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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
(FORMERLY NAMED MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.)
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30005-8805
(770) 442-6640
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Incorporated in Georgia SEC File No.: 0-22458 IRS Employer Id.
No.: 58-1949379
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The Company (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the past 90
days.
At August 8, 1997, 48,487,815 shares of the Company's Common Stock
were outstanding.
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Part 1--FINANCIAL INFORMATION
Item 1. Financial Statements
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 2,337,553 $ 2,583,735
Restricted cash 1,104,337 966,075
Accounts receivable, net of allowance for doubtful accounts 95,024 109,537
Stock subscription receivable -- 16,076,260
Inventories 1,017,778 1,359,331
Current portion of notes receivable 384,163 172,284
Assets held for sale 3,073,672 6,271,003
Other current assets 2,024,620 1,261,694
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Total current assets 10,037,147 28,799,919
------------- -------------
Property and equipment, less accumulated depreciation 122,807,617 85,484,158
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships 2,120,319 2,288,129
Notes receivable -- 272,267
Other assets 423,997 190,479
Debt issuance costs, less accumulated amortization 2,559,417 2,453,798
Intangible assets, less accumulated amortization 2,658,583 2,608,608
------------- -------------
Total other noncurrent assets 7,762,316 7,813,281
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$ 140,607,080 $ 122,097,358
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 1,117,017 $ 1,120,467
Accounts payable 13,437,409 2,354,823
Accrued expenses 7,905,763 5,777,707
Accrued expenses related to assets held for sale 1,263,096 3,250,000
Income taxes payable 9,999 86,888
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Total current liabilities 23,733,284 12,589,885
Line of credit 7,493,377 7,250,053
Term loan revolver 12,500,000 12,500,000
Notes payable to shareholder 15,750,798 --
Notes payable 8,842,449 5,788,475
Convertible subordinated debentures 475,100 16,521,422
Other accrued expenses 1,827,151 2,438,383
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Total liabilities 70,622,159 57,088,218
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Contingent liability for guaranteed stock values -- 777,861
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Shareholders' equity
Preferred stock, 6,000,000 shares authorized
with no par value
Series F, 2,700,000 authorized; 0 and 808,692
issued and outstanding -- 22,700,000
Series G, 213,551 authorized; 0 and 213,551 issued
and outstanding -- 4,826,260
Common stock, 100,000,000 shares authorized with no par
value; 48,448,231 and 28,472,877 shares
issued and outstanding 141,194,654 97,062,239
Outstanding warrants 2,085,100 2,440,100
Notes receivable from employees (6,114,880) (5,681,951)
Accumulated deficit (67,179,953) (57,115,369)
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Total shareholders' equity 69,984,921 64,231,279
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$ 140,607,080 $ 122,097,358
============= =============
</TABLE>
The year-end balance sheet information was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting standards.
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUES
Entertainment revenue $ 11,374,795 $ 11,157,497 $ 18,545,715 $ 18,154,226
------------ ------------ ------------ ------------
OPERATING EXPENSES
Entertainment expenses 12,804,843 8,667,221 19,855,782 15,508,783
General and administrative expenses 2,456,273 2,886,146 4,249,472 4,606,903
Other expenses 179,451 193,720 337,533 416,458
Depreciation and amortization 1,352,325 1,634,156 2,719,979 2,927,492
Loss due to impairment of assets -- 2,871,000 -- 2,871,000
------------ ------------ ------------ ------------
Total operating expenses 16,792,892 16,252,243 27,162,766 26,330,636
------------ ------------ ------------ ------------
Operating loss (5,418,097) (5,094,746) (8,617,051) (8,176,410)
OTHER (EXPENSE) INCOME
Interest expense (613,757) (1,308,452) (1,406,725) (2,421,390)
Interest income 152,587 33,481 302,580 76,419
Loss on settlement of strategic alliance agreements -- (1,005,751) -- (1,005,751)
Gain associated with development and construction division -- 795,000 -- 795,000
Gain associated with cancellation of warrants -- 334,333 -- 334,333
Other 26,240 345,823 (40,198) 1,193,372
------------ ------------ ------------ ------------
Loss before benefit for income taxes (5,853,027) (5,900,312) (9,761,394) (9,204,427)
Benefit for income taxes -- 1,929,500 -- 3,186,174
Equity in net (losses) earnings of limited partnerships, net of tax 0 26,392 (24,691) (45,976)
------------ ------------ ------------ ------------
Net loss $ (5,853,027) $ (3,944,420) $ (9,786,085) $ (6,064,229)
============ ============ ============ ============
NET LOSS APPLICABLE TO COMMON STOCK
Net loss $ (5,853,027) $ (3,944,420) $ (9,786,085) $ (6,064,229)
Less: Preferred stock dividends -- (1,819,427) -- (2,222,245)
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (5,853,027) $ (5,763,847) $ (9,786,085) $ (8,286,474)
============ ============ ============ ============
Net loss per share of common stock $ (0.14) $ (0.46) $ (0.28) $ (0.71)
============ ============ ============ ============
Weighted average number of shares of
common stock and common stock equivalents
used in calculating net loss per share 41,892,012 12,529,000 35,394,240 11,703,103
============ ============ ============ ============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
1997 1996
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $ (9,786,085) $ (6,064,229)
Adjustments to reconcile net loss to
net cash provided (used) by operating activities
Equity in net losses of limited partnerships,
net of tax 24,691 45,976
Allowance for doubtful accounts 440,000
Depreciation and amortization 2,719,979 2,927,492
Amortization of loan costs 330,762 602,750
Loss on impairment of assets -- 2,871,000
Loss on settlement of strategic alliance agreements -- 521,000
Amortization of warrants -- 225,000
Gain associated with cancellation of warrants -- (334,333)
(Gain) loss on sale of property and equipment 40,198 (1,193,372)
Gain associated with development and construction
division -- (795,000)
Changes in assets and liabilities, net of acquisition
Decrease (increase) in accounts receivable 14,513 (748,247)
Decrease in inventory 288,373 122,982
Increase in other assets (1,230,425) (6,516,895)
Increase in debt issuance costs and
intangible assets (814,880) (736,473)
Increase in accounts payable 11,082,586 1,153,864
Increase (decrease) in accrued expenses 1,516,824 (193,009)
Decrease in income taxes payable (76,889) --
Decrease in accrued expenses relating to assets
held for sale (664,312) --
Decrease in deferred revenue -- (277,248)
------------ ------------
Cash provided (used) by operating activities 3,445,335 (7,948,742)
------------ ------------
Investing activities:
Purchases of property and equipment (40,402,897) (2,232,908)
Proceeds from sale of property and equipment 2,647,418 3,390,683
Increase in notes receivable (68,750) (3,473,579)
Principal receipts under notes receivable 129,138 9,468
Decrease (increase) in investments in and advances to
limited partnerships 26,887 (3,002,765)
(Increase) decrease in restricted cash (138,262) 1,056,684
Decrease in restricted certificates of deposit 3,169,429
------------ ------------
Cash used by investing activities (37,806,466) (1,082,988)
------------ ------------
Financing activities:
Proceeds from borrowings 19,594,356 18,063,565
Payments of borrowings (549,710) (14,194,393)
Issuance of preferred stock -- 6,662,000
Redemption of preferred stock -- (1,935,740)
Redemption of subordinated debentures -- (200,000)
Accretion of preferred stock -- (631,924)
Issuance of common stock -- 3,912,500
Increase in interest receivable on notes receivable from
employees (210,816) --
Decrease in stock subscription receivable 16,076,260 --
Stock issuance costs -- (962,102)
Payment of contingent liability for stock price guarantee (777,861) (1,795,510)
Purchase of stock (17,280) (85,021)
Payment of dividends -- (138,455)
------------ ------------
Cash provided by financing activities 34,114,949 8,694,920
------------ ------------
Decrease in cash and cash equivalents (246,182) (336,810)
Cash and cash equivalents, beginning of period 2,583,735 1,549,338
------------ ------------
Cash and cash equivalents, end of period $ 2,337,553 $ 1,212,528
============ ============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying consolidated financial statements include all adjustments
necessary to present fairly, in all materials respects, the consolidated
financial position and results of operations of the Company and its
subsidiaries as of the dates and for the periods presented. The Company's
business is seasonal in nature and the Company is engaged in the implementation
of a new business plan. Operating results for the six month period ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's report on Form 10-K
for the year ended December 31, 1996.
NET LOSS PER SHARE OF COMMON STOCK
Net loss per share of common stock is computed by dividing net loss
applicable to common stock by the weighted average number of shares of common
stock outstanding during the periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of operations
The Company's operations for the three months ended June 30, 1997,
resulted in a net loss of $5.8 million ($0.14 per share) as compared to a net
loss of $3.9 million ($0.46 per share) for the comparable period in the prior
year. For the six months ended June 30, 1997, the Company's operations resulted
in a net loss of $9.8 million ($0.28 per share) as compared to a net loss of
$6.0 million ($0.71 per share) in the comparable period in the prior year.
Three family entertainment centers ("FECs") that were purchased in
August 1996 were included in the Company's results of operations for the six
months ended June 30, 1997 but were not included in the comparable period in
the prior year. These FECs contributed $1.1 and $1.9 million in entertainment
revenues for the three and six months ended June 30, 1997, respectively,
5
<PAGE> 6
which was substantially offset by the period-to-period decrease in
entertainment revenues of $1.1 and $1.6 million, respectively, as a result of
the closing of three parks (located in Dallas, Texas, Atlanta, Georgia, and
Puente Hills, California) in order to convert the parks to the Company's new
"Malibu Speedzone" concept.
Entertainment expenses increased by $4.1 and $4.3 million for the
three and six months ended June 30, 1997, respectively, as compared to the same
periods in the prior year primarily as a result of (i) the three FECs purchased
in August 1996, (ii) the incremental expenses associated with the parks
converted to Speedzones for grand opening expenses and pre-opening costs such
as advertising, training, travel, uniforms , etc. and (iii) additional
advertising expenses and payroll associated with strengthening the sales and
marketing staff during the latter part of the second quarter at FECs other than
the Malibu SpeedZones.
Net loss for the six months ended June 30, 1997 was greater than the
comparable 1996 period primarily due to a $3.2 million dollar tax benefit and
"non-recurring" income items of $1.3 million which were included in the 1996
results of operations. As a result of the uncertainty regarding the operating
results to be achieved upon the execution of the new business plan adopted in
the fourth quarter of 1996, the Company reversed the income tax benefit in the
fourth quarter of 1996 and has recognized no similar benefit in 1997.
Interest expense decreased by $1.0 million for the six months ended
June 30, 1997 as compared to the same period in the prior year primarily due to
a decrease in the outstanding balance of third party debt during the first half
of the year.
The Company continues to refine and implement its previously announced
business plan, the principal components of which are (i) developing a capital
structure designed to allow the Company to achieve its business objectives,
(ii) redefining the Company's business through repositioning, disposing,
expanding or redeveloping its existing FECs, (ii) seeking to enhance
profitability through improved operating and management efficiencies, sales and
marketing programs, employee training and the alignment of the Company's cost
structure to a level appropriate for the business transacted, (iv) growth of
the Company's business through strategic acquisitions and development of new
parks, and (v) the development of the Company's name recognition and related
sponsorship opportunities. A key aspect of the new plan is the development and
refinement of the Company's new concept -- the "Malibu SpeedZone" parks --
primarily designed for young adults. Malibu SpeedZones include the Company's
Malibu Grand Prix racing attraction, go-kart-type racing attractions and the
Company's new "Top-Eliminator" dragster attraction, together with a restyled
clubhouse, miniature golf course, video game room and meeting and party rooms
to complement the racing attractions. The Company completed the renovation of
three of its former Malibu GrandPrix FECs in Dallas, Texas; Atlanta, Georgia
and Puente Hills, California to Malibu SpeedZones. The Malibu Speedzones at
these locations opened in the latter part of June 1997. Assuming that cost
effective financing is available to the Company (see "--Liquidity and Capital
Resources"), the Company expects to acquire sites for the construction of
Malibu SpeedZone parks and convert a number of its other FECs to this
concept once it has been proven and refined.
The business of the Company is highly seasonal. Approximately
two-thirds of the Company's revenues have historically been generated during
the six-month period of April
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through September. As a result, the Company's operating income can be expected
to be substantially lower in the first and last quarters of the year than the
second and third quarters. As a result of this seasonality and the fact that
the Company's business plan is in the early stages of implementation, the
Company believes that the results of operations for the six months ended June
30, 1997 are not necessarily indicative of the Company's future results of
operations.
Liquidity and Capital Resources
During the six months ended June 30, 1997, the Company financed its
operations primarily through cash flow from operations, capital contributions
and the borrowings from the Company's largest shareholder, and proceeds from
the sale of 11 of the Company's FECs. The Company's principal uses of cash
during the first two quarters of 1997 were to finance off-peak season
operations and costs associated with the development of the business plan, to
renovate the parks which are being converted into Malibu SpeedZones, and to
purchase land for future development.
The Company's capital expenditures totalled $40.4 million and $5.8
million, respectively, for the three and six months ended June 30, 1997, as
compared to $2.2 million and $0 for the comparable periods of last year. The
total capital expenditures for the redevelopment of the three SpeedZone parks
is currently estimated at $51 million.
During the second quarter of 1997, the Company entered into two
promissory notes with its largest shareholder with terms which are believed to
be comparable to terms which would be attainable from third parties. The first
promissory note is for $9.5 million with interest at 10% and is payable on the
earlier of demand or August 2001. The second promissory note is for maximum
borrowing of up to $30.0 million with interest at LIBOR plus 350 basis points
and matures in August 2001. In July 1997, the Company entered into a loan
agreement with a financial institution under which the Company borrowed $21.4
million. The loan bears interest at LIBOR plus 350 basis points and matures in
September 1998.
The Company believes that, with respect to its current operations, the
Company's cash on hand and funds from operations will be sufficient to fund the
Company's reasonably foreseeable working capital and debt service requirements.
However, the Company presently expects that funding for capital expenditures
during the latter part of 1997 for the Company's existing FECs and the
conversion of certain other FECs to the Malibu SpeedZone concept will require
the Company to seek to secure additional capital resources, which could involve
the issuance of debt or equity securities, securitization of assets or other
capital transactions. The cost of conversion of existing FECs to the Malibu
SpeedZone concept, or the development of new Malibu SpeedZone parks, will be
dependent upon various factors, including land acquisition, construction and
other costs, but is expected to be substantial ($10-20 million per facility).
The pursuit of any acquisition opportunities which may become available and the
implementation of the Company's business plan on a more rapid timetable than
the Company presently contemplates
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also may require the Company to issue additional debt or equity securities or
to consider possible changes in its capitalization or structure. Accordingly,
there can be no assurances that the Company will be able fully to implement its
business plan or to pursue those or other opportunities that otherwise might be
available to the Company or as to the timing or terms thereof.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings Per
Share". The new standard, which is effective for the fiscal year ending
December 31, 1997, revises the disclosure requirements and simplifies the
computations of earnings per share. Management believes that the impact of this
standard will not be material.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income". The new standard, which is effective for Companies with fiscal years
beginning after December 15, 1997, establishes standards for reporting
comprehensive income. Management believes that the impact of this standard will
not be material.
FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. When used herein, words such as
"anticipate," "believe," "estimate," "expect," "intend," and similar
expressions, as they relate to the Company or the Company's management,
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, relating to the operations and results of
operations of the Company, the Company's rapid expansion, the ownership and
leasing of real estate, competition from other hospitality companies and
changes in economic cycles, as well as the other factors described herein.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, estimated, expected or
intended.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
3.1 Articles of Incorporation of the Company (incorporated
by reference to the Company's Annual Report on Form
10-K for the year ended September 30, 1993) (the "1993
10-K")"
3.2 Bylaws of the Company, as amended (incorporated by
reference to the Company's Current Report on Form 8-K,
dated June 19, 1996 (the "1996 8-K")
4.1 Specimen Certificate of Company's common stock
(incorporated by reference to the 1993 10-K)
4.2 Form of Warrant (incorporated by reference to the 1993
10-K)
4.3 Indenture, dated as of November 15, 1994, between the
Company and Continental Stock Transfer and Trust
Company, as Trustee (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1994) and Supplemental Indenture thereto
dated August 28, 1996 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 10-K")
4.4 Certificates of Designations of Preferred Stock Terms
(incorporated by reference to the 1996 10-K)
10.1 1993 Company Incentive Stock Option Plan with
accompanying forms of Incentive Stock Option Agreement,
Nonstatutory Stock Option Agreement, Stock Bonus
Agreement, Stock Bonus Agreement and Stock Purchase
Agreement (incorporated by reference to the Company's
Registration Statement on Form SB-2) (File No.
33-68454-A) (the "Registration Statement")
10.2 1993 Company Nonemployee Director Stock Option Plan
with accompanying forms of Stock Option (incorporated
by reference to the Registration Statement)
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10.3 Equity Incentive Plan (incorporated by reference to
Annex A of the Company's proxy statement on Schedule
14A for the 1997 Annual Meeting of Shareholders)
10.4 Promissory Note, dated June 30, 1993, in the principal
amount of $6,150,000 granted by the Company in favor of
M.B. Seretean (incorporated by reference to the
Registration Statement)
10.5 Consolidated, Amended and Restated Loan and Security
Agreement, dated as of August 22, 1996, by and between
the Company and Foothill Capital Corporation
(incorporated by reference to the 1996 10-K)
10.6 Investment Agreement, dated as of June 5, 1996, as
amended, between MEI Holdings, L.P. and the Company
(incorporated by reference to MEI Holdings' Amendment
No. 3 to Schedule 13-D-1 filed September 25, 1996)
("MEI Holdings' 13-D-1")
10.7 Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 13D-1)
10.8 Standstill Agreement, dated August 28, 1996, between the
Purchaser and the Company (incorporated by reference to
MEI Holdings' 13-D-1)
10.9 Registration Rights Agreement, dated August 28, 1996
(incorporated by reference to MEI Holdings' 13D-1)
10.10 Agreements, dated August 28, 1996 (incorporated by
reference to the 1996 8-K)
10.11 Letters re: Voting Agreements, dated August 28, 1996
(incorporated by reference to the 1996 10-K)
10.12 Redemption Agreement, dated November 14, 1996, between
the Company and MEI Holdings, L.P. (incorporated by
reference to MEI Holdings' Schedule 14-D-1, dated
November 14, 1996)
10.13 Promissory Note from the Company to MEI Holdings for
$30.0 million, dated as of June 5, 1997, as amended and
restated (filed herewith)
10.14 Promissory Note from the Company to MEI Holdings for
$9.5 million, dated as of June 5, 1997 (filed herewith)
10
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10.15 Loan Agreement, dated as of June 27, 1997, between
Malibu Centers, Inc. and Nomura Asset Capital
Corporation ("Nomura") (filed herewith)
10.16 Promissory Note from Malibu Centers, Inc. to Nomura for
$21,390,375 (filed herewith)
10.17 Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (filed herewith)
27 Financial Date Schedule (for Sec purposes only)
(b) No reports of Form 8-K were filed during the period covered by this
report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company
caused this report to be signed on behalf by the undersigned, thereunto duly
authorized.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By: /s/ Richard M. FitzPatrick
--------------------------
Richard M. FitzPatrick
Chief Financial Officer
August 14, 1997
12
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company (incorporated
by reference to the Company's Annual Report on Form
10-K for the year ended September 30, 1993) (the "1993
10-K")"
3.2 Bylaws of the Company, as amended (incorporated by
reference to the Company's Current Report on Form 8-K,
dated June 19, 1996 (the "1996 8-K")
4.1 Specimen Certificate of Company's common stock
(incorporated by reference to the 1993 10-K)
4.2 Form of Warrant (incorporated by reference to the 1993
10-K)
4.3 Indenture, dated as of November 15, 1994, between the
Company and Continental Stock Transfer and Trust
Company, as Trustee (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1994) and Supplemental Indenture thereto
dated August 28, 1996 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 10-K")
4.4 Certificates of Designations of Preferred Stock Terms
(incorporated by reference to the 1996 10-K)
10.1 1993 Company Incentive Stock Option Plan with
accompanying forms of Incentive Stock Option Agreement,
Nonstatutory Stock Option Agreement, Stock Bonus
Agreement, Stock Bonus Agreement and Stock Purchase
Agreement (incorporated by reference to the Company's
Registration Statement on Form SB-2) (File No.
