding in which he was adjudged liable on the basis that personal
benefit was improperly received by him. Indemnification in connection with a
proceeding by or in the right of the Company shall be limited to reasonable
expenses (including attorneys' fees) incurred in connection with the proceeding.
7.2. Determination of Indemnification. Unless
ordered by a court, the Company shall not indemnify a director, officer,
employee or agent under Section 7.1 unless authorized in the specific case upon
a determination that indemnification of the director, officer, employee, or
agent is permissible in the circumstances because he has met the applicable
standard of conduct set forth in Section 7.1. The determination shall be made:
(i) by the Board of Directors by a majority vote of
a quorum consisting of directors not at the time parties to
the proceeding; or
(ii) if such a quorum is not obtainable, by majority
vote of a committee duly designated by the Board of Directors
(in which designation directors who are parties may
participate), consisting solely of two or more directors not
at the time parties to the proceedings;
<PAGE> 67
(iii) by special legal counsel:
(A) selected by the Board of Directors
or its committee in the manner described in
paragraph (i) or (ii) of this Section 7.2; or
(B) if a quorum of the Board of
Directors cannot be obtained under paragraph
(i) of this Section 7.2 and a committee
cannot be designated under paragraph (ii) of
this Section 7.2, then selected by majority
vote of the full Board of Directors (in which
selection directors who are parties may
participate); or
(iv) by the shareholders, but shares owned by or
voted under the control of directors who are at the time
parties to the proceeding may not be voted on the
determination. Authorization of indemnification or an
obligation to indemnify and an evaluation as to reasonableness
of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that
if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled
under paragraph (iii) of this Section 7.2 to select counsel.
7.3 Successful Defense. To the extent that a
director, officer, employee, or agent of the Company has been
successful, on the merits or otherwise, in defense of any action, suit
or proceeding referred to in Section 7.1 or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
7.4 Advance Payment. The Company shall pay for or
reimburse the reasonable expenses incurred by a director, officer,
employee or agent who is an individual who was, is, or is threatened
to be made a named defendant or respondent to a threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal in
advance of the final disposition of the proceeding if such person
furnishes the Company both a written affirmation of his good-faith
belief that he has met the standard of conduct set forth in Section
7.1 and a written undertaking, executed personally or on his behalf,
to repay any advances if it is ultimately determined that he is not
entitled to indemnification by the Company as authorized in this
Article.
<PAGE> 68
7.5 Survival of Indemnification Following Death or
Termination. The right to indemnification and advancement of expenses
provided by or granted pursuant to this Article VII shall, continue as
to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
7.6 Non-Exclusivity. The indemnification and advancement of
expenses provided by this Article VII shall not be deemed exclusive
of any other rights to which a person seeking indemnification may be
entitled under any article of incorporation, by-law, agreement, note
of shareholders or directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office.
7. Amendments. Article VIII will be amended by the addition
of the following sentence at the end thereof: "Notwithstanding the foregoing,
any alteration, amendment or repeal of any provision of Article II, III or VII
of these By-Laws, and the adoption of any By-Law inconsistent with any
provision of said Articles II, III and VII may be approved only by the
affirmative vote of at least two thirds of all members of the Board of
Directors or of the holders of shares having at least two-thirds of the voting
power with respect such alteration, amendment, repeal or adoption."
<PAGE> 69
EXHIBIT D
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT, dated as of _____ __, 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 (the "INVESTMENT AGREEMENT"), dated June 5, 1996, 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 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. 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
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:
<PAGE> 70
(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) "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 the Investment Agreement, the Warrant
Agreement [or the Credit Facility].
(h) "SECURITIES ACT" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(i) "SUBSIDIARY" means a subsidiary within the
meaning of Rule 405 under the Securities Act.
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<PAGE> 71
(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.
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
(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.
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<PAGE> 72
2.3. NO BREACH. The Purchaser will not be deemed to have
breached the terms of Section 2.1 above if Restricted Securities beneficially
owned by it exceed the percentage limitation set forth in Section 2.1 due to
any reduction in Total Voting Power.
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 down to the next lowest number) to the Purchaser's then-
beneficial ownership of outstanding Voting Securities in relation to the then
Total Voting Power ("Proportional"); 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 of such persons be less than two and
(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.
(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
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<PAGE> 73
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.
IV. TERMINATION
4.1. TERMINATION. This Agreement will terminate 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
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<PAGE> 74
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 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.
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.
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<PAGE> 75
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,
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
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<PAGE> 76
provided will be cumulative and not exclusive of any rights or remedies
provided by law.
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.