33-68454-A) (the "Registration Statement")
10.2 1993 Company Nonemployee Director Stock Option Plan
with accompanying forms of Stock Option (incorporated
by reference to the Registration Statement)
</TABLE>
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<TABLE>
<S> <C>
10.3 Equity Incentive Plan (incorporated by reference to
Annex A of the Company's proxy statement on Schedule
14A for the 1997 Annual Meeting of Shareholders)
10.4 Promissory Note, dated June 30, 1993, in the principal
amount of $6,150,000 granted by the Company in favor of
M.B. Seretean (incorporated by reference to the
Registration Statement)
10.5 Consolidated, Amended and Restated Loan and Security
Agreement, dated as of August 22, 1996, by and between
the Company and Foothill Capital Corporation
(incorporated by reference to the 1996 10-K)
10.6 Investment Agreement, dated as of June 5, 1996, as
amended, between MEI Holdings, L.P. and the Company
(incorporated by reference to MEI Holdings' Amendment
No. 3 to Schedule 13-D-1 filed September 25, 1996)
("MEI Holdings' 13-D-1")
10.7 Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 13D-1)
10.8 Standstill Agreement, dated August 28, 1996, between the
Purchaser and the Company (incorporated by reference to
MEI Holdings' 13-D-1)
10.9 Registration Rights Agreement, dated August 28, 1996
(incorporated by reference to MEI Holdings' 13D-1)
10.10 Agreements, dated August 28, 1996 (incorporated by
reference to the 1996 8-K)
10.11 Letters re: Voting Agreements, dated August 28, 1996
(incorporated by reference to the 1996 10-K)
10.12 Redemption Agreement, dated November 14, 1996, between
the Company and MEI Holdings, L.P. (incorporated by
reference to MEI Holdings' Schedule 14-D-1, dated
November 14, 1996)
10.13 Promissory Note from the Company to MEI Holdings for
$30.0 million, dated as of June 5, 1997, as amended and
restated (filed herewith)
10.14 Promissory Note from the Company to MEI Holdings for
$9.5 million, dated as of June 5, 1997 (filed herewith)
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
10.15 Loan Agreement, dated as of June 27, 1997, between
Malibu Centers, Inc. and Nomura Asset Capital
Corporation ("Nomura") (filed herewith)
10.16 Promissory Note from Malibu Centers, Inc. to Nomura for
$21,390,375 (filed herewith)
10.17 Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (filed herewith)
27 Financial Date Schedule (for Sec purposes only)
</TABLE>
<PAGE> 1
Exhibit 10.13
ALL INDEBTEDNESS EVIDENCED BY THIS AMENDED AND RESTATED SUBORDINATED
PROMISSORY NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND
TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF,
THE AMENDED AND RESTATED SUBORDINATION AGREEMENT, DATED AS OF JUNE 27,
1997, AS THE SAME MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME, BY AND AMONG MALIBU ENTERTAINMENT WORLDWIDE, INC.,
AS BORROWER, MEI HOLDINGS, L.P., AS SUBORDINATED LENDER, AND FOOTHILL
CAPITAL CORPORATION, AS SENIOR LENDER.
AMENDED AND RESTATED SUBORDINATED PROMISSORY NOTE
$30,000,000 New York, N.Y.
June 5, 1997
FOR VALUE RECEIVED, the undersigned, Malibu Entertainment
Worldwide, Inc., a Georgia corporation ("Maker"), promises to pay to the order
of MEI Holdings, L.P., a Delaware limited partnership (together with any
subsequent holder of this Note, "Holder"), at its offices located at c/o The
Hampstead Group, 2200 Ross Avenue., Suite 4200 West, Dallas, Texas 75201, or
at such other address or to such account as Holder may from time to time
designate in writing, the unpaid principal sum of all advances made by Holder
to Maker from time to time in an aggregate principal amount of up to Thirty
Million United States Dollars ($30,000,000), together with interest thereon
from the date hereof on the unpaid principal balance at the rate and otherwise
as herein provided. Unless otherwise specified by Holder in writing, all
payments on this Note shall be made in lawful money of the United States of
America and in immediately available funds.
The unpaid principal amount of this Note and all accrued and
unpaid interest thereon shall become due and be paid on August 31, 2001 (the
"Maturity Date"). Maker may, at its option and upon three (3) Business Days'
prior written notice from Maker to Holder, prepay in whole or in part the
outstanding principal balance of this Note without payment of any premium or
penalty.
For purposes of this Note: (i) "Applicable Interest Rate"
shall mean a rate per annum equal to LIBOR plus 350 basis points, which
Applicable Interest Rate shall be adjusted monthly on the Determination Date;
(ii) "Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business; (iii) "Default Rate" shall mean a rate per annum (adjusted monthly on
each Determination Date) equal to the Applicable Interest Rate plus 500 basis
points; provided, however, in no event shall such rate exceed the maximum rate
permitted by applicable law; (iv) "Determination Date" shall mean the date
which is two Eurodollar
<PAGE> 2
Business Days prior to the first day of a calendar month; (v) "Eurodollar
Business Day" shall mean a Business Day on which banks in the City of London,
England, are open for interbank or foreign exchange transactions; and (vi)
"LIBOR" shall mean the rate (expressed as a percentage per annum) for deposits
in U.S. dollars, for a one-month period, that appears on Telerate Page 3750 (or
the successor thereto) as of 11:00 a.m., London, England time, on the related
Determination Date. If such rate does not appear on Telerate Page 3750 as of
11:00 a.m., London, England time, on the related Determination Date, LIBOR
shall be the arithmetic mean of the offered rates (expressed as a percentage
per annum) for deposits in U.S. dollars for a one-month period that appear on
the Reuters Screen LIBOR Page as of 11:00 a.m., London, England time, on such
Determination Date, if at least two such offered rates so appear. If fewer
than two such offered rates appear on the Reuters Screen LIBOR Page as of 11:00
a.m., London, England time, on such Determination Date, Holder shall request
the principal London, England office of any four major reference banks in the
London interbank market selected by Holder to provide such bank's offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one-month period as of
11:00 a.m., London, England time, on such Determination Date for amounts of not
less than U.S. $1,000,000. If at least two such offered quotations are so
provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than
two such offered quotations are so provided, Holder shall request any three
major banks in New York City selected by Holder to provide such bank's rate
(expressed as a percentage per annum) for loans in U.S. dollars to leading
European banks for a one- month period as of approximately 11:00 a.m., New York
City time, on the applicable Determination Date for amounts of not less than
U.S. $1,000,000. If at least two such rates are so provided, LIBOR shall be
the arithmetic mean of such rates. If fewer than two such rates are so
provided, then LIBOR shall be LIBOR as in effect on the Eurodollar Business Day
immediately preceding the applicable Determination Date. LIBOR shall be
determined in accordance with this paragraph by Holder or its agent.
Maker shall pay interest, in arrears for each one-month LIBOR
interest period (or portion thereof) from and including the first Business Day
of each calendar month (or from the date hereof in the case of the initial
interest period) to but excluding the first Business Day of the immediately
succeeding calendar month, on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rate determined for each
such one-month interest period on the immediately preceding Determination Date,
on the first Business Day of each calendar month during the term of this Note.
The balance of the unpaid principal of this Note together with all accrued and
unpaid interest thereon shall be paid on the Maturity Date, all in accordance
with the terms and provisions set forth herein. Interest on the unpaid
principal balance of this Note shall be computed on the actual number of days
elapsed, and a year of 360 days.
Holder shall maintain an account or accounts evidencing the
indebtedness of Maker to Holder resulting from each advance made by Holder,
including the amount of principal and interest payable and paid to Holder from
time to time hereunder. The entries made in such account or accounts shall be
prima facie evidence of the existence and the amounts of the obligations
recorded therein, provided that any failure of Holder to maintain such account
or accounts or any error therein shall not in any manner affect the obligation
of
- 2 -
<PAGE> 3
Maker to repay the advances made by Holder to Maker in accordance with the
terms of this Note.
Maker shall use the proceeds of the loan evidenced by this
Note solely to fund its working capital requirements and to repay indebtedness
of the Maker the proceeds of which were used by Maker solely to fund its
working capital requirements.
If Maker fails to make any payment of principal, accrued and
unpaid interest or any other amount due hereunder on any due date therefor,
whether at stated maturity or otherwise, the unpaid amount (including, to the
extent enforceable at law, any unpaid amount of interest) shall bear interest
at the Default Rate until paid. Maker shall also pay to Holder, in addition to
the amount due, all reasonable costs and expenses incurred by Holder in
collecting or enforcing, or attempting to collect or enforce this Note,
including without limitation court costs and reasonable attorneys' fees and
expenses (including reasonable attorneys' fees and expenses on any appeal by
either Maker or Holder and in any bankruptcy proceeding).
With respect to the amounts due pursuant to this Note, Maker
waives demand, presentment, protest, notice of dishonor, notice of nonpayment,
suit against any party, diligence in collection of this Note, and all other
requirements necessary to enforce this Note.
In no event shall any amount deemed to constitute interest due
or payable hereunder (including interest calculated at the Default Rate) exceed
the maximum rate of interest permitted by applicable law (the "Maximum
Amount"), and in the event such payment is inadvertently paid by Maker or
inadvertently received by Holder, then such sum shall be credited as a payment
of principal or other amounts (other than interest) outstanding hereunder, and,
if in excess of the outstanding amount of principal or other amounts
outstanding hereunder, shall be immediately returned to Maker upon such
determination. It is the express intent hereof that Maker not pay and Holder
not receive, directly or indirectly, interest in excess of the Maximum Amount.
Holder shall not by any act, delay, omission, or otherwise be
deemed to have modified, amended, waived, extended, discharged, or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge, or termination of any kind shall be valid unless in
writing and signed by Holder. All rights and remedies of Holder under the
terms of this Note and applicable statutes or rules of law shall be cumulative,
and may be exercised successively or concurrently. Maker agrees that there are
no defenses, equities, or setoffs with respect to the obligations set forth
herein, and to the extent any such defenses, equities, or setoffs may exist,
the same are hereby expressly released, forgiven, waived, and forever
discharged. The obligations of Maker hereunder shall be binding upon and
enforceable against Maker and its successors and assigns and shall inure to the
benefit of Holder and its successors and assigns.
Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note is
- 3 -
<PAGE> 4
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.
This Note was negotiated in New York, and made by Holder and
accepted by Maker in the State of New York, which State the parties agree has a
substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects, including without limitation matters of
construction, validity, and performance, this Note and the obligations arising
hereunder shall be governed by, and construed in accordance with, the internal
laws of the State of New York and any applicable law of the United States of
America. To the fullest extent permitted by law, Maker hereby unconditionally
and irrevocably waives any claim to assert that the laws of any other
jurisdiction governs this Note, and this Note shall be governed by and
construed in accordance with the laws of the State of New York pursuant to
Section 5-1401 of the New York General Obligations Law.
MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT LIMITATION
ANY TORT ACTION, BROUGHT WITH RESPECT TO THIS NOTE. HOLDER MAY FILE A COPY OF
THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF MAKER'S KNOWING, VOLUNTARY,
AND BARGAINED-FOR AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY,
AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER SHALL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Maker may not assign or delegate this Note or any of its
rights or obligations hereunder without the prior consent of Holder (which
consent may be given or withheld in the sole discretion of Holder). Holder may
assign or delegate this Note or any of its rights or obligations hereunder
without prior consent of or notice to Maker.
This Note amends and restates the $10,000,000 Subordinated
Promissory Note, dated June 5, 1997, from Maker payable to the order of Holder.
IN WITNESS WHEREOF, Maker has caused this Note to be duly
executed on its behalf as of the day and year first above written.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By:
--------------------------------------
Name:
Title:
- 4 -
<PAGE> 1
Exhibit 10.14
PROMISSORY NOTE
$9,500,00 Dallas, Texas
As of June 5, 1997
FOR VALUE RECEIVED, the undersigned, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("Maker"), promises to pay to the order of MEl
Holdings, L.P., a Delaware limited partnership (together with any subsequent
holder of this Note, "Holder"), at its offices located at c/o The Hampstead
Group, 2200 Ross Avenue., Suite 4200 West, Dallas, Texas 75201, or at such
other address or to such account as Holder may from time to time designate in
writing, the unpaid principal sum of all advances made by Holder to Maker from
time to time in an aggregate principal amount of up to Nine Million Five
Hundred Thousand United States Dollars ($9,500,000), together with interest
thereon from the date hereof on the unpaid principal balance at the rate and
otherwise as herein provided. Unless otherwise specified by Holder in writing,
all payments on this Note shall be made in lawful money of the United States of
America and in immediately available funds.
Interest shall accrue on the unpaid principal balance of this Note at
the rate of ten percent (10%) per annum. Accrued but unpaid interest shall be
compounded annually. Interest on the unpaid principal balance of this Note
shall be computed on the actual number of days elapsed, and a year of 360 days.
The unpaid principal amount of this Note and all accrued and unpaid
interest thereon shall become due and be paid on demand, or if demand is not
sooner made on August 31, 2001 (the "Maturity Date").
Maker may, at its option and upon three (3) Business Days' prior
written notice from Maker to Holder, prepay in whole or in part the outstanding
principal balance of this Note without payment of any premium or penalty.
Holder shall maintain an account or accounts evidencing the
indebtedness of Maker to Holder resulting from each advance made by Holder,
including the amount of principal and interest payable and paid to Holder from
time to time hereunder. The entries made in such account or accounts shall be
prima facie evidence of the existence and the amounts of the obligations
recorded therein, provided that any failure of Holder to maintain such account
or accounts or any error therein shall not in any manner affect the obligation
of Maker to repay the advances made by Holder to Maker in accordance with the
terms of this Note.
If Maker fails to make any payment of principal, accrued and unpaid
interest or any other amount due hereunder on any due date therefor, whether at
stated maturity or otherwise, the unpaid amount (including, to the extent
enforceable at law, any unpaid amount of interest) shall bear interest until
paid at a rate per annum equal to the lesser of eighteen percent (18%) per
annum or the maximum rate of interest permitted by applicable law (the "Maximum
Amount"). Maker shall also pay to Holder, in addition to the amount due, all
reasonable costs and expenses incurred by Holder in collecting or enforcing, or
attempting to collect or enforce this Note, including without limitation court
costs and reasonable attorneys' fees and expenses (including reasonable
attorneys' fees and expenses on any appeal by either
<PAGE> 2
Maker or Holder and in any bankruptcy proceeding).
With respect to the amounts due pursuant to this Note, Maker waives
demand, presentment, protest, notice of dishonor, notice of nonpayment, suit
against any party, diligence in collection of this Note, and all other
requirements necessary to enforce this Note.
In no event shall any amount deemed to constitute interest due or
payable hereunder (including interest calculated at the Default Rate) exceed
the Maximum Amount, and in the event such payment is inadvertently paid by
Maker or inadvertently received by Holder, then such sum shall be credited as a
payment of principal or other amounts (other than interest) outstanding
hereunder, and, if in excess of the outstanding amount of principal or other
amounts outstanding hereunder, shall be immediately returned to Maker upon such
determination. It is the express intent hereof that Maker not pay and Holder
not receive, directly or indirectly, interest in excess of the Maximum Amount.
Holder shall not by any act, delay, omission, or otherwise be deemed
to have modified, amended, waived, extended, discharged, or terminated any of
its rights or remedies, and no modification, amendment, waiver, extension,
discharge, or termination of any kind shall be valid unless in writing and
signed by Holder. All rights and remedies of Holder under the terms of this
Note and applicable statutes or rules of law shall be cumulative, and may be
exercised successively or concurrently. Maker agrees that there are no
defenses, equities, or setoffs with respect to the obligations set forth
herein, and to the extent any such defenses, equities, or setoffs may exist,
the same are hereby expressly released, forgiven, waived, and forever
discharged. The obligations of Maker hereunder shall be binding upon and
enforceable against Maker and its successors and assigns and shall inure to the
benefit of Holder and its successors and assigns.
Wherever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the Note.
This Note was negotiated in Texas, and made by Holder and accepted by
Maker in the State of Texas, which State the parties agree has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects, including without limitation matters of construction,
validity, and performance, this Note and the obligations arising hereunder
shall be governed by, and construed in accordance with, the internal laws of
the State of Texas and any applicable law of the United States of America. To
the fullest extent permitted by law, Maker hereby unconditionally and
irrevocably waives any claim to assert that the laws of any other jurisdiction
governs this Note.
MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL
BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING WITHOUT LIMITATION ANY TORT
ACTION, BROUGHT WITH RESPECT TO THIS NOTE. HOLDER MAY FILE A COPY OF THIS
WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF MAKER'S KNOWING, VOLUNTARY, AND
BARGAINED FOR AGREEMENT IRREVOCABLY TO WAIVE ITS RIGHTS TO TRIAL BY JURY, AND
THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, ANY DISPUTE OR
CONTROVERSY WHATSOEVER BETWEEN MAKER AND HOLDER SHALL INSTEAD BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
2
<PAGE> 3
Maker may not assign or delegate this Note or any of its rights or
obligations hereunder without the prior consent of Holder (which consent may be
given or withheld in the sole discretion of Holder). Holder may assign or
delegate this Note or any of its rights or obligations hereunder without prior
consent of or notice to Maker.
This indebtedness evidenced by this Note constitutes "Current MEIH
Advances" under that certain Amendment Number Three to Consolidated, Amended,
and Restated Loan and Security Agreement dated as of June 27,1997, by and among
Foothill Capital Corporation, Maker and various subsidiaries of Maker.
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed on
its behalf as of the day and year first above written.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By:
-----------------------------------
Name: Richard M. FitzPatrick
Title: Vice President
3
<PAGE> 1
EXHIBIT 10.15
================================================================================
LOAN AGREEMENT
Dated as of June 27, 1997
Between
MALIBU CENTERS, INC.
as Borrower
and
NOMURA ASSET CAPITAL CORPORATION,
as Lender
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Principles of Construction . . . . . . . . . . . . . . . . . . . 11
II. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.1 Loan Commitment; Disbursement to Borrower . . . . . . . . . . . 11
2.1.1 The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.2 Disbursement to Borrower . . . . . . . . . . . . . . . . . . . . 12
2.1.3 The Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.3 Loan Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3.1 Repayment and Prepayment . . . . . . . . . . . . . . . . . . . . 12
2.3.2 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 12
2.3.3 Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Release of Properties . . . . . . . . . . . . . . . . . . . . . 13
Section 2.5 Assumption of Loan . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.6 Interest and Principal . . . . . . . . . . . . . . . . . . . . . 14
2.6.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.2 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.7 Payments and Computations . . . . . . . . . . . . . . . . . . . 14
2.7.1 Making of Payments . . . . . . . . . . . . . . . . . . . . . . . 14
2.7.2 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7.3 Late Payment Charge . . . . . . . . . . . . . . . . . . . . . . 15
III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Conditions Precedent to Closing . . . . . . . . . . . . . . . . 15
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.1 Borrower Representations . . . . . . . . . . . . . . . . . . . . 18
Section 4.2 Survival of Representations . . . . . . . . . . . . . . . . . . 27
V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.1 Borrower Covenants . . . . . . . . . . . . . . . . . . . . . . . 27
VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.1 Borrower's Negative Covenants . . . . . . . . . . . . . . . . . 32
VII. CASUALTY; CONDEMNATION; ESCROWS . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.1 Insurance; Casualty and Condemnation . . . . . . . . . . . . . . 36
7.1.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.2 Casualty and Application of Proceeds . . . . . . . . . . . . . . 38
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
7.1.3 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.2 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . 42
Section 7.3 Tax and Insurance Escrow Fund . . . . . . . . . . . . . . . . . 42
Section 7.4 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . 43
VIII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . 46
IX. INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
X. INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.2 Lender's Discretion . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.4 Modification; Waiver in Writing . . . . . . . . . . . . . . . . 49
Section 11.5 Delay Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.7 Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.10 Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.11 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.12 Remedies of Borrower . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 11.14 Exhibits and Schedules Incorporated . . . . . . . . . . . . . . 54
Section 11.15 Offsets, Counterclaims and Defenses . . . . . . . . . . . . . . 54
Section 11.16 No Joint Venture or Partnership; No Third Party Beneficiarie4 . 53
Section 11.17 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.18 Waiver of Counterclaim . . . . . . . . . . . . . . . . . . . . 55
Section 11.19 Conflict; Construction of Documents; Reliance. . . . . . . . . . 55
Section 11.20 Brokers and Financial Advisors . . . . . . . . . . . . . . . . . 55
Section 11.21 Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.22 Indemnification Against Tax . . . . . . . . . . . . . . . . . . 56
</TABLE>
SCHEDULES
Schedule I - Initial Deposits
- ii -
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of June 27, 1997 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
"AGREEMENT"), is between NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation, having an address at Two World Financial Center, Building B, New
York, New York 10281 ("LENDER"), and MALIBU CENTERS, INC., a Delaware
corporation, having an address at c/o The Hampstead Group, Texas Commerce
Tower, 2200 Ross Ave., Suite 4200-W, Dallas, Texas 75201 ("BORROWER").
All capitalized terms used herein shall have the respective meanings
set forth in Article I hereof.
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain the Loan from Lender; and
WHEREAS, Lender is willing to make the Loan to Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan
Documents.
NOW, THEREFORE, in consideration of the making of the Loan by Lender
to Borrower and the covenants, agreements, representations and warranties set
forth in this Agreement, the parties hereto hereby covenant, agree, represent
and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:
"AFFILIATE" shall mean, as to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person or
of an Affiliate of such Person.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"APPLICABLE INTEREST RATE" shall mean a rate per annum equal
to LIBOR plus 350 basis points. The Applicable Interest Rate for each
one-month interest period shall be determined monthly on the Determination Date
immediately preceding such interest period.
1
<PAGE> 5
"ASSIGNMENT OF AGREEMENTS" shall mean collectively the
California Assignment of Agreements and the Texas Assignment of Agreements.
"ASSIGNMENT OF LEASES" shall mean collectively the California
Assignment of Leases and the Texas Assignment of Leases.
"AWARD" shall have the meaning set forth in Section 7.1.3(b).
"BASIC CARRYING COSTS" shall mean, with respect to each of the
Properties, the aggregate sum of the following costs associated with each of
the Properties for the relevant Fiscal Year or payment period: (i) real
property taxes with respect to each of the Properties and (ii) insurance
premiums with respect to each of the Properties.
"BORROWER" shall mean Malibu Centers, Inc., a Delaware
corporation, together with its successors and assigns.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any other day on which national banks in New York, New York are not
open for business.
"CALIFORNIA ASSIGNMENT OF AGREEMENTS: shall mean, with respect
to the California Property, that certain first priority Assignment of
Agreements, Permits and Contracts dated as of the date hereof, from Borrower,
as assignor, to Lender, as assignee, assigning to Lender all of Borrower's
interest in and to the Property Management Agreement and all other licenses,
permits and contracts necessary for the use and operation of the California
Property as security for the Loan, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"CALIFORNIA ASSIGNMENT OF LEASES" shall mean that certain
first priority Assignment of Leases and Rents, dated as of the date hereof,
from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of
Borrower's interest in and to the Leases and Rents of the California Property
as security for the Loan, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"CALIFORNIA ENVIRONMENTAL INDEMNITY" shall mean that certain
Environmental and Hazardous Substance Indemnification Agreement concerning the
California Property dated as of the date hereof, executed by Borrower in
connection with the Loan for the benefit of Lender.
"CALIFORNIA IMPROVEMENTS" shall have the meaning set forth in
the California Mortgage with respect to the California Property
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"CALIFORNIA MORTGAGE" shall mean that certain first priority
Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of
the date hereof, executed and delivered by Borrower as security for the Loan
made to Borrower and encumbering the California Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"CALIFORNIA PROPERTY" shall mean the real property and the
improvements thereon and the personal property owned by Borrower and encumbered
by the California Mortgage, together with all rights pertaining to such
property and improvements, as more particularly described in the granting
clauses of the California Mortgage and referred to therein as the "Mortgaged
Property."
"CALIFORNIA PREMISES" shall have the meaning set forth in the
granting clause of the California Mortgage with respect to the California
Property.
"CALIFORNIA TITLE INSURANCE POLICY" shall mean the ALTA
mortgagee title insurance policy in the form (acceptable to Lender) issued with
respect to the California Property and insuring the lien of the California
Mortgage encumbering the California Property.
"CASUALTY" shall have the meaning specified in Section
7.1.1(d).
"CASUALTY/CONDEMNATION INVOLUNTARY PREPAYMENTS" shall have the
meaning set forth in Section 2.3.2.
"CENTERS GUARANTY" shall mean that certain guaranty executed
by Borrower guarantying any and all Obligations (as defined in the MEI Loan
Agreement) under the MEI Loan Agreement and secured by the Mortgages and the
other Loan Documents.
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"CONDEMNATION" shall have the meaning set forth in Section
7.1.3(a).
"CONDEMNATION PROCEEDS" shall mean any Award in respect of any
Condemnation.
"CONDEMNATION RESTORATION" shall have the meaning set forth in
Section 7.1.3(c).
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"CONSENT AND SUBORDINATION OF PROPERTY MANAGER" shall mean
that certain Consent and Agreement of Manager and Subordination of Management
Agreement, executed by the Property Manager, in favor of Lender.
"DEBT" shall mean the outstanding principal amount set forth
in, and evidenced by, the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the Note,
this Agreement, the Mortgages or any other Loan Document.
"DEBT SERVICE" shall mean, with respect to any particular
period of time, scheduled principal and interest payments due and payable under
the Note.
"DEFAULT" shall mean the occurrence of any event hereunder or
under any other Loan Document which, but for the giving of notice or the
passage of time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate
per annum (adjusted monthly on each Determination Date) equal to the Applicable
Interest Rate plus 500 basis points; provided, however, in no event shall such
rate exceed the maximum rate permitted by applicable law.
"DETERMINATION DATE" shall mean the date which is two
Eurodollar Business Days prior to the first day of a calendar month.
"ENVIRONMENTAL INDEMNITIES" shall mean collectively the
California Environmental Indemnity and the Texas Environmental Indemnity.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EURODOLLAR BUSINESS DAY" shall mean a Business Day on which
banks in the City of London, England, are open for interbank or foreign
exchange transactions.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
8.1(a).
"FISCAL YEAR" shall mean each twelve month period commencing
on January 1 and ending on December 31 during the term of the Loan.
"GAAP" shall mean generally accepted accounting principles in
the United States of America.
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"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"IMPROVEMENTS" shall mean collectively the California
Improvements and the Texas Improvements.
"INDEPENDENT" shall mean, when used with respect to any
Person, a Person who (a) is in fact independent, (b) does not have any direct
financial interest in Borrower, or in any Affiliate of Borrower or any
Affiliate of any constituent partner, shareholder, member or beneficiary of
Borrower, and (c) is not connected with Borrower or any Affiliate of Borrower
or any Affiliate of any constituent partner, shareholder, member or beneficiary
of Borrower as an officer, employee, promoter, underwriter, trustee, partner,
member, director (other than an Independent Director of an Affiliate of
Borrower) or person performing similar functions. Whenever it is herein
provided that any Independent Person's opinion or certificate shall be
provided, such opinion or certificate shall state that the Person executing the
same has read this definition and is Independent within the meaning thereof.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in
Section 4.1(dd)(xvi).
"INSURANCE PREMIUMS" shall have the meaning set forth in
Section 7.1.1(c) hereof.
"INSURANCE PROCEEDS" shall mean all proceeds received under
insurance policies required to be maintained by Borrower.
"LEASE" shall mean any lease (or, to the extent of the
interest therein of Borrower, any sublease or sub-sublease), letting, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any person is granted a possessory
interest in, or right to use or occupy all or any portion of, any space in
either of the Properties, and every modification, amendment or other agreement
relating to such lease, sublease, sub-sublease or other agreement entered into
in connection with such lease, sublease, sub-sublease or other agreement and
every guarantee of the performance and observance of the covenants, conditions
and agreements to be performed and observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting either of the Properties or any part thereof or the construction,
use, alteration or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any
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<PAGE> 9
instruments, either of record or known to Borrower, at any time in force
affecting either of the Properties or any part thereof, including, without
limitation, any which may (i) require repairs, modifications or alterations in
or to either or both of the Properties or any part thereof, or (ii) in any way
limit the use and enjoyment thereof.
"LENDER" shall mean Nomura Asset Capital Corporation, a
Delaware corporation, together with its successors and assigns.
"LETTER AGREEMENT" shall mean that certain letter agreement
between MEI and Lender which letter agreement shall serve to amend the MEI Loan
Agreement to provide, amongst other things, that an Event of Default hereunder
shall be an Event of Default under the MEI Loan Agreement.
"LIBOR" shall mean the rate (expressed as a percentage per
annum) for deposits in U.S. dollars, for a one-month period, that appears on
Telerate Page 3750 (or the successor thereto) as of 11:00 a.m., London, England
time, on the related Determination Date. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London, England time, on the related
Determination Date, LIBOR shall be the arithmetic mean of the offered rates
(expressed as a percentage per annum) for deposits in U.S. dollars for a
one-month period that appear on the Reuters Screen LIBOR Page as of 11:00 a.m.,
London, England time, on such Determination Date, if at least two such offered
rates so appear. If fewer than two such offered rates appear on the Reuters
Screen LIBOR Page as of 11:00 a.m., London, England time, on such Determination
Date, Lender shall request the principal London, England office of any four
major reference banks in the London interbank market selected by Lender to
provide such bank's offered quotation (expressed as a percentage per annum) to
prime banks in the London interbank market for deposits in U.S. dollars for a
one-month period as of 11:00 a.m., London, England time, on such Determination
Date, for amounts of not less than U.S. $1,000,000. If at least two such
offered quotations are so provided, LIBOR shall be the arithmetic mean of such
quotations. If fewer than two such offered quotations are so provided, Lender
shall request any three major banks in New York City selected by Lender to
provide such bank's rate (expressed as a percentage per annum) for loans in
U.S. dollars to leading European banks for a one-month period as of
approximately 11:00 a.m., New York City time, on the applicable Determination
Date for amounts of not less than U.S. $1,000,000. If at least two such rates
are so provided, LIBOR shall be the arithmetic mean of such rates. If fewer
than two such rates are so provided, then LIBOR shall be LIBOR as in effect on
the Eurodollar Business Day immediately preceding the applicable Determination
Date. LIBOR shall be determined in accordance with this paragraph by Lender or
its agent.
"LICENSES" shall have the meaning set forth in Section 4.1(v).
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"LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting either or both of the Properties or any portion
thereof or Borrower, or any interest therein, including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, the
filing of any financing statement, and mechanic's, materialmen's and other
similar liens and encumbrances.
"LOAN" shall mean the loan made by Lender to Borrower in the
original principal amount set forth in, and evidenced by, the Note executed and
delivered by Borrower and secured by the Mortgages and the other Loan Documents
executed and delivered by Borrower.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Note, the Mortgages, the Assignment of Leases, the Assignment of Agreements,
the Environmental Indemnities, the Consent and Subordination of Property
Manager, the Centers Guaranty, the MEI Guaranty, the Pledge, the Letter
Agreement and any other document pertaining to the Properties as well as all
other documents executed and/or delivered by Borrower in connection with the
Loan.
"MALIBU" shall mean Malibu Entertainment Worldwide, Inc., a
Georgia corporation.
"MATURITY DATE" shall mean the date on which the final payment
of principal of the Note becomes due and payable as therein provided, whether
at the Stated Maturity, by declaration of acceleration, or otherwise.
"MAXIMUM PERMITTED TRADE PAYABLES" shall mean unsecured trade
payables customarily satisfied within thirty (30) days which are incurred by
Borrower in the ordinary course of business.
"MEI" shall mean MEI Holdings, L.P., a Delaware limited
partnership.
"MEI GUARANTY" shall mean that certain guaranty executed by
MEI, secured by the Pledge and guarantying the Obligations, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"MEI LOAN AGREEMENT" shall mean that certain Loan Agreement
between MEI and Nomura Asset Capital Corporation dated as of June 5, 1997, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
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"MORTGAGES" shall mean collectively the California Mortgage
and the Texas Mortgage, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"MORTGAGED PROPERTY" shall have the same meaning as
"Properties."
"NOMURA" shall mean Nomura Securities International, Inc.
"NOTE" shall mean that certain Promissory Note dated as of the
date hereof, made by Borrower in favor of Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"OBLIGATIONS" shall mean any and all debt, liabilities and
obligations of Borrower to Lender or in connection with the Loan, including,
without limiting the generality of the foregoing, the Debt and any and all
obligations and liabilities pursuant to the Centers Guaranty.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to
Lender by Borrower which is signed by an authorized senior officer of Borrower.
"ORIGINAL PLEDGE" shall mean that certain Pledge and Security
Agreement dated June 5, 1997 between Lender and MEI executed in connection with
the MEI Loan Agreement.
"OTHER CHARGES" shall mean all maintenance charges, ground
rents, impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining either of the Properties, now or hereafter levied or
assessed or imposed against either of the Properties or any part thereof.
"PERMITTED ENCUMBRANCES" shall mean, with respect to the
Properties, collectively: (a) the Liens created or permitted by the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in each of
the Title Insurance Policies relating to each of the Properties or any part
thereof, (c) Liens, if any, for Taxes and Other Charges imposed by any
Governmental Authority not yet due or delinquent or being contested in
accordance with the terms hereof, and (d) statutory liens for labor or
materials securing sums not yet due and payable or being contested in
accordance with the terms hereof and (e) Liens permitted pursuant to Section
6.1(b).
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.
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<PAGE> 12
"PLEDGE" shall mean that certain Amended and Restated Pledge
and Security Agreement executed by MEI and Lender which amends and restates the
Original Pledge such that the Original Pledge as amended and restated by the
Pledge will also secure the MEI Guaranty.
"POLICIES" shall have the meaning specified in Section
7.1.1(c).
"PREMISES" shall collectively mean the California Premises and
the Texas Premises.
"PROPERTIES" shall mean collectively the California Property
and the Texas Property.
"PROPERTY MANAGEMENT AGREEMENT" shall mean a property
management agreement approved by Lender, which may in the Borrower's discretion
be entered into by and between Borrower and the Property Manager, pursuant to
which the Property Manager is to provide management and other services with
respect to the Property, provided, that property management agreements shall
not include contracts pertaining to provision of food and beverage services in
connection with the normal operation of Borrower's business.
"PROPERTY MANAGER" shall mean Malibu, a wholly owned
subsidiary of Malibu or such other property manager selected by Lender in
accordance with this Agreement.
"RELEASE" shall mean a discharge and satisfaction of the Lien
of the Mortgages and each of the other Loan Documents encumbering the
Properties and any other collateral thereunder.
"RENT" shall mean all rents (including, without limitation,
fixed minimum rent and percentage rent), rent equivalents, moneys payable as
damages or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses), income,
receivables, receipts, expense reimbursements and recoveries from tenants,
revenues, deposits (including, without limitation, security, utility and other
deposits), accounts, cash, issues, profits, charges for services rendered, and
other consideration of whatever form or nature received by or paid to or for
the account of or benefit of Borrower or its agents or employees from any and
all sources arising from or attributable to each of the Properties and
proceeds, if any, from business interruption or other loss of income insurance.
"RESTORATION" shall have the meaning set forth in Section
7.1.2(b).
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
Section 8.2(c).
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"SPE MEMBER" shall have the meaning set forth in Section
4.1 (dd)(XV).
"STATED MATURITY" shall mean September 30, 1998.
"SURVEYS" shall mean the surveys of each of the Properties
prepared by a surveyor licensed in the state where such Property is located and
satisfactory to Lender and the company or companies issuing the Title Insurance
Policies, and containing a certification of such surveyor satisfactory to
Lender.
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set
forth in Section 7.3.
"TAXES" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents now or hereafter levied or
assessed or imposed against the Properties or any part thereof, including, but
not limited to, (a) any ad valorem real and tangible personal property taxes
levied against the Properties and (b) any intangible personal property tax
levied or imposed on Lender with respect to its ownership in the Loan.
"TERM" shall have the meaning set forth in Section 7.1.1(a).