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<PAGE> 77
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:
-------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
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:
-----------------------------------
Name:
--------------------------------
Title:
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EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made
and entered into as of ______ __, 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
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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 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
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"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 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
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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.
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
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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 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).
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(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 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.
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(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 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
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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).
(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
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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.
(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
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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 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.
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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
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
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<PAGE> 89
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, 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.
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<PAGE> 90
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 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
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<PAGE> 91
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.
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
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<PAGE> 92
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.
(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.
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<PAGE> 93
(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 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.
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<PAGE> 94
(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> 95
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 96
EXHIBIT F
_________ __, 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.
--------------------------------
L. Scott Demerau
<PAGE> 97
EXHIBIT F
_________ __, 1996
Mountasia Entertainment
International, Inc.
5895 Windward Parkway
Suite 220
Alpharetta, Georgia 30202-4128
Ladies and Gentlemen:
The undersigned is a 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.
----------------------
Julia Demerau
<PAGE> 1
EXHIBIT 99
[MOUNTASIA
ENTERTAINMENT
INTERNATIONAL, INC.
LOGO]
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC. TO RECEIVE
$40 MILLION COMMON STOCK INVESTMENT
ATLANTA, June 6 /PRNewswire/ -- Mountasia Entertainment International, Inc.
(Nasdaq-NNM: FUNN) announced today that it had entered into an agreement
pursuant to which an outside investment group will invest $40 million in the
Company. Under the agreement, the investment group will receive approximately
44.4% of the Company's Common Stock outstanding as of the closing. The
arrangements with the investment group also include a commitment to provide up
to $30 million of additional capital in certain circumstances.
In light of the pending investment, Mountasia announced that it had
terminated its previously announced exchange offer for Common Stock and amended
its shareholder rights plan to exempt the proposed investment therefrom.
As an accommodation to Mountasia, between now and the anticipated closing
in early July, the investment group will make available to the Company up to $33
million of interim financing, which will be used to refinance approximately $11
million of existing secured debt (which has been in default), to redeem or
repurchase up to $2.5 million of subordinated debt and preferred stock, and to
fund enhancements to the Company's family entertainment centers and
Company-owned developments, including acquisitions. It is anticipated that the
interim financing will be exchanged for Common Stock and that the balance of
the $40 million equity commitment will be paid in cash at the closing. After
the equity investment is completed, the Company intends to enter into a
permanent credit facility with a bank or other financial institution, which
would both replace the interim debt financing and be expanded to provide
capital for growth.
The Company also said that the investment agreement includes antidilution
provisions under which additional shares of Common Stock would be issued to
adjust for any post-closing issuances of Common Stock under existing
commitments below 130% of the per-share investment price as of the closing.
The investment group will be entitled to minority representation on the
Company's Board of Directors, but will not be permitted to increase its equity
stake to 50% or more without the approval of the Company's outside directors.
-more-
5895 Windward Parkway, Suite 220 - Alpharetta, Georgia 30202-4182
Phone - 404-442-6640 - Fax 404-442-6644 - Fax 404-442-6655
<PAGE> 2
-2-
L. Scott Demerau, Mountasia's Chief Executive Officer said, "We believe
that the investment arrangements give Mountasia an exciting opportunity to
pursue its growth strategy without the type of capital constraints under which
the Company has been laboring."
The Common Stock investment is subject to confirmatory due diligence
and other closing conditions, and there can be no assurance that the
contemplated investment will be consummated. Were the transaction not to
close, it is anticipated that the interim financing facility provided by the
investment group would be refinanced within 18 months. The investment is
scheduled to be completed in early July.
Upon repayment of certain of the Company's existing obligations from
the proceeds of the pending Common Stock investment, the Company will recognize
an extraordinary non-cash expense estimated at $2.3 million (pre-tax) for the
write-off of unamortized debt financing costs. In addition, the Company is
currently reviewing its future plans for each of its owned family entertainment
centers and partnership interests. This review could result in adjustments to
the carrying values of these assets and corresponding expenses in the Company's
current fiscal year. The Company expects to complete this review prior to the
completion of the pending investment and the aggregate of these charges is
preliminarily estimated to be approximately $1.5 million in the current period.
Headquartered in Atlanta, Georgia, Mountasia Entertainment
International, Inc. is a leader in the family entertainment center industry,
with 53 company owned or licensed family fun centers located in the United
States and four other countries. Mountasia has been publicly traded since
November, 1993.
-0- 6/6/96
/CONTACT: Margaret Schaeffer, Investor Relations, or Greg Waters,
Chief Financial Officer, 770-442-6640, both of Mountasia Entertainment
International, Inc./
(FUNN)
-0-