"TEXAS ASSIGNMENT OF AGREEMENTS: shall mean, with respect to
the Texas Property, that certain first priority Assignment of Agreements,
Permits and Contracts dated as of the date hereof, from Borrower, as assignor,
to Lender, as assignee, assigning to Lender all of Borrower's interest in and
to the Property Management Agreement and all other licenses, permits and
contracts necessary for the use and operation of the Texas Property as security
for the Loan, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"TEXAS ASSIGNMENT OF LEASES" shall mean that certain first
priority Assignment of Leases and Rents, dated as of the date hereof, from
Borrower, as assignor, to Lender, as assignee, assigning to Lender all of
Borrower's interest in and to the Leases and Rents of the Texas Property as
security for the Loan, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"TEXAS ENVIRONMENTAL INDEMNITY" shall mean that certain
Environmental and Hazardous Substance Indemnification Agreement concerning the
Texas Property dated as of the date hereof, executed by Borrower in connection
with the Loan for the benefit of Lender.
"TEXAS IMPROVEMENTS" have the meaning set forth in the Texas
Mortgage with respect to the Texas Property
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"TEXAS MORTGAGE" shall mean that certain first priority
Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of
the date hereof, executed and delivered by Borrower as security for the Loan
made to Borrower and encumbering the Texas Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"TEXAS PREMISES" shall have the meaning set forth in the
granting clause of the Texas Mortgage with respect to the Texas Property.
"TEXAS PROPERTY" shall mean the real property and the
improvements thereon owned by Borrower and encumbered by the Texas Mortgage,
together with all rights pertaining to such property and improvements, as more
particularly described in the granting clauses of the Texas Mortgage and
referred to therein as the "Mortgaged Property."
"TEXAS TITLE INSURANCE POLICY" shall mean the ALTA mortgagee
title insurance policy, or the equivalent under Texas law, in the form
(acceptable to Lender) issued with respect to the Texas Property and insuring
the lien of the Texas Mortgage encumbering the Texas Property.
"TITLE INSURANCE POLICIES" shall mean collectively the
California Title Insurance Policy and the Texas Title Insurance Policy.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean, as appropriate,
either the Uniform Commercial Code in effect in California or the Uniform
Commercial Code in effect in Texas.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise
specified. Unless otherwise specified, the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined.
II. GENERAL TERMS
SECTION 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
2.1.1 THE LOAN. Upon the terms and subject to the
conditions of this Agreement, not later than 1:00 p.m. (New York City time) on
the Closing Date, Lender shall
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make available to Borrower $21,390,375 aggregate principal amount of the Loan,
in immediately available funds, at an account of Borrower in the United States
designated in writing by Borrower to Lender on or prior to the Closing Date.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may request and
receive only one borrowing hereunder in respect of the Loan and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
Borrower shall, on the Closing Date, receive its Loan, subject to the direction
given by Borrower as to the application of Loan proceeds to the items set forth
in Section 2.2.
2.1.3 THE NOTE. The Loan shall be evidenced by the Note
of Borrower, in the original principal amount of the Loan. The Loan shall bear
interest as provided in the Note and in Section 2.6 hereof and shall be subject
to repayment as provided in the Note and in Section 2.3 hereof. The holder of
the Note shall be entitled to the benefits of this Agreement and the Loan shall
be secured by the Mortgages, the Assignment of Leases and the other Loan
Documents.
SECTION 2.2 USE OF PROCEEDS.
Borrower shall use, in the following order of priority, the
proceeds of the Loan disbursed to it pursuant to Section 2.1 to (a) repay and
discharge any existing loans secured by the Properties, other than debt of the
Borrower permitted hereunder, (b) pay all past-due Basic Carrying Costs, if
any, in respect of the Properties, (c) fund the Tax and Insurance Escrow Fund
to the extent required to be funded on the Closing Date pursuant to the terms
of this Agreement and as more particularly set forth on Schedule I, (d) pay
costs and expenses incurred in connection with the closing of the Loan, as
approved by Lender and (e) either (x) employ all or any part of the balance, if
any, to fund the Borrower's working capital requirements or (y) distribute all
or any part of the balance, if any, to the Persons owning an equity interest in
Borrower.
SECTION 2.3 LOAN PREPAYMENT.
2.3.1 REPAYMENT AND PREPAYMENT. Borrower shall repay any
outstanding principal indebtedness of the Loan in full on the Maturity Date of
the Loan, together with interest thereon to (but excluding) the date of
repayment. Borrower may, at its option and upon three (3) Business Days' prior
written notice from Borrower to Lender, prepay in whole or in part the Debt
without payment of any other premium or penalty; provided, however, that in the
event that Borrower makes any prepayment of the Debt on a day other than the
last day of an interest period, Borrower shall reimburse Lender for any costs,
fees or expenses incurred by Lender in connection with such prepayment
including, without limitation, costs, fees and
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expenses associated with the unwinding of any LIBOR contract. No amount so
paid or prepaid may be reborrowed.
2.3.2 MANDATORY PREPAYMENTS. The Loan is subject to
mandatory prepayment in certain instances of Casualty and Condemnation (each, a
"CASUALTY/CONDEMNATION INVOLUNTARY PREPAYMENT"), in the manner and to the
extent set forth in Section 7.1.2 and Section 7.1.3 hereof. Each
Casualty/Condemnation Involuntary Prepayment, if not made on the last day of an
interest period, shall include a reimbursement to Lender for any costs, fees or
expenses incurred by Lender in connection with such prepayment including,
without limitation, costs, fees and expenses associated with the unwinding of
any LIBOR contract.
2.3.3 RECOURSE. The Obligations are full recourse
obligations of the Borrower. Anything contained herein, or in any other Loan
Document to the contrary notwithstanding, no recourse shall be had for the
Obligations against any partner, shareholder, agent, director, officer, or
employee of the Borrower. It is understood that the preceding sentence shall
not (A) in the event of any malfeasance, such as fraud, misappropriation of
funds or intentional misrepresentation, estop the Lender from instituting or
prosecuting a legal action or proceeding or otherwise making a claim against
the person or persons committing such malfeasance, (B) constitute a waiver,
release or discharge of any Obligation, and the same shall continue until paid
or discharged in full and (C) constitute a waiver, release or discharge any
obligations or liabilities of MEI pursuant to the MEI Guaranty or Borrower
pursuant to the Centers Guaranty.
SECTION 2.4 RELEASE OF PROPERTIES.
(a) Upon a repayment in full by (x) Borrower of the
Obligations and (y) MEI of the Obligations (as defined in the MEI Loan
Agreement) under the MEI Loan Agreement, Lender shall release the Lien of the
Mortgages and any other Loan Documents on the Properties and the other
collateral thereunder.
(b) In connection with the Release, Borrower shall
submit to Lender, not less than fifteen (15) days prior to the anticipated
Release, forms of Releases (including without limitation, releases of Liens and
UCC termination statements) for the Properties and any other applicable items
of collateral for execution by Lender. Such Releases shall be in forms
appropriate in the jurisdiction in which the Properties and any other
applicable items of collateral are located and satisfactory to Lender in its
sole discretion. In addition, Borrower shall provide all other documentation
Lender reasonably requires to be delivered by Borrower in connection with such
Releases, together with an Officer's Certificate, if requested by Lender,
certifying that
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such documentation (i) is in compliance with all Legal Requirements, and (ii)
will effect such Releases in accordance with the terms of this Agreement.
(c) Borrower shall pay all costs and expenses incurred
by Lender in connection with any Release (including reasonable attorney's fees
and costs).
SECTION 2.5 ASSUMPTION OF LOAN.
Borrower acknowledges that Lender, in agreeing to make the
Loan, has examined and relied on the creditworthiness and experience of
Borrower in owning and operating properties such as the Properties, and that
Lender will continue to rely on Borrower's ownership and operation of the
Properties as a means of maintaining the value of the Properties as security
for repayment of the Debt. Borrower acknowledges that Lender has a valid
interest in maintaining the value of the Properties so as to ensure that,
should Borrower default in the repayment of the Debt, Lender can recover the
Debt by a sale of the Properties. Accordingly, Borrower shall not, without the
prior written consent of Lender, transfer the Properties or any part thereof,
or permit the Properties or any part thereof to be transferred.
SECTION 2.6 INTEREST AND PRINCIPAL.
2.6.1 GENERALLY. Borrower shall pay interest, in arrears, on
August 1, 1997 and, thereafter, for each one month interest period (or portion
thereof) from and including the first Business Day of each calendar month to
but excluding the first Business Day of the immediately succeeding calendar
month, on the unpaid principal balance from time to time outstanding at the
Applicable Interest Rate for such interest period, on the first day of each
calendar month during the term hereof (or if such day is not a Business Day,
the next day which is a Business Day). The balance of the principal sum
together with all accrued and unpaid interest thereon shall be paid on the
Maturity Date, all in accordance with the terms and provisions set forth in the
Note.
2.6.2 DEFAULT RATE. Borrower agrees that upon the occurrence
of an Event of Default Lender shall be entitled to receive and Borrower shall
pay to Lender interest on the entire unpaid principal sum of the Loan and any
other amounts (including interest to the extent permitted by applicable law)
due at the Default Rate. Interest at the Default Rate, to the extent not paid,
shall be added to the Debt and shall be secured by the Mortgages. This
Section, however, shall not be construed as an agreement or privilege to extend
the date of payment of the Debt, nor as a waiver of any other right or remedy
accruing to Lender by reason of the occurrence of any Event of Default.
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SECTION 2.7 PAYMENTS AND COMPUTATIONS.
2.7.1 MAKING OF PAYMENTS. Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to Lender
by 11:00 a.m., New York City time, on the date such payment is due, to Lender
by deposit to the following account:
Mellon Bank Pittsburgh
ABA# 043 000 261
Account Name: NACC Clearance Account
Account # 109-2525
Attn: Lance W. Haberin/Ref: Malibu Entertainment/MEI Holdings
Whenever any payment hereunder or under the Note shall be stated to be due on a
day which is not a Business Day, such payment shall be made on the first
Business Day thereafter.
2.7.2 COMPUTATIONS. Interest payable hereunder or under the
Note by Borrower shall be computed on the basis of the actual number of days
elapsed and a 360-day year.
2.7.3 LATE PAYMENT CHARGE. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower on the date on
which it is due, Borrower shall pay to Lender upon demand an amount equal to
the lesser of three percent (3%) of such unpaid sum or the maximum amount
permitted by applicable law in order to defray the expense incurred by Lender
in handling and processing such delinquent payment and to compensate Lender for
the loss of the use of such delinquent payment. Any such amount shall be in
addition to any other amounts required under the Loan Documents (including,
without limitation, Section 2.6.2 hereof) and shall be secured by the Mortgages
and the other Loan Documents.
III. CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO CLOSING.
The obligation of Lender to make the Loan hereunder is subject
to the fulfillment by Borrower or waiver by Lender of the following conditions
precedent no later than the Closing Date:
(a) Representations and Warranties; Compliance with
Conditions. The representations and warranties of Borrower contained in this
Agreement and the other Loan
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Documents shall be true and correct in all material respects on and as of the
Closing Date with the same effect as if made on and as of such date, and no
Default or Event of Default shall have occurred and be continuing; and Borrower
shall be in compliance in all material respects with all terms and conditions
set forth in this Agreement and in each other Loan Document on its part to be
observed or performed.
(b) Loan Agreement and Note. Lender shall have
received a copy of this Agreement and the Note, in each case, duly executed and
delivered on behalf of Borrower.
(c) Delivery of Loan Documents; Title Insurance;
Reports.
(i) Mortgage, Assignment of Leases,
Assignments of Agreements. Lender shall have received from Borrower
fully executed and acknowledged counterparts of the Mortgages, the
Assignment of Leases and the Assignment of Agreements relating to the
Properties and evidence that counterparts of the Mortgages and the
Assignment of Leases have been delivered to the title company for
recording, in the reasonable judgment of Lender, so as to effectively
create upon such recording valid and enforceable Liens upon the
Properties, of the requisite priority, in favor of Lender, subject
only to the Permitted Encumbrances. Lender shall have also received
from Borrower fully executed counterparts of the Environmental
Indemnities and the Consent and Subordination of Property Manager
provided a Property Manager is in place at the Closing.
(ii) Title Insurance. Lender shall have
received the Title Insurance Policies issued by a title company
acceptable to Lender and dated as of the Closing Date. Such Title
Insurance Policies shall (A) provide coverage in amounts satisfactory
to Lender, (B) insure Lender that the Mortgages create valid first
liens on the Properties, free and clear of all exceptions from
coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any
endorsements), (C) contain such endorsements and affirmative coverages
as Lender may reasonably request and are available in the state where
such Property is located, and (D) name Lender as the insured. The
Title Insurance Policies shall be assignable to future holders of the
Note. Lender also shall have received evidence that all premiums in
respect of the Title Insurance Policies have been paid.
(iii) Surveys. Lender shall have received a
current title survey for the Properties, certified to the title
company and Lender and their successors and assigns in form and
content satisfactory to Lender and prepared by a professional and
properly licensed land surveyor satisfactory to Lender in accordance
with the 1992 Minimum
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Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The
surveys should meet the classification of an "Urban Survey" and the
following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) should be added to the
survey: 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13. Such surveys shall
reflect the same legal description contained in the applicable Title
Insurance Policy relating to the Properties referred to in clause (ii)
above and shall include, among other things, a metes and bounds
description of the real property comprising part of each of the
Properties reasonably satisfactory to Lender. The surveyors' seal
shall be affixed to the surveys and the surveyors shall provide a
certification for the surveys in form and substance acceptable to
Lender.
(iv) Insurance. Lender shall have received
valid certificates of insurance for the Policies required hereunder,
and evidence of the payment of all premiums due and payable for the
existing policy period and evidence that the current Policies will be
renewed on the same terms and conditions (or other terms and
conditions acceptable to Lender), all of which terms and conditions
shall be satisfactory to Lender.
(v) Zoning. For each of the Properties Lender
shall have received, at Lender's option, (A) letters or other evidence
with respect to such Property from the appropriate municipal
authorities (or other Persons) concerning applicable zoning,
subdivision and building laws, (B) an ALTA 3.1 zoning endorsement for
the Title Insurance Policy pertaining to such Property, or (C) a
zoning opinion letter, in substance reasonably satisfactory to Lender.
Lender shall have also received evidence satisfactory to Lender that
each of the Properties is independent of any other real property for
taxing purposes.
(vi) Encumbrances. Borrower shall have taken
or caused to be taken such actions in such a manner so that Lender has
a valid and perfected Lien of first priority as of the Closing Date
with respect to the Mortgages, subject only to applicable Permitted
Encumbrances, and Lender shall have received satisfactory evidence
thereof.
(d) Related Documents. Each additional document not
specifically referenced herein, but requested by Lender and relating to the
transactions contemplated herein, shall have been duly authorized, executed and
delivered by all parties thereto and Lender shall have received and approved
originals thereof.
(e) Delivery of Organizational Documents. On or before
the Closing Date, Borrower shall have delivered or caused to be delivered to
Lender certified copies of all organizational documentation related to Borrower
as Lender may request in its sole discretion,
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including, without limitation, good standing certificates, qualifications to do
business in the appropriate jurisdictions, resolutions authorizing the entering
into of the Loan and incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have
received opinions of Borrower's counsel with respect to due execution,
authority, enforceability of the Loan Documents (including but not limited to
the MEI Guaranty and the Pledge) and such other matters as Lender may require,
all such opinions to be in form, scope and substance satisfactory to Lender and
Lender's counsel in their sole discretion.
(g) INTENTIONALLY DELETED
(h) Basic Carrying Costs. Borrower shall have paid all
Basic Carrying Costs relating to the Properties which are in arrears,
including, without limitation, (i) accrued but unpaid insurance premiums
relating to the Properties, (ii) currently due Taxes (including any in arrears)
relating to the Properties, and (iii) currently due Other Charges relating to
the Properties, which amounts will be funded with proceeds of the Loan if such
proceeds are sufficient therefor.
(i) Completion of Proceedings. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and the other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(j) INTENTIONALLY DELETED
(k) Payments. All payments, deposits or escrows
required to be made or established by Borrower under this Agreement, the Note
and the other Loan Documents on or before the Closing Date shall have been
paid. Lender shall have received a settlement statement setting forth the
disbursement of the Loan in form and content satisfactory to Lender.
(l) Third Party Reports. Lender shall have received an
environmental property condition report in respect of the Properties addressed
to Lender.
(m) INTENTIONALLY DELETED
(n) Payoff Letters. Lender shall have received a true
and correct copy of the payoff letters for all of the existing debt encumbering
the Properties.
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(o) MEI Guaranty. Lender shall have received a duly
executed MEI Guaranty together with a duly executed Pledge securing the MEI
Guaranty.
(p) Centers Guaranty. Lender shall have received a
duly executed Centers Guaranty.
(q) Letter Agreement. Lender shall have received a
duly executed Letter Agreement.
(r) Structure Fee. Borrower shall have paid Lender a
non-refundable fee of $650,000.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 BORROWER REPRESENTATIONS.
Borrower represents and warrants as of the date hereof and as
of the Closing Date that:
(a) Organization. Borrower has been duly organized and
is validly existing and in good standing with requisite power and authority to
own its properties and to transact the businesses in which it is now engaged.
Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations. Borrower possesses all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to
entitle it to own its properties and to transact the businesses in which it is
now engaged, and the sole business of Borrower is the ownership, management and
operation of the Properties.
(b) Proceedings. Borrower has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and the other Loan Documents. This Agreement and such other Loan Documents
have been duly executed and delivered by or on behalf of Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization and similar laws affecting rights of
creditors generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).
(c) No Conflicts. The execution, delivery and
performance of this Agreement and the other Loan Documents by Borrower will not
conflict with or result in a
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<PAGE> 23
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance (other
than pursuant to the Loan Documents) upon any of the property or assets of
Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, partnership agreement, operating agreement or other agreement or
instrument to which Borrower is a party or by which any of Borrower's property
or assets is subject, nor will such action result in any violation of the
provisions of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Borrower or any of
Borrower's properties or assets, and any consent, approval, authorization,
order, registration or qualification of or with any court or any such
regulatory authority or other governmental agency or body required for the
execution, delivery and performance by Borrower of this Agreement or any other
Loan Documents has been obtained and is in full force and effect.
(d) Litigation. There are no actions, suits or
proceedings at law or in equity by or before any Governmental Authority or
other agency now pending or threatened against or affecting Borrower or the
Properties, which actions, suits or proceedings, if determined against Borrower
or the Properties, might materially adversely affect the condition (financial
or otherwise) or business of Borrower or the condition or ownership of the
Properties.
(e) Agreements. Neither Borrower nor any Affiliate of
Borrower is a party to any agreement or instrument or subject to any
restriction which might materially and adversely affect Borrower or the
Properties, or Borrower's business, properties or assets, operations or
condition (financial or otherwise). Borrower is not in default in any respect
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party or by which Borrower or the Properties are bound except for defaults in
the aggregate which are not likely to have a material adverse effect on the
Borrower, the Properties or Lenders rights or interest hereunder.
(f) Title. Borrower has good, marketable and insurable
title in fee simple to the real property comprising the Properties and good
title to the balance of the Properties, free and clear of all Liens whatsoever
except Permitted Encumbrances. The Mortgages, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (i) a
valid, perfected lien on the Properties, subject only to Permitted Encumbrances
and (ii) perfected security interests in and to, and perfected collateral
assignments of, all personalty (including the Leases) comprising part of the
Properties, all in accordance with the terms thereof, in each case subject only
to any applicable Permitted Encumbrances. The Permitted Encumbrances do not
materially and adversely affect the value of the Properties, the use of the
Properties for the use being made thereof as of the date of this Agreement, the
operation of the Properties or Borrower's ability
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to repay the Loan in full. There are no overdue claims for payment for work,
labor or materials affecting any of the Properties which are or may become a
Lien prior to, or of equal priority with, the Liens created by the Loan
Documents that will not be paid from the proceeds of the Loan.
(g) No Bankruptcy Filing. Borrower is not
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion of
its assets or property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it.
(h) Full and Accurate Disclosure. No statement of fact
made by Borrower in this Agreement or in any of the other Loan Documents, nor
any written materials relating to the business, operations or condition
(financial or otherwise) of Borrower or the Properties that were supplied to
Lender in connection with Lender's due diligence investigation contains (or, in
the case of such written material, at the time supplied contained) any untrue
statement of a material fact or omits (or omitted, as the case may be) to state
any material fact necessary to make the statements contained herein or therein
not misleading. There is no material fact presently known to Borrower which
has not been disclosed to Lender in writing in connection with Lender's due
diligence investigation which adversely affects, nor as far as Borrower can
foresee, might adversely affect, the Properties or the business, operations or
condition (financial or otherwise) of Borrower.
(i) No Plan Assets. Borrower is not an "employee
benefit plan" (as defined in Section 3(3) of ERISA), subject to Title I of
ERISA, and none of the assets of Borrower constitutes or will constitute "plan
assets" of one or more such plans within the meaning of 29 C.F.R. Section
2510.3-101. In addition, (i) Borrower is not a "governmental plan" within the
meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower are
not subject to state statutes regulating investments of, and fiduciary
obligations with respect to, governmental plans.
(j) Compliance. Borrower and the Properties and the
use thereof comply with all applicable Legal Requirements, including, without
limitation, building and zoning ordinances and codes and subdivision laws and
regulations except for violations in the aggregate which are not likely to have
a material adverse effect on Borrower, the Properties or Lender's rights or
interests hereunder. Borrower is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority except for
violations in the aggregate which are not likely to have a material adverse
effect on Borrower, the Properties or Lender's rights or interests hereunder.
There has not been and shall never be committed by Borrower or any other person
in occupancy of or involved with the operation or use of the
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Properties any act or omission affording the federal government or any state or
local government the right of forfeiture as against the Properties or any part
thereof or any monies paid in performance of Borrower's obligations under any
of the Loan Documents. Borrower hereby covenants and agrees not to commit,
permit or suffer to exist any act or omission affording such right of
forfeiture.
(k) Financial Information.
(i) All financial data, including, without
limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of the
Properties, including those required under Section 3.1 hereof (A) are
true, complete and correct in all material respects, (B) accurately
represent the financial condition of the Properties as of the date of
such reports, and (C) have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as
disclosed therein. Borrower does not have any material contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a
materially adverse effect on the Properties or the present operation
thereof, except as referred to or reflected in said financial
statements. Since the date of such financial statements, there has
been no materially adverse change in the financial condition,
operations or business of Borrower from that set forth in said
financial statements.
(ii) All federal and state income tax returns
have been filed by Borrower and there are no income taxes due and
owing by Borrower.
(l) Condemnation. No Condemnation or other proceeding
has been commenced or, to Borrower's best knowledge, is contemplated with
respect to all or any portion of either of the Properties or for the relocation
of roadways providing access to either of the Properties.
(m) Federal Reserve Regulations. No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements or by the terms
and conditions of this Agreement or the other Loan Documents.
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<PAGE> 26
(n) Utilities and Public Access. Each of the
Properties has rights of access to public ways and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service each of the
Properties for its intended use. All public utilities necessary or convenient
to the full use and enjoyment of the Properties are located either in the
public rights-of-way abutting the Properties (which are connected so as to
serve the Properties without passing over other property) or in recorded
easements serving the Properties and such easements are set forth in the Title
Insurance Policies. All roads necessary for the use of the Properties for its
current purpose have been completed and dedicated to public use and accepted by
all Governmental Authorities.
(o) Not a Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
(p) Separate Lot. Each of the Properties are comprised
of one (1) or more parcels which constitute a separate tax lot and does not
constitute a portion of any other tax lot not a part of such Property.
(q) Assessments. There are no pending or proposed
special or other assessments for public improvements or otherwise affecting
either of the Properties, nor are there any contemplated improvements to either
of the Properties (other than completion of redevelopment projects already in
progress and previously disclosed to Lender) that may result in such special or
other assessments, and there are no other facts or circumstances which would
cause the Taxes for Fiscal Year 1997 to be significantly higher than the Taxes
assessed and imposed for Fiscal Year 1996.
(r) Enforceability. The Loan Documents are not subject
to any right of rescission, set-off, counterclaim or defense by Borrower,
including the defense of usury, nor would the operation of any of the terms of
the Loan Documents, or the exercise of any right thereunder, render the Loan
Documents unenforceable except to the extent such unenforceability may be the
result of bankruptcy, insolvency, reorganization or similar laws affecting
rights of creditors generally or general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law), and
Borrower has not asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.
(s) No Prior Assignment. There are no prior
assignments of the Leases or any portion of the Rents due and payable or to
become due and payable which are presently outstanding.
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(t) Insurance. Borrower has obtained and has delivered
to Lender certified copies of all Policies reflecting the insurance coverages,
amounts and other requirements set forth in this Agreement and there have been
no acts or omissions that would impair the coverage of any such Policies or the
benefits of the mortgagee endorsement.
(u) Use of Properties. The California Property is used
exclusively for an active entertainment center and other appurtenant and
related uses. The Texas Property is used exclusively for an active
entertainment center and other appurtenant and related uses.
(v) Certificate of Occupancy; Licenses. All material
certifications, permits, licenses and approvals, including, without limitation,
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of each of the Properties as they are currently being
used (collectively, the "LICENSES"), have been obtained and are in full force
and effect. Borrower shall keep and maintain all Licenses necessary for such
operation of the Properties. The use being made of each of the Properties is
in conformity with the certificates of occupancy issued for such Property.
(w) Flood Zone. Except as shown on the Surveys none of
the Improvements on the Properties are located in an area as identified by the
Federal Emergency Management Agency as an area having special flood hazards.
(x) Physical Condition. The Properties, including,
without limitation, all buildings, improvements, parking facilities, sidewalks,
storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
condition, order and repair in all material respects. There exist no
structural or other material defects or damages in either of the Properties,
whether latent or otherwise, and Borrower has not received notice from any
insurance company or bonding company of any defects or inadequacies in either
of the Properties, or any part thereof, which would adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy
of insurance or bond.
(y) Boundaries. Except as shown on the Surveys all of
the improvements which were included in determining the appraised value of each
of the Properties lie wholly within the boundaries and building restriction
lines of such Property, and no improvements on adjoining properties encroach
upon such Property, and no easements or other encumbrances upon such Property
encroach upon any of the improvements, so as to affect the value or
marketability of such Property except those which are insured against by title
insurance.
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(z) Leases. The Properties are not subject to any
Leases.
(aa) Surveys. The Surveys for the Properties delivered
to Lender in connection with this Agreement do not fail to reflect any material
matter affecting such Property or the title thereto and have either been
prepared in accordance with the provisions of Section 3.1(c)(iii) hereof, or
will be modified within 30 days of the date hereof to comply with Section
3.1(c)(iii) hereof.
(bb) Property Value. Borrower or Borrower's parent
purchased the Properties for $12,400,000 and Borrower has no reason to believe
that the fair market value of the Properties is less than $12,400,000.
(cc) Filing and Recording Taxes. All transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of the Properties to Borrower have
been paid. All mortgage, mortgage recording, stamp, intangible or other
similar taxes required to be paid by any Person under applicable Legal
Requirements currently in effect in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the Loan
Documents, including, without limitation, the Mortgages, have been paid, and,
under current Legal Requirements, the Mortgages are enforceable in accordance
with their terms by Lender (or any subsequent holder thereof) except to the
extent such enforceability may be limited as a result of bankruptcy,
insolvency, reorganization or similar laws affecting rights of creditors
generally or general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(dd) Single-Purpose. Borrower hereby represents and
warrants to, and covenants with, Lender that as of the date hereof and until
such time as the Debt shall be paid in full:
(i) Borrower does not own and will not own any
asset or property other than (A) the Properties, and (B) incidental
personal property necessary for or arising out of the ownership or
operation of the Properties.
(ii) Borrower will not engage in any business
other than the ownership, management and operation of the Properties
and Borrower will conduct and operate its business substantially as
presently conducted and operated.
(iii) Borrower will not enter into any contract
or agreement with any Affiliate of Borrower, any constituent party of
Borrower or any Affiliate of any
25
<PAGE> 29
constituent party, except (x) upon terms and conditions that are
intrinsically fair and substantially similar to those that would be
available on an arms-length basis with third parties other than any
such party or (y) if otherwise approved by Lender.
(iv) Borrower has not incurred and will not
incur any indebtedness, secured or unsecured, direct or indirect,
absolute or contingent (including guaranteeing any obligation), other
than the Debt and the indebtedness permitted under this Agreement. No
indebtedness other than the Debt may be secured (subordinate or pari
passu) by the Properties except that indebtedness, in addition to the
Debt, may be secured by Liens against the portion of the Properties
which is not comprised of real property provided such Liens are
granted in accordance with the terms of this Agreement.
(v) Borrower has not made and will not make
any loans or advances to any third party (including any Affiliate or
constituent party), and shall not acquire obligations or securities of
its Affiliates.
(vi) Borrower is and will remain solvent and
Borrower will pay its debts and liabilities (including, as applicable,
shared personnel and overhead expenses) from its assets as the same
shall become due.
(vii) Borrower has done or caused to be done and
will do all things necessary to observe organizational formalities and
preserve its existence, and Borrower will not, nor will Borrower
permit any constituent party of Borrower to, amend, modify or
otherwise change the partnership agreement, partnership certificate,
articles of incorporation, bylaws, articles of organization, operating
agreement, trust or other organizational documents of Borrower or such
constituent party without the prior written consent of Lender.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from those of
its Affiliates and any constituent party and Borrower will file its
own tax returns. Borrower shall maintain its books, records,
resolutions and agreements as official records.
(ix) Borrower will be, and at all times will
hold itself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate of Borrower or any
constituent party of Borrower), shall conduct business in its own
name, shall correct any known misunderstanding regarding its status as
a separate entity, shall not identify itself or any of its Affiliates
as a division or part of the others
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<PAGE> 30
and shall maintain and utilize a separate telephone number and
separate stationery, invoices and checks.
(x) Borrower will maintain adequate capital
for the normal obligations reasonably foreseeable in a business of its
size and character and in light of its contemplated business
operations.
(xi) Neither Borrower nor any constituent party
of Borrower will seek or effect the liquidation, dissolution, winding
up, consolidation or merger, in whole or in part, of Borrower.
(xii) Borrower will neither commingle the funds
and other assets of Borrower with those of any Affiliate or
constituent party of Borrower or any other Person nor control the
decisions with respect to the daily affairs of any other Person.
(xiii) Borrower has and will maintain its assets
in such a manner that it will not be costly or difficult to segregate,
ascertain or identify its individual assets from those of any
Affiliate or constituent party of Borrower or any other Person.
(xiv) Except with respect to the Centers Pledge,
Borrower does not and will not hold itself out to be responsible for
the debts or obligations of any other Person.
(xv) If Borrower is a limited partnership or a
limited liability company, each general partner or at least one member
(the "SPE Member") of Borrower, as applicable, is a corporation whose
sole asset is its interest in Borrower and each general partner or the
SPE Member of Borrower, as applicable, will at all times comply, and
will cause Borrower to comply, with each of the representations,
warranties and covenants contained in this Section 4.1(dd) as if such
representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a
manager under the law where the Borrower is organized.
(xvi) Borrower shall at all times cause there to
be at least one duly appointed member of the board of directors (an
"INDEPENDENT DIRECTOR") of Borrower, if Borrower is a corporation or
if Borrower is not a corporation of each general partner of Borrower
(or of the SPE Member of Borrower), reasonably satisfactory to Lender
who shall not have been at the time of such individual's initial
appointment, and may not have been at any time during the preceding
five years, and shall not be at any time while
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serving as a director of Borrower, the general partner or Member, as
the case may be, either (A) a shareholder of, or an officer, director
(other than an Independent Director of an Affiliate of Borrower),
partner or employee of, Borrower or any of its shareholders, partners,
members, subsidiaries or Affiliates, (B) a customer of, or supplier
to, Borrower or any of its shareholders, partners, members,
subsidiaries or Affiliates, (C) a person or other entity controlling
or under common control with any such shareholder, officer, director,
partner, member, employee, supplier or customer, or (D) a member of
the immediate family of any such shareholder, officer, director,
partner, member, employee, supplier or customer. As used herein, the
term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policy of
a person or entity, whether through ownership of voting securities, by
contract or otherwise.
(xvii) Borrower shall not cause or permit the
board of directors of Borrower, if Borrower is a corporation or if
Borrower is not a corporation of the general partner of Borrower (or
of the SPE Member of Borrower) to take any action which, under the
terms of any certificate of incorporation, bylaws or any voting trust
agreement with respect to any common stock, requires a vote of the
board of directors of Borrower the general partner of Borrower or the
SPE Member of Borrower, as the case may be, unless at the time of such
action there shall be at least one member of the board of directors
who is an Independent Director.
(ee) Existing Debt. The total aggregate outstanding
principal amount of the existing debt encumbering the portion of the Properties
which is real property is $31,390,375.
(ff) Taxes. The total Taxes (including special or other
assessments) payable with respect to both of the Properties for the calendar
year 1996 was $233,191.95.
(gg) INTENTIONALLY DELETED
(hh) Property Management Agreement. If Borrower has
entered into a Property Management Agreement, the Property Manager's rights to
receive any fees pursuant to such Property Management Agreement are subordinate
to the Liens of the Mortgages and other Loan Documents.
(ii) Ownership of Borrower. Borrower is wholly owned by
Mountasia Family Entertainment Centers, Inc., a Texas corporation, which is
wholly owned by Malibu.
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SECTION 4.2 SURVIVAL OF REPRESENTATIONS.
Borrower agrees that all of the representations and warranties
of Borrower set forth in Section 4.1 and elsewhere in this Agreement and in the
other Loan Documents shall survive for so long as any amount remains owing to
Lender under this Agreement or any of the other Loan Documents by Borrower.
All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents by Borrower shall be deemed to have
been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
SECTION 5.1 BORROWER COVENANTS.
From the date hereof and until payment and performance in full
of all obligations of Borrower under the Loan Documents or the earlier Release
of all the Liens of the Mortgages in accordance with the terms of this
Agreement and the other Loan Documents, Borrower hereby covenants and agrees
with Lender that:
(a) Existence; Compliance with Legal Requirements;
Insurance. Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, and its
material rights, licenses, permits and franchises and, except as set forth in
Section 4.1(j), comply with all Legal Requirements applicable to it and the
Properties. Borrower shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property used
or useful in and material to the conduct of its business and shall keep the
Properties in good working order and repair, and from time to time make, or
cause to be made, all reasonably necessary repairs, renewals, replacements,
betterments and improvements thereto, all as more fully provided in the
Mortgages. Borrower shall keep the Properties insured at all times by
financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided in this Agreement.
(b) Taxes and Other Charges. Borrower shall pay all
Taxes and Other Charges now or hereafter levied or assessed or imposed against
the Properties or any part thereof as the same become due and payable;
provided, however, Borrower's obligation to directly pay Taxes and Other
Charges shall be suspended for so long as Borrower complies with the terms and
provisions of Section 7.3 hereof. Borrower will deliver to Lender receipts for
payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid or are not then delinquent no later than thirty (30)
days prior to the date on which the Taxes and/or Other Charges would otherwise
be delinquent if not paid (provided, however, that Borrower is not required to
furnish such receipts for payment of Taxes in the event that such Taxes have
been paid by Lender pursuant to Section 7.3 hereof). Borrower shall not suffer
and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against either of the
Properties (other than a Permitted Encumbrance), and shall promptly pay for all
utility services provided to both of the Properties. After prior
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written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith
and with due diligence, the amount or validity or application in whole or in
part of any Taxes or Other Charges, provided that (i) no Default or Event of
Default has occurred and remains uncured, (ii) Borrower is permitted to do so
under the provisions of any mortgage or deed of trust superior in lien to the
Mortgages, (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower is
subject and shall not constitute a default thereunder, and such proceeding
shall be conducted in accordance with all applicable statutes, laws and
ordinances, (iv) neither of the Properties nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, cancelled or
lost, and (v) Borrower shall promptly upon final determination thereof pay the
amount of any such Taxes or Other Charges, together with all costs, interest
and penalties which may be payable in connection therewith. In addition, if
the Taxes or Other Charges are not paid in full when Borrower commences such
contest, then the following shall apply: (A) such proceeding shall suspend the
collection of Taxes or Other Charges from such Property, and (B) Borrower shall
furnish such security as may be required in the proceeding, or as may be
reasonably requested by Lender, to insure the payment of any such Taxes or
Other Charges, together with all interest and penalties thereon. Lender may
pay over any such cash deposit or part thereof held by Lender to the claimant
entitled thereto at any time when, in the judgment of Lender, the entitlement
of such claimant is established.
(c) Litigation. Borrower shall give prompt written
notice to Lender of any litigation or governmental proceedings pending or
threatened against Borrower which might materially adversely affect Borrower's
condition (financial or otherwise) or business or either of the Properties.
(d) Access to Premises. Borrower shall permit agents,
representatives and employees of Lender to inspect both of the Properties or
any part thereof at reasonable hours upon reasonable advance notice.
(e) Notice of Default. Borrower shall promptly advise
Lender of any material adverse change in Borrower's condition, financial or
otherwise, or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.
(f) Cooperate in Legal Proceedings. Borrower shall
cooperate fully with Lender with respect to any proceedings before any court,
board or other Governmental Authority which may in any way affect the rights of
Lender hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
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(g) INTENTIONALLY DELETED
(h) Insurance Benefits. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully
or equitably payable in connection with either of the Properties, and Lender
shall be reimbursed for any expenses incurred in connection therewith
(including, without limitation, reasonable attorneys' fees and disbursements,
and the payment by Borrower of the expense of an appraisal on behalf of Lender
in case of a fire or other casualty affecting either of the Properties or any
part thereof) out of such Insurance Proceeds.
(i) Further Assurances; Supplemental Mortgage
Affidavits. Borrower shall, at Borrower's sole cost and expense:
(i) furnish to Lender all instruments,
documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other
insurance reports and agreements, and each and every other document,
certificate, agreement and instrument required to be furnished by
Borrower pursuant to the terms of the Loan Documents or reasonably
requested by Lender in connection therewith;
(ii) execute and deliver to Lender such
documents, instruments, certificates, assignments and other writings,
and do such other acts necessary or desirable, to evidence, preserve
and/or protect the collateral at any time securing or intended to
secure the obligations of Borrower under the Loan Documents, as Lender
may reasonably require; and
(iii) do and execute all and such further lawful
and reasonable acts, conveyances and assurances for the better and
more effective carrying out of the intents and purposes of this
Agreement and the other Loan Documents, as Lender shall reasonably
require from time to time.
(j) Financial Reporting. Borrower will furnish to
Lender annually, within 90 days following the end of each Fiscal Year,
financial statements of Borrower for each such fiscal year, certified, by the
chief financial officer of the Borrower, to have been prepared in accordance
with GAAP, together with a certificate of such officer, addressed to Lender,
stating that, to such officer's knowledge, no Event of Default is in existence.
Such certified financial statements shall include a balance sheet, profit and
loss statement, and statement of cash flow.
(k) Business and Operations. Borrower will continue to
engage in the businesses presently conducted by it as, and to the extent the
same, is necessary for the
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ownership, maintenance, management and operation of the Properties. Borrower
will qualify to do business and will remain in good standing under the laws of
each jurisdiction as and to the extent the same is required for the ownership,
maintenance, management and operation of the Properties.
(l) Title to the Properties. Borrower will warrant and
defend (i) the title to each of the Properties and every part thereof, subject
only to Liens permitted hereunder (including Permitted Encumbrances), and (ii)
the validity and priority of the Liens of the Mortgages and the Assignment of
Leases on the Properties, subject only to Liens permitted hereunder (including
Permitted Encumbrances), in each case against the claims of all Persons
whomsoever. Borrower shall reimburse Lender for any losses, costs, damages or
expenses (including reasonable attorneys' fees and court costs) incurred by
Lender if an interest in either of the Properties, other than as permitted
hereunder, is claimed by another Person.
(m) Costs of Enforcement. In the event (i) that either
or both of the Mortgages are foreclosed in whole or in part or that either or
both of the Mortgages are put into the hands of an attorney for collection,
suit, action or foreclosure, (ii) of the foreclosure of any mortgage prior to
or subsequent to the Mortgages in which proceeding Lender is made a party, or
(iii) of the bankruptcy, insolvency, reorganization, rehabilitation,
liquidation or other similar proceeding in respect of Borrower or an assignment
by Borrower for the benefit of its creditors, then Borrower, its successors or
assigns, shall be chargeable with and agree to pay all costs of collection and
defense, including, without limitation, attorneys' fees, in connection
therewith and in connection with any appellate proceeding or post-judgment
action involved therein, which shall be due and payable together with all
required service or use taxes on demand.
(n) Estoppel Statements.
(i) Within ten (10) days after request by Lender,
Borrower shall furnish Lender with a statement, duly acknowledged and
certified, setting forth (A) the amount of the original principal
amount of the Note, (B) the unpaid principal amount of the Note, (C)
the Applicable Interest Rate of the Note, (D) the date installments of
interest and principal were last paid, (E) any offsets or defenses to
the payment of the Debt, if any, and (F) that the Note, this
Agreement, the Mortgages and the other Loan Documents are valid, legal
and binding obligations and have not been modified or, if modified,
giving particulars of such modification.
(o) Loan Proceeds. Borrower shall use the proceeds of
the Loan received by it on the Closing Date only for the purposes set forth in
Section 2.2 hereof.
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(p) INTENTIONALLY DELETED
(q) INTENTIONALLY DELETED
(r) INTENTIONALLY DELETED
(s) No Joint Assessment. Borrower shall not suffer,
permit or initiate the joint assessment of either of the Properties (i) with
any other real property constituting a tax lot separate from either of the
Properties, and (ii) with any portion of either of the Properties which may be
deemed to constitute personal property, or any other procedure whereby the lien
of any taxes which may be levied against such personal property shall be
assessed or levied or charged to either of the Properties.
(t) Leasing Matters. Borrower shall not lease either
of the Properties, in whole or in part, without the prior written consent of
Lender which consent may be withheld in the sole discretion of Lender.
(u) Principal Place of Business. Borrower shall not
change its principal place of business set forth on the first page of this
Agreement without first giving Lender thirty (30) days prior written notice.
(v) Property Manager. Borrower covenants and agrees
with Lender that (i) each of the Properties will be managed at all times by
either the Borrower or the Property Manager, (ii) if at any time the Properties
are managed by the Property Manager they will be managed pursuant to a
Property Management Agreement (x) approved by Lender and (y) which provides
that the Property Manager's rights to management fees or other payments on
account of managing the Properties or otherwise will at all times be
subordinate to the Liens of the Mortgage and other Loan Documents, (ii) it
shall not permit a change in control of the Property Manager, and (iv) the
Property Management Agreement may be terminated by Lender at any time for cause
(including, but not limited to, the Property Manager's gross negligence,
willful misconduct or fraud) or at any time following either (A) the occurrence
and during the continuance of a monetary Default or an Event of Default or (B)
upon a change in control of the Property Manager. Borrower further covenants
and agrees that Borrower shall require the Property Manager to maintain, at all
times that all or any portion of the Debt remains outstanding, worker's
compensation insurance in compliance with Legal Requirements.
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VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS.
From the date hereof until payment and performance in full of
all obligations of Borrower under the Loan Documents or the earlier release of
the Lien of the Mortgages in accordance with the terms of this Agreement and
the other Loan Documents, Borrower covenants and agrees with Lender that it
will not do, directly or indirectly, any of the following:
(a) Operation of Properties. Borrower shall not,
without the prior consent of Lender, replace the Property Manager of the
Properties or enter into any other management agreements with respect to the
Properties.
(b) Liens. Borrower shall not, without the prior
written consent of Lender, create, incur, assume or suffer to exist any Lien on
any portion of the Properties or permit any such action to be taken, except:
(i) Permitted Encumbrances; and (ii) Liens incurred in the ordinary course of
business in connection with purchase money financing of equipment located on
either the California Premises or the Texas Premises.
(c) Dissolution. Borrower shall not dissolve,
terminate, liquidate, merge with, consolidate into or acquire another Person.
(d) Change In Business. Borrower shall not enter into
any line of business other than the ownership and operation of the Properties,
or make any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other than
the continuance of its present business.
(e) Debt Cancellation. Borrower shall not cancel or
otherwise forgive or release any claim or debt owed to Borrower by any Person,
except for adequate consideration and in the ordinary course of Borrower's
business.
(f) Affiliate Transactions. Borrower shall not enter
into, or be a party to, any transaction with an Affiliate of Borrower or any of
the partners or members of Borrower except in the ordinary course of business
and (x) on terms which are fully disclosed to and approved by Lender in advance
or (y) are no less favorable to Borrower or such Affiliate than would be
obtained in a comparable arm's-length transaction with an unrelated third
party.
(g) Zoning. Borrower shall not initiate or consent to
any zoning reclassification of any portion of the Properties or seek any
variance under any existing zoning
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ordinance or use or permit the use of any portion of the Properties in any
manner that could result in such use becoming a non-conforming use under any
zoning ordinance or any other applicable land use law, rule or regulation,
without the prior written consent of Lender.
(h) Assets. Borrower shall not purchase or own any
properties other than (x) the Properties and (y) incidental personal property
necessary for or arising out of the ownership or operation of the Properties.
(i) Debt. Borrower shall not create, incur or assume
any debt other than (x) the Debt, (y) debt secured by liens permitted under
Section 6.1(b)(ii) or (z) unsecured trade debt customarily payable within
thirty (30) days in an aggregate amount not to exceed the Maximum Permitted
Trade Payables, nor shall Borrower allow any trade payables to be outstanding
for more than sixty (60) days.
(j) Transfer or Encumbrance of the Properties.
(i) Borrower acknowledges that Lender, in
agreeing to make the Loan, has examined and relied on the
creditworthiness and experience of Borrower in owning and operating
properties such as the Properties, and that Lender will continue to
rely on Borrower's ownership and operation of the Properties as a
means of maintaining the value of the Properties as security for
repayment of the Debt. Borrower acknowledges that Lender has a valid
interest in maintaining the value of the Properties so as to ensure
that, should Borrower default in the repayment of the Debt, Lender can
recover all or a portion of the Debt by a sale of the Properties.
Accordingly, except for Liens permitted hereunder, Borrower shall not,
without the prior written consent of Lender, sell, convey, alienate,
mortgage, encumber, pledge or otherwise transfer the Properties, or
any part thereof or any interest therein, or permit the Properties, or
any part thereof or any interest therein, to be sold, conveyed,
alienated, mortgaged, encumbered, pledged or otherwise transferred
(except for (x) transfers of inventory, including redemption prizes
and (y) replacement of equipment, but in each case only if such
transfers/replacements are done in the ordinary course of business and
if such inventory or equipment is replaced with inventory or
equipment, as the case may be, of equivalent value).
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(ii) A sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Properties within the meaning
of this Section 6.1(j) shall be deemed to include: (A) an installment
sales agreement wherein Borrower agrees to sell either or both of the
Properties or any part thereof or any interest therein for a price to
be paid in installments; (B) an agreement by Borrower leasing all or a
substantial part of either or both of the Properties, or a sale,
assignment or other transfer of, or the grant of a security interest
in, Borrower's right, title and interest in and to any Leases or any
Rents; (C) if Borrower or any general partner or Member of Borrower is
a corporation, the voluntary or involuntary sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of such
corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or
otherwise) or the creation or issuance of new stock in one or a series
of transactions by which an aggregate of more than 20% of such
corporation's stock shall be vested in a party or parties who are not
now stockholders or any change in the control of such corporation; (D)
if Borrower or any general partner or Member of Borrower is a limited
or general partnership, joint venture or limited liability company,
the change, removal, resignation or addition of a partner, joint
venturer or member or the sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the partnership interest of any
partner or the sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the interest of any joint venturer or member;
(E) if Borrower is a limited or general partnership, joint venture,
limited liability company, trust, nominee trust, tenancy in common or
other unincorporated form of business association or form of ownership
interest, the voluntary or involuntary sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of a controlling interest of
any Person having a direct legal or beneficial ownership interest in
Borrower, including any legal or beneficial interest in any
constituent partner or member of Borrower; (F) any instrument
subjecting the either or both of Properties to a condominium regime or
transferring ownership to a cooperative corporation; and (G) the
dissolution or termination of Borrower or any general partner or
Member of Borrower or the merger or consolidation of Borrower or any
general partner or Member of Borrower with any other Person.
(iii) Lender shall not be required to
demonstrate any actual impairment of its security or any increased
risk of default hereunder in order to declare the Debt immediately due
and payable upon Borrower's sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of either or both of the Properties
without Lender's consent. This provision shall apply to every sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Properties, other than Liens permitted hereunder, regardless of
whether voluntary or not, or whether or not Lender has
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consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Properties.
(iv) Lender's consent to one sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the
Properties shall not be deemed to be a waiver of Lender's right to
require such consent to any future occurrence of the same. Any sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Properties made in contravention of this Section shall be null and
void and of no force and effect.
(v) Borrower agrees to bear and shall pay or
reimburse Lender on demand for all costs and expenses (including,
without limitation, title search costs, title insurance endorsement
premiums and reasonable attorneys' fees and disbursements) incurred by
Lender in connection with the review, approval and documentation of
any sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of either or both of the Properties.
(k) Distributions. Upon an Event of Default or a
Default, Borrower shall not make any distributions to any Person owning an
equity interest in Borrower. Any distributions made in contravention of this
subparagraph shall be void and shall be payable directly to Lender to satisfy
the Obligations.
(l) Control of Borrower. The ownership of Borrower (as set
forth in Section 4.1(ii)) will not be modified or changed in any manner.
VII. CASUALTY; CONDEMNATION; ESCROWS
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 INSURANCE.
(a) Borrower, at its sole cost and expense, for the mutual
benefit of Borrower and Lender, shall keep both of the Properties insured and
obtain and maintain during all times that any sum is outstanding under the Note
or the other Loan Documents (the "TERM") policies of insurance insuring against
loss or damage by fire and lightning and against loss or damage by all other
risks and hazards covered by a standard extended coverage insurance policy,
including, without limitation, riot and civil commotion, vandalism, malicious
mischief, burglary and theft. Such insurance shall be in an amount equal to
the greatest of (i) the then full replacement cost of such Property, without
deduction for physical depreciation, (ii) the outstanding principal balance of
the Loan, and (iii) such amount that the insurer would not deem
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Borrower a co-insurer under said policies. The policies of insurance carried
in accordance with this paragraph shall be paid annually in advance and shall
contain a "Replacement Cost Endorsement" with a waiver of depreciation.
(b) Borrower, at its sole cost and expense, for the
mutual benefit of Borrower and Lender, shall also obtain and maintain during
the Term the following policies of insurance:
(i) Flood insurance if any part of either of
the Properties is located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards
and in which flood insurance has been made available under the
National Flood Insurance Program in an amount at least equal to the
Debt or the maximum limit of coverage available with respect to such
Property under said program, whichever is less;
(ii) Comprehensive public liability
insurance, including broad form property damage, blanket contractual
and personal injuries (including death resulting therefrom) coverages
and containing minimum limits per occurrence of $1,000,000 and
$2,000,000 in the aggregate for any policy year. In addition, at
least $10,000,000 excess and/or umbrella liability insurance shall be
obtained and maintained during the Term for any and all claims,
including all legal liability imposed upon Borrower and all court
costs and attorneys' fees incurred in connection with the ownership,
operation and maintenance of each of the Properties;
(iii) Business interruption insurance in an amount
reasonably acceptable to Lender;
(iv) Insurance against loss or damage from
(A) leakage of sprinkler systems and (B) explosion of steam boilers,
air conditioning equipment, high pressure piping, machinery and
equipment, pressure vessels or similar apparatus now or hereafter
installed in any of the Improvements (without exclusion for
explosions), in an amount reasonably acceptable to Lender;
(v) Worker's compensation insurance with
respect to any employees of Borrower, as required by any Governmental
Authority or Legal Requirement;
(vi) During any period of repair or
restoration, builder's "all risk" insurance in an amount equal to not
less than the full insurable value of the Property
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(where such repair or restoration is taking place) against such risks
(including, without limitation, fire and extended coverage and
collapse of the Improvements to agreed limits) as Lender may request,
in form and substance acceptable to Lender;
(vii) If either of the Properties is or becomes a
"non-conforming use" under applicable zoning and building ordinances,
ordinance or law coverage to compensate for the cost of demolition and
the increased cost of construction for such Property; and
(viii) Such other insurance as may from time to
time be reasonably required by Lender in order to protect its
interests, including, without limitation, earthquake and hurricane
insurance.
(c) All policies of insurance (the "POLICIES") required
pursuant to this Section 7.1.1 shall (i) be issued by companies approved by
Lender and licensed to do business in California, if such Policy relates the
California Property or Texas if such Policy relates to the Texas Property, with
a claims paying ability rating of "AA" or better by Standard & Poor's Ratings
Services; (ii) name Lender and its successors and/or assigns as their interest
may appear as the mortgagee; (iii) contain a non-contributory standard
mortgagee clause and a mortgagee's loss payable endorsement, or their
equivalents, naming Lender as the person to which all payments made by such
insurance company shall be paid; (iv) contain a waiver of subrogation against
Lender; (v) be maintained throughout the Term without cost to Lender; (vi) be
assigned and certified copies thereof delivered to Lender; (vii) not contain a
deductible clause in excess of five percentage points (5%) of the then full
replacement cost of such Property; (viii) contain such provisions as Lender
deems reasonably necessary or desirable to protect its interest, including,
without limitation, endorsements providing that neither Borrower, Lender nor
any other Person shall be a co-insurer under said Policies and that Lender
shall receive at least thirty (30) days prior written notice of any
modification, reduction or cancellation of any of the Policies; and (ix)
otherwise be approved by Lender in the exercise of its reasonable judgment as
to amounts, form, risk coverage, deductibles, loss payees and insurers.
Borrower shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as
the same become due and payable and shall furnish to Lender evidence of the
renewal of each of the Policies with receipts for the payment of the Insurance
Premiums or other evidence of such payment reasonably satisfactory to Lender
(provided, however, that Borrower is not required to furnish such evidence of
payment to Lender in the event that such Insurance Premiums have been paid by
Lender pursuant to Section 7.3 hereof). If Borrower does not furnish such
evidence and receipts at least thirty (30) days prior to the expiration of any
expiring Policy, then Lender may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Borrower
agrees to reimburse Lender for the cost of such Insurance Premiums promptly on
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demand. Within thirty (30) days after request by Lender, Borrower shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Lender, taking into consideration changes in the value
of money over time, changes in liability laws, changes in prudent customs and
practices, and the like. In the event Borrower satisfies the requirements
under this Section 7.1.1 through the use of a Policy covering more than the
Properties, Borrower shall provide evidence satisfactory to Lender that the
Insurance Premiums for the Properties covered by such Policy are separately
allocated under such Policy and payment of such allocation shall continue such
Policy as to the Properties notwithstanding any other payment of premiums, or,
if no such allocation is available at any time during the Term, Lender shall
have the right to increase the Tax and Insurance Escrow in an amount sufficient
to purchase a non-blanket Policy covering the Properties from insurance
companies which qualify under this Agreement.
(d) If either the California Property or the Texas
Property is damaged or destroyed, in whole or in part, by fire or other
casualty (a "CASUALTY"), Borrower shall give prompt written notice thereof to
Lender. Following the occurrence of a Casualty, Borrower, regardless of
whether insurance proceeds are available, shall promptly proceed to restore,
repair, replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to such damage or destruction, all to
be effected in accordance with applicable law. The expenses incurred by Lender
in the adjustment and collection of insurance proceeds shall become part of the
Debt and be secured by the Mortgages and shall be reimbursed by Borrower to
Lender upon demand.
7.1.2 CASUALTY AND APPLICATION OF PROCEEDS.
(a) In case of loss or damages covered by any of the
Policies, the following provisions shall apply:
(i) In the event of a Casualty that is less
than $100,000, Borrower may settle and adjust any claim by Borrower
without the consent of Lender, provided that such adjustment is
carried out in a competent and timely manner and the proceeds of any
such policy shall be due and payable solely to Lender and held in
escrow by Lender.
(ii) In the event a Casualty shall equal or
exceed $100,000, then and in that event, Lender may settle and adjust
any claim by Borrower without the consent of Borrower and agree with
the insurance company or companies on the amount to be paid on the
loss and the proceeds of any such policy shall be due and payable
solely to Lender and held in escrow by Lender.
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(b) In the event of a Casualty where the loss is in an
aggregate amount less than twenty percent (20%) of the value of (x) the
California Property (as determined by Lender in its sole discretion) or (y) the
Texas Property (as determined by Lender in its sole discretion), as
appropriate, and if, in the reasonable judgment of Lender, such Property can be
restored within six (6) months after the occurrence of the Casualty and prior
to maturity of the Note to an economic unit not less valuable (including an
assessment of the impact of the termination of any Leases due to such Casualty)
and not less useful than the same was prior to the Casualty, and after such
restoration will adequately secure the outstanding balance of the Note, then,
if no Default or Event of Default shall have occurred and be then continuing,
the proceeds of insurance shall be deposited with the Lender, whereupon such
insurance proceeds, after reimbursement of any expenses incurred by Lender,
shall be maintained and applied, at Borrower's election, to either (x) prepay
the Obligations (provided such prepayment is in an amount sufficient to fully
satisfy the Obligations) or (y) pay for the cost of restoring, repairing,
replacing or rebuilding such Property or part thereof subject to the Casualty
(the "RESTORATION"), in the manner set forth herein. Borrower hereby covenants
and agrees to commence and diligently to prosecute such Restoration; provided
that: (i) Borrower shall pay all costs (and if required by Lender, Borrower
shall deposit the total thereof with Lender in advance) of such Restoration in
excess of the net proceeds of insurance made available pursuant to the terms
hereof; (ii) the Restoration shall be done in compliance with all applicable
laws, rules and regulations; and (iii) Lender shall have received evidence
reasonably satisfactory to it that, during the period of the Restoration, the
sum of (A) income derived from the Properties, as reasonably determined by
Lender, plus (B) proceeds of rent loss insurance or business interruption
insurance, if any, to be paid, will equal or exceed the sum of (1) expenses in
connection with the operation of the Properties, (2) the Debt Service under the
Loan, and (3) all other amounts required to be paid pursuant to this Agreement,
including but not limited to pursuant to Section 7.3.
(c) Except as provided above, the proceeds of insurance
collected upon any Casualty (after reimbursement of any expenses incurred by
Lender) shall be deposited with Lender and at the option of Lender in its sole
discretion, be applied to the payment of the Debt or such proceeds shall be
maintained and applied to pay for the cost of any Restoration in the manner set
forth herein. Any such application to the Debt shall be without any prepayment
consideration. Any such application to the Debt shall be applied to those
payments of principal and interest last due under the Note but shall not
postpone or reduce any payments otherwise required pursuant to the Note other
than such last due payments.
(d) In the event Borrower is entitled to reimbursement
out of insurance proceeds held by Lender, such proceeds shall be disbursed by
Lender from time to time upon Lender being furnished with: (i) evidence
satisfactory to Lender of the estimated cost of
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<PAGE> 45
completion of the Restoration; (ii) funds, or at Lender's option, assurances
satisfactory to Lender that such funds are available, sufficient in addition to
the proceeds of insurance to complete the proposed Restoration; (iii) such
architect's certificates, waivers of lien, contractor's sworn statements, title
insurance endorsements, bonds, plats of survey and such other evidences of
cost, payment and performance as Lender may reasonably require and approve; and
(iv) all plans and specifications for such Restoration, such plans and
specifications to be delivered and approved by Lender prior to commencement of
any work. In addition, no disbursement made prior to the final completion of
the Restoration shall exceed ninety percent (90%) of the value of the work
performed from time to time; funds other than proceeds of insurance shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrower for that purpose, shall be
at least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all Liens or claims for Lien
other than Permitted Encumbrances. Any surplus which may remain out of
insurance proceeds held by Lender after payment of such costs of Restoration
shall be paid to Borrower.
7.1.3 CONDEMNATION.
(a) Borrower shall promptly give Lender written notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding against either or both of the Premises or either or both of the
Improvements or any part thereof (a "CONDEMNATION") and shall deliver to Lender
copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Borrower, regardless of whether an
Award (as hereinafter defined) is available, shall either (i) prepay the
Obligations in full or (ii) promptly proceed to restore, repair, replace or
rebuild the affected Property to the extent practicable to be of at least equal
value and of substantially the same character as prior to such Condemnation,
all to be effected in accordance with applicable law.
(b) Lender is hereby irrevocably appointed as
Borrower's attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain any award or payment ("AWARD") for any taking
accomplished through a Condemnation and to make any compromise or settlement in
connection with such Condemnation, subject to the provisions of this Section.
Notwithstanding any taking in connection with a Condemnation by any public or
quasi-public authority (including, without limitation, any transfer made in
lieu of or in anticipation of such a Condemnation), Borrower shall continue to
pay the Debt at the time and in the manner provided for in the Note, this
Agreement, the Mortgages and the other Loan Documents and the Debt shall not be
reduced unless and until any Award shall have been actually received and
applied by Lender to expenses of collecting the Award and to discharge
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of the Debt. Lender shall not be limited to the interest paid on the Award by
the condemning authority but shall be entitled to receive out of the Award
interest at the rate or rates provided in the Note. Borrower shall cause any
Award that is payable to Borrower to be paid directly to Lender.
(c) In the event of any Condemnation where the Award is
in an aggregate amount less than twelve percent (12%) of the value of (x) the
California Property (as determined by Lender in its sole discretion) or (y) the
Texas Property (as determined by Lender in its sole discretion), as applicable,
and, if, in the reasonable judgment of Lender, the Properties can be restored
within six (6) months after the occurrence of the Condemnation and prior to
maturity of the Note to an economic unit not less valuable (including an
assessment of the impact of the termination of any Leases due to such
Condemnation) and not less useful than the same was prior to the Condemnation,
and after such restoration will adequately secure the outstanding balance of
the Note, then, if no Default or Event of Default shall have occurred and be
then continuing, the proceeds of the Award shall be deposited with Lender,
whereupon such proceeds, after reimbursement of any expenses incurred by
Lender, shall be maintained and applied at Borrower's election to either (x)
prepay the Obligations (provided such prepayment is in an amount sufficient to
fully satisfy the Obligations) or (y) to reimburse Borrower for the cost of
restoring, repairing, replacing or rebuilding such Property or part thereof
subject to Condemnation (the "CONDEMNATION RESTORATION"), in the manner set
forth herein. Borrower hereby covenants and agrees to commence and diligently
to prosecute such Condemnation Restoration; provided that: (i) Borrower shall
pay all costs (and if required by Lender, Borrower shall deposit the total
thereof with Lender in advance) of such Condemnation Restoration in excess of
the Award made available pursuant to the terms hereof; (ii) the Condemnation
Restoration shall be done in compliance with all applicable laws, rules and
regulations; and (iii) Lender shall have received evidence reasonably
satisfactory to it that, during the period of the Condemnation Restoration, the
sum of (A) income derived from the Properties, as reasonably determined by
Lender, plus (B) proceeds of rent loss insurance or business interruption
insurance, if any, to be paid, will equal or exceed the sum of (1) expenses in
connection with the operation of the Properties, (2) the Debt Service under the
Loan, and (3) all other amounts required to be paid pursuant to this Agreement,
including but not limited to pursuant to Section 7.3.
(d) Except as provided above, the proceeds of the Award
collected upon any Condemnation (after reimbursement of any expenses incurred
by Lender) shall be deposited with Lender and, at the option of Lender in its
sole discretion, be applied to the payment of the Debt, or such proceeds shall
be maintained and applied to reimburse Borrower for the cost of the
Condemnation Restoration in the manner set forth herein. Any such application
to the Debt shall be without any prepayment consideration. Any such
application to the Debt shall be applied to
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those payments of principal and interest last due under the Note but shall not
postpone or reduce any payments otherwise required pursuant to the Note other
than such last due payments. If such Property is sold, through foreclosure or
otherwise, prior to the receipt by Lender of such Award, Lender shall have the
right, whether or not a deficiency judgment on the Note shall be recoverable or
shall have been sought, recovered or denied, to receive all or a portion of
said Award sufficient to pay the outstanding balance of the Note and interest
thereon.
(e) In the event Borrower is entitled to reimbursement
out of the Award received by Lender, such proceeds shall be disbursed by Lender
from time to time upon Lender being furnished with: (i) evidence satisfactory
to Lender of the estimated cost of completion of the Condemnation Restoration;
(ii) funds, or at Lender's option, assurances satisfactory to Lender that such
funds are available, sufficient in addition to the proceeds of the Award to
complete the Condemnation Restoration; (iii) such architect's certificates,
waivers of lien, contractor's sworn statements, title insurance endorsements,
bonds, plats of survey and such other evidences of costs, payment and
performance as Lender may reasonably require and approve; and (iv) all plans
and specifications for such Condemnation Restoration, such plans and
specifications to be delivered and approved by Lender prior to commencement of
work. In addition, no disbursement made prior to the final completion of the
Condemnation Restoration shall exceed ninety percent (90%) of the value of the
work performed from time to time; funds other than proceeds of the Award shall
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrower for that purpose, shall be
at least sufficient in the reasonable judgment of Lender to pay for the costs
of completion of the Condemnation Restoration, free and clear of all Liens or
claims for Lien other than Permitted Encumbrances. Any surplus which may
remain out of the Award received by Lender after payment of such costs of
Condemnation Restoration shall, in the sole and absolute discretion of Lender,
be retained by Lender and applied to payment of the Debt.
SECTION 7.2 INTENTIONALLY DELETED
SECTION 7.3 TAX AND INSURANCE ESCROW FUND.
At Lender's election (which may be made at any time) Borrower
shall pay to Lender on the first Business Day of each calendar month (a)
one-twelfth of the Taxes that Lender estimates will be payable during the next
ensuing twelve (12) months in order to accumulate with Lender sufficient funds
to pay all such Taxes at least thirty (30) days prior to their respective due
dates and (b) one-twelfth of the Insurance Premiums that Lender estimates will
be payable for the renewal of the coverage afforded by the Policies for the
succeeding
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annual period upon the expiration thereof in order to accumulate with Lender
sufficient funds to pay all such Insurance Premiums at least thirty (30) days
prior to the expiration of the Policies (said amounts in clauses (a) and (b)
above hereinafter called the "TAX AND INSURANCE ESCROW FUND"). The Tax and
Insurance Escrow Fund and the payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as an
aggregate sum by Borrower to Lender. Lender will apply the Tax and Insurance
Escrow Fund to payments of Taxes and Insurance Premiums required to be made by
Borrower pursuant to Section 5.1 hereof and under the Mortgages (unless
Borrower is contesting such Taxes in accordance with the terms of Section
5.1(b)). In making any payment relating to the Tax and Insurance Escrow Fund,
Lender may do so according to any bill, statement or estimate procured from the
appropriate public office (with respect to Taxes) or insurer or agent (with
respect to Insurance Premiums), without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.1 hereof, Lender shall, in its sole discretion,
return any excess to Borrower or credit such excess against future payments to
be made to the Tax and Insurance Escrow Fund. Any amount remaining in the Tax
and Insurance Escrow Fund after the Debt has been paid in full shall be
returned to Borrower. In allocating such excess, Lender may deal with the
Person shown on the records of Lender to be the owner of the Properties. If at
any time Lender reasonably determines that the Tax and Insurance Escrow Fund is
not or will not be sufficient to pay the items set forth in clauses (a) and (b)
above, Lender shall notify Borrower of such determination and Borrower shall
increase its monthly payments to Lender by the amount that Lender estimates is
sufficient to make up the deficiency at least thirty (30) days prior to
delinquency of the Taxes and/or thirty (30) days prior to expiration of the
Policies, as the case may be. Borrower shall not be entitled to receive any
interest on account of any money deposited with Lender pursuant to the terms of
this section.
SECTION 7.4 INTENTIONALLY DELETED
VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an
event of default hereunder (an "EVENT OF DEFAULT"):
(i) any portion of the Debt is not paid when
due;
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(ii) any of the Taxes or Other Charges are not
paid when the same are due and payable subject to Borrower's rights to
contest such Taxes or Other Charges pursuant to the terms of this
Agreement;
(iii) the Policies are not kept in full force
and effect, or certified copies of the Policies are not delivered to
Lender within ten (10) days of request;
(iv) Borrower transfers or encumbers any
portion of the Properties without Lender's prior written consent,
except for Liens permitted hereunder;
(v) any representation or warranty made by
Borrower herein or in any other Loan Document, or in any report,
certificate, financial statement or other instrument, agreement or
document furnished by or on behalf of Borrower to Lender, shall have
been false or misleading in any material respect as of the date the
representation or warranty was made; provided, however, if such false
or misleading representation or warranty is susceptible of being cured
within thirty (30) days, the same shall be an Event of Default
hereunder only if the same is not cured within a reasonable time not
to exceed thirty (30) days after notice from Lender;
(vi) Borrower shall make an assignment for the
benefit of creditors;
(vii) a receiver, liquidator or trustee shall be
appointed for Borrower or Borrower shall be adjudicated a bankrupt or
insolvent, or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal
or state law, shall be filed by or against, consented to or acquiesced
in by Borrower, or any proceeding for the dissolution or liquidation
of Borrower shall be instituted; provided, however, that if such
appointment, adjudication, petition or proceeding was involuntary and
not consented to by Borrower, then the same shall be an Event of
Default hereunder only if the same is not discharged, stayed or
dismissed within sixty (60) days after the date of such appointment or
adjudication, the date such petition is first filed or the date such
proceeding is instituted, as the case may be;
(viii) Borrower attempts to assign its rights
under this Agreement or any of the other Loan Documents or any
interest herein or therein in contravention of the Loan Documents;
(ix) Borrower breaches any of its negative
covenants contained in Section 6.1 or any covenant contained in
Section 4.1(dd) hereof;
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(x) INTENTIONALLY DELETED;
(xi) an Event of Default (as defined in the MEI
Loan Agreement) shall occur under the MEI Loan Agreement;
(xii) Borrower shall continue to be in Default
under any of the other terms, covenants or conditions of this
Agreement not specified in subsections (i) to (xi) above, for ten (10)
days after notice to Borrower from Lender, in the case of any Default
which can be cured by the payment of a sum of money, or for thirty
(30) days after notice to Borrower from Lender in the case of any
other Default; provided, however, that if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such 30-day
period and provided further that Borrower shall have commenced to cure
such Default within such 30-day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30-day period shall be
extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cure such Default, such additional period
not to exceed sixty (60) days; or
(xiii) there shall be default under either of the
Mortgages or any of the other Loan Documents beyond any applicable
cure periods contained in such documents, whether as to Borrower or
the Properties, or any other such event shall occur or condition shall
exist, if the effect of such event or condition is to accelerate the
maturity of any portion of the Debt or to permit Lender to accelerate
the maturity of all or any portion of the Debt.
(b) Upon the occurrence of an Event of Default (other
than an Event of Default described in clauses (vi), (vii) or (viii) above) and
at any time thereafter, Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or at
law or in equity, take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against Borrower and in and to the
Properties, including, without limitation, declaring the Debt to be immediately
due and payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower and the Properties,
including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in clauses (vi), (vii) or
(viii) above, the Debt and all other obligations of Borrower hereunder and
under the other Loan Documents shall immediately and automatically become due
and payable, without notice or demand, and Borrower hereby expressly waives any
such notice or demand, anything contained herein or in any other Loan Document
to the contrary notwithstanding.
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SECTION 8.2 REMEDIES.
(a) Upon the occurrence of an Event of Default, all or
any one or more of the rights, powers, privileges and other remedies available
to Lender against Borrower under this Agreement or any of the other Loan
Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or
not all or any of the Debt shall be declared due and payable, and whether or
not Lender shall have commenced any foreclosure proceeding or other action for
the enforcement of its rights and remedies under any of the Loan Documents with
respect to the Properties. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents. Without limiting the generality of the foregoing,
Borrower agrees that, to the fullest extent of the law, if an Event of Default
is continuing (i) Lender is not subject to any "one action" or "election of
remedies" law or rule, and (ii) all Liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until
Lender has exhausted all of its remedies against the Properties and the
Mortgages have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.
(b) Lender shall have the right from time to time to
partially foreclose each of the Mortgages in any manner and for any amounts
secured by the Mortgages then due and payable as determined by Lender in its
sole discretion, including, without limitation, in the event: (i) Borrower
defaults beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose either or
both of the Mortgages to recover such delinquent payments or (ii) Lender elects
to accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose either or both of the Mortgages to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgages as Lender may elect. Notwithstanding one or more
partial foreclosures, the Properties shall remain subject to the Mortgages to
secure payment of sums secured by the Mortgages and not previously recovered.
(c) Lender shall have the right from time to time to
sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "SEVERED LOAN DOCUMENTS"), in such
denominations as Lender shall determine in its sole discretion for purposes of
evidencing and enforcing its rights and remedies provided hereunder. Borrower
shall execute and deliver to Lender from time to time, promptly after the
request of Lender, a severance agreement and such other documents as Lender
shall request in order to effect the severance described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender.
Borrower hereby absolutely and irrevocably appoints Lender as its true
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and lawful attorney, coupled with an interest, in its name and stead to make
and execute all documents necessary or desirable to effect the aforesaid
severance, Borrower ratifying all that its said attorney shall do by virtue
thereof; provided, however, that Lender shall not make or execute any such
documents under such power until three (3) days after notice has been given to
Borrower by Lender of Lender's intent to exercise its rights under such power.
SECTION 8.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Lender under this Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against Borrower pursuant to this Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender's rights,
powers and remedies may be pursued singly, concurrently or otherwise, at such
time and in such order as Lender may determine in Lender's sole discretion. No
delay or omission to exercise any remedy, right or power accruing upon an Event
of Default shall impair any such remedy, right or power or shall be construed
as a waiver thereof, but any such remedy, right or power may be exercised from
time to time and as often as may be deemed expedient. A waiver of one Default
or Event of Default with respect to Borrower shall not be construed to be a
waiver of any subsequent Default or Event of Default by Borrower or to impair
any remedy, right or power consequent thereon. Any and all amounts collected
or retained by Lender after an Event of Default has occurred and is continuing,
including, but not limited to, interest at the Default Rate, late charges or
any escrowed amount, may be applied by Lender to payment of the Debt in any
order or priority that Lender in its sole discretion may elect.
IX. INTENTIONALLY DELETED
X. INTENTIONALLY DELETED
XI. MISCELLANEOUS
SECTION 11.1 SURVIVAL.
This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lender of the Loan and the execution and delivery
to Lender of the Note, and shall continue in full force and effect so long as
all or any of the Debt is outstanding and unpaid unless a longer period is
expressly set forth herein or in the other Loan Documents. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and
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agreements in this Agreement, by or on behalf of Borrower, shall inure to the
benefit of the legal representatives, successors and assigns of Lender.
SECTION 11.2 LENDER'S DISCRETION.
Whenever pursuant to this Agreement, Lender exercises any
right given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to
decide whether arrangements or terms are satisfactory or not satisfactory shall
(except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.
SECTION 11.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND
THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE
STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP
TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS) AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW
YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN
DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE
FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL
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BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER
OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION
BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF
NEW YORK, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE
AND APPOINT CT CORPORATION SYSTEMS, 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS
ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND
ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL
BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III)
SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO
HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A
SUCCESSOR.
SECTION 11.4 MODIFICATION; WAIVER IN WRITING.
No modification, amendment, extension, discharge, termination
or waiver of any provision of this Agreement, or of the Note, or of any other
Loan Document, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to, or demand on
Borrower, shall
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<PAGE> 55
entitle Borrower to any other or future notice or demand in the same, similar
or other circumstances.
SECTION 11.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, or
under the Note or under any other Loan Document, or any other instrument given
as security therefor, shall operate as or constitute a waiver thereof, nor
shall a single or partial exercise thereof preclude any other future exercise,
or the exercise of any other right, power, remedy or privilege. In particular,
and not by way of limitation, by accepting payment after the due date of any
amount payable under this Agreement, the Note or any other Loan Document,
Lender shall not be deemed to have waived any right either to require prompt
payment when due of all other amounts due under this Agreement, the Note or the
other Loan Documents, or to declare a default for failure to effect prompt
payment of any such other amount.
SECTION 11.6 NOTICES.
All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
(including by facsimile) and shall be effective for all purposes if hand
delivered or sent by (a) certified or registered United States mail, postage
prepaid, or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with receipt of delivery, or (c) facsimile (with
acknowledged transmission), addressed as follows:
If to Borrower: Malibu Centers, Inc.
c/o The Hampstead Group
Texas Commerce Tower
2200 Ross Ave., Suite 4200-W
Dallas, Texas 75201
Attention: Daniel A. Decker
Telephone: 214-220-4565
Facsimile: 214-220-4949
52
<PAGE> 56
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Robert A. Profusek, Esq.
Telephone: 212-326-3800
Facsimile: 212-755-7306
If to Lender: Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281
Attention: Raymond Anthony
Telephone: (212) 667-1850
Facsimile: (212) 667-1666
with a copy to:
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281
Attention: Sheryl McAfee
Telephone: (212) 667-9300
Facsimile: (212) 667-1260
with a copy to:
Nomura Asset Capital Corporation
Two World Financial Center,
New York, New York 10281
Attention: Barry Funt, Esq., General Counsel
Telephone: (212) 667-1845
Facsimile: (212) 667-1567
and:
53
<PAGE> 57
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: J. Philip Rosen, Esq.
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
or at such other address and person as shall be designated from time to time by
any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section. A notice shall be deemed to
have been given: in the case of hand delivery, at the time of delivery; in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and
facsimile, upon the first attempted delivery or acknowledged transmission, as
applicable, on a Business Day.
SECTION 11.7 TRIAL BY JURY.
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH
IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
SECTION 11.8 HEADINGS.
The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
SECTION 11.9 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the
54
<PAGE> 58
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
SECTION 11.10 PREFERENCES.
Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.
SECTION 11.11 WAIVER OF NOTICE.
Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement
or the other Loan Documents specifically and expressly provide for the giving
of notice by Lender to Borrower and except with respect to matters for which
Borrower is not, pursuant to applicable law, permitted to waive the giving of
notice. To the fullest extent permitted by applicable law, Borrower hereby
expressly waives the right to receive any notice from Lender with respect to
any matter for which this Agreement or the other Loan Documents do not
specifically and expressly provide for the giving of notice by Lender to
Borrower.
SECTION 11.12 REMEDIES OF BORROWER.
In the event that a claim or adjudication is made that Lender
or its agents have acted unreasonably or unreasonably delayed acting in any
case where, by law or under this Agreement or the other Loan Documents, Lender
or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents shall be liable
for any monetary damages, and Borrower's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether Lender
has acted reasonably shall be determined by an action seeking declaratory
judgment.
55
<PAGE> 59
SECTION 11.13 EXPENSES.
Borrower covenants and agrees to pay, or if Borrower fails to
pay to reimburse, Lender upon receipt of written notice from Lender for all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Lender in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
(including, without limitation, any opinions requested by Lender as to any
legal matters arising under this Agreement or the other Loan Documents with
respect to the Properties); (ii) Borrower's ongoing performance of and
compliance with Borrower's respective agreements and covenants contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date, including, without limitation, confirming
compliance with environmental and insurance requirements; (iii) Lender's
ongoing performance and compliance with all agreements and conditions contained
in this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date; (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement and the other Loan Documents and any
other documents or matters requested by Lender; (v) the filing and recording of
the Loan Documents, title insurance and reasonable fees and expenses of counsel
for providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of
any action or proceeding or other litigation, in each case against, under or
affecting Borrower, this Agreement, the other Loan Documents, the Properties,
or any other security given for the Loan; and (vii) enforcing any obligations
of or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Properties or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings; provided, however, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same arise by reason
of the gross negligence, illegal acts, fraud or willful misconduct of Lender.
SECTION 11.14 EXHIBITS AND SCHEDULES INCORPORATED.
The exhibits and schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
SECTION 11.15 OFFSETS, COUNTERCLAIMS AND DEFENSES.
Any assignee of Lender's interest in and to this Agreement,
the Note and the other Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses
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<PAGE> 60
which are unrelated to such documents which Borrower may otherwise have against
any assignor of such documents, and no such unrelated counterclaim or defense
shall be interposed or asserted by Borrower in any action or proceeding brought
by any such assignee upon such documents and any such right to interpose or
assert any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrower.
SECTION 11.16 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD
PARTY BENEFICIARIES.
(a) Borrower and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely that of borrower
and lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Properties other than that
of mortgagee or lender.
(b) This Agreement and the other Loan Documents are
solely for the benefit of Lender, MEI and Borrower and nothing contained in
this Agreement or the other Loan Documents shall be deemed to confer upon
anyone other than Lender, MEI and Borrower any right to insist upon or to
enforce the performance or observance of any of the obligations contained
herein or therein. All conditions to the obligations of Lender to make the
Loan hereunder are imposed solely and exclusively for the benefit of Lender and
no other Person shall have standing to require satisfaction of such conditions
in accordance with their terms or be entitled to assume that Lender will refuse
to make the Loan in the absence of strict compliance with any or all thereof
and no other Person shall under any circumstances be deemed to be a beneficiary
of such conditions, any or all of which may be freely waived in whole or in
part by Lender if, in Lender's sole discretion, Lender deems it advisable or
desirable to do so.
SECTION 11.17 PUBLICITY.
All news releases, publicity or advertising by Borrower or its
Affiliates through any media intended to reach the general public which refers
to the Loan Documents or the financing evidenced by the Loan Documents or to
Lender, Nomura or any of their Affiliates shall be subject to the prior written
approval of Lender.
SECTION 11.18 WAIVER OF COUNTERCLAIM.
Borrower hereby waives the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against it by Lender or its agents.
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<PAGE> 61
SECTION 11.19 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this
Loan Agreement and any of the other Loan Documents, the provisions of this Loan
Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower
shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or Affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under any of the Loan Documents or any other
agreements or instruments which govern the Loan by virtue of the ownership by
it or any parent, subsidiary or Affiliate of Lender of any equity interest any
of them may acquire in Borrower, and Borrower hereby irrevocably waives the
right to raise any defense or take any action on the basis of the foregoing
with respect to Lender's exercise of any such rights or remedies. Borrower
acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse
to or competitive with the business of Borrower or its Affiliates.
SECTION 11.20 BROKERS AND FINANCIAL ADVISORS.
Borrower hereby represents that it has dealt with no financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Agreement. Borrower
hereby agrees to indemnify and hold Lender harmless from and against any and
all claims, liabilities, costs and expenses of any kind in any way relating to
or arising from a claim by any Person that such Person acted on behalf of
Borrower in connection with the transactions contemplated herein. The
provisions of this Section 11.20 shall survive the expiration and termination
of this Agreement and the payment of the Debt.
SECTION 11.21 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such
parties, whether oral or written, are superseded by the terms of this Agreement
and the other Loan Documents.
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<PAGE> 62
SECTION 11.22 INDEMNIFICATION AGAINST TAX.
Borrower indemnifies and agrees to defend and hold Lender
harmless against all real estate transfer, mortgage recording, documentary
stamp and intangible taxes and other amounts imposed on Lender by virtue of its
execution of any of the Loan Documents or by reason of the Loan (other than
Lender's income tax or franchise taxes of Lender based on or imposed in lieu of
income tax), including any penalties, interest and attorneys' fees incurred by
Lender in connection therewith, and all such charges shall be secured by the
Liens of the Mortgages and bear interest at the Default Rate until paid.
59
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.
MALIBU CENTERS, INC., a Delaware corporation
By:
-----------------------------------------
Name:
Title:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Name:
Title:
60
<PAGE> 64
SCHEDULE I
INITIAL DEPOSITS WITH LENDER
<TABLE>
<CAPTION>
SUBACCOUNT AMOUNT
---------- ------
<S> <C>
Monthly Debt Service $ -0-
Tax and Insurance Escrow $ -0-
</TABLE>
<PAGE> 1
Exhibit 10.16
PROMISSORY NOTE
New York, New York
$21,390,375 June 27, 1997
FOR VALUE RECEIVED, MALIBU CENTERS, INC., a Delaware corporation
having its principal place of business at c/o The Hampstead Group, Texas
Commerce Tower, 2200 Ross Ave., Suite 4200-W, Dallas, Texas 75201 (hereinafter
referred to as "MAKER"), promises to pay to the order of NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation, at its principal place of business at Two
World Financial Center, Building B, New York, New York 10281 (hereinafter
referred to as "PAYEE"), or at such place as the holder hereof may from time to
time designate in writing, the principal sum of TWENTY ONE MILLION THREE
HUNDRED NINETY THOUSAND THREE HUNDRED SEVENTY FIVE AND NO/100 DOLLARS
($21,390,375.00), in lawful money of the United States of America, with
interest thereon to be computed on the unpaid principal balance from time to
time outstanding at the Applicable Interest Rate (as hereinafter defined) for
each interest period, and to be paid in installments as follows:
Maker shall pay interest, in arrears, on August 1, 1997 and,
thereafter, for each one month interest period (or portion
thereof) from and including the first Business Day
(hereinafter defined) of each calendar month to but excluding
the first Business Day of the immediately succeeding calendar
month, on the first day of each calendar month during the term
hereof (or if such day is not a Business Day, the next day
which is a Business Day).
The balance of said principal sum together with all accrued and unpaid interest
thereon shall be due and payable on September 30, 1998 (the "MATURITY DATE").
Interest on the principal sum of this Note shall be calculated on the basis of
the actual number of days elapsed and a three hundred sixty (360) day year.
All amounts due under this Note shall be payable without setoff, counterclaim
or any other deduction whatsoever and are payable without relief from valuation
and appraisement laws and with all expenses, costs and charges incurred in
collection or enforcement hereof, including, without limitation, attorneys'
fees and court costs.
1. The term "APPLICABLE INTEREST RATE" as used in this
Note shall mean a rate per annum equal to LIBOR (as defined on Exhibit A) plus
350 basis points. The Applicable Interest Rate for each one-month interest
period shall be determined monthly on the Determination Date (as defined on
Exhibit A) immediately preceding such interest period.
2. This Note is evidence of that certain mortgage loan
made by Payee to Maker contemporaneously herewith (the "LOAN") and is executed
pursuant to, and is subject to,
<PAGE> 2
the terms and conditions of that certain Loan Agreement executed the date
hereof between Maker and Payee (as amended, supplemented or otherwise modified
from time to time, the "LOAN AGREEMENT"). This Note is secured by, among other
things: (a) a Deed of Trust, Assignment of Leases and Rents and Security
Agreement dated as of the date hereof, given by Maker, as grantor, to Payee, as
grantee (the "CALIFORNIA MORTGAGE"), encumbering the fee estate of Maker in a
certain property located in the County of Los Angeles, City of Industry and
State of California as more particularly described therein (the "CALIFORNIA
PROPERTY"), (b) a Deed of Trust, Assignment of Leases and Rents and Security
Agreement dated as of the date hereof, given by Maker, as grantor, to Payee, as
grantee (the "TEXAS MORTGAGE"; the California Mortgage and the Texas Mortgage
are hereinafter referred to as the "MORTGAGE"), encumbering the fee estate of
Maker in a certain property located in the County of Harris, City of Houston
and State of Texas as more particularly described therein (the "TEXAS
PROPERTY"), (c) an Assignment of Leases and Rents, in respect of the California
Property, dated as of the date hereof, executed by Maker in favor of Payee (the
"CALIFORNIA ASSIGNMENT OF LEASES"), (d) an Assignment of Leases and Rents, in
respect of the Texas Property, dated as of the date hereof, executed by Maker
in favor of Payee (the "TEXAS ASSIGNMENT OF LEASES"; the California Assignment
of Leases and the Texas Assignment of Leases are hereinafter referred to as the
"ASSIGNMENT OF LEASES"), and (e) the other Loan Documents (as defined in the
Loan Agreement). Reference is made to the Mortgage, the Assignment of Leases
and the other Loan Documents for a description of the nature and extent of the
security afforded thereby, the rights of the holder hereof in respect of such
security, the terms and conditions upon which this Note is secured and the
rights and duties of the holder of this Note. The holder of this Note is
entitled to the benefits of the Mortgage, the Assignment of Leases and the
other Loan Documents and may enforce the agreements contained therein and
exercise the remedies provided therein or otherwise in respect thereof, all in
accordance with the terms thereof. No reference herein to any of the Mortgage,
the Assignment of Leases and the other Loan Documents and no other provision of
this Note or of the Mortgage, the Assignment of Leases or the other Loan
Documents shall alter or impair the obligation of Maker, which is absolute and
unconditional, to pay the principal of and interest on this Note at the time
and place and at the rates and in the monies and funds described herein. All
of the agreements, conditions, covenants, provisions and stipulations contained
in the Mortgage, the Assignment of Leases and the other Loan Documents which
are to be kept and performed by Maker are by this reference hereby made part of
this Note to the same extent and with the same force and effect as if they were
fully set forth in this Note, and Maker covenants and agrees to keep and
perform the same, or cause the same to be kept and performed, in accordance
with their terms. All capitalized terms not otherwise defined herein shall
have the meaning set forth in the Loan Agreement.
3. If any sum payable under this Note is not paid on the
date on which it is due, Maker shall pay to Payee upon demand an amount equal
to the lesser of three percent (3%) of such unpaid sum or the maximum amount
permitted by applicable law in order to defray a portion of the expenses
incurred by Payee in handling and processing such delinquent payment and to
compensate Payee for the loss of the use of such delinquent payment. If the
day when any payment required under this Note is due is not a Business Day,
then payment shall be due
-2-
<PAGE> 3
on the first Business Day thereafter. The term "BUSINESS DAY" shall mean a day
other than (i) a Saturday or Sunday, or (ii) any day on which national banks in
New York, New York are not open for business.
4. The whole of the principal sum of this Note, together
with all interest accrued and unpaid thereon and all other sums due hereunder
and under the other Loan Documents (all such sums hereinafter collectively
referred to as the "DEBT"), or any portion thereof, shall without notice become
immediately due and payable at the option of Payee if any payment required in
this Note is not paid on the date on which it is due (after giving effect to
any applicable grace periods) or upon the happening of any other Event of
Default (as defined in the Loan Agreement). In the event that it should become
necessary to employ counsel to collect or enforce the Debt or to protect or
foreclose the security therefor, Maker also shall pay on demand all costs of
collection incurred by Payee, including, without limitation, reasonable
attorneys' fees, and costs reasonably incurred for the services of counsel
whether or not suit be brought.
5. Maker does hereby agree that upon the occurrence of
an Event of Default, Payee shall be entitled to receive and Maker shall pay to
Payee interest on the entire unpaid principal sum of this Note and any other
amounts (including interest to the extent permitted by applicable law) due at
the Default Rate (as defined in the Loan Agreement). Interest at the Default
Rate shall be computed from the occurrence and during the continuance of the
Event of Default until the actual receipt and collection of the Debt (or that
portion thereof that is then due). Interest at the Default Rate, to the extent
not paid, shall be added to the Debt and shall be secured by the Mortgage.
This paragraph, however, shall not be construed as an agreement or privilege to
extend the date of payment of the Debt, nor as a waiver of any other right or
remedy accruing to Payee by reason of the occurrence of any Event of Default.
6. This Note may be prepaid in accordance with Section
2.3 of the Loan Agreement.
7. INTENTIONALLY DELETED.
8. It is expressly stipulated and agreed to be the
intent of Maker and Payee at all times to comply with applicable state law or
applicable United States federal law (to the extent that it permits Payee to
contract for, charge, take, reserve or receive a greater amount of interest
than under state law) and that this paragraph shall control every other
covenant and agreement in this Note, the Loan Agreement, the Mortgage and the
other Loan Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
this Note, the Loan Agreement, the Mortgage or any of the other Loan Documents
or contracted for, charged, taken, reserved or received with respect to the
Debt, or if Payee's exercise of the option to accelerate the Maturity Date or
any prepayment by Maker results in Maker having paid any interest in excess of
that permitted by applicable law, then it is Maker's and Payee's express intent
that all excess amounts theretofore collected by Payee
-3-
<PAGE> 4
shall be credited on the principal balance of this Note and all other Debt and
the provisions of this Note, the Loan Agreement, the Mortgage and the other
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new documents, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
or thereunder. All sums paid or agreed to be paid to Payee for the use,
forbearance or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full stated term of the Debt until payment in full so that the rate or amount
of interest on account of the Debt does not exceed the maximum lawful rate from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding.
9. (a) The liability and obligation of Maker hereunder
are full recourse obligations of Maker. Anything contained herein, or in any
other Loan Document to the contrary notwithstanding, no recourse shall be had
for the obligations against any shareholder, partner, agent, director, officer,
or employee of Maker. It is understood that the preceding sentence shall not
(A) in the event of any malfeasance, such as fraud, misappropriation of funds
or intentional misrepresentation, estop the Payee from instituting or
prosecuting a legal action or proceeding or otherwise making a claim against
the person or persons committing such malfeasance, (B) constitute a waiver,
release or discharge of any Obligation, and the same shall continue until paid
or discharged in full, (C) affect the validity or enforceability of any
guaranty made in connection with the Loan or any of the rights and remedies of
Payee thereunder.
(b) Notwithstanding anything to the contrary
contained in this Note, the Loan Agreement, the Mortgage or any of the other
Loan Documents: (i) Payee shall not be deemed to have waived any right which
Payee may have under Sections 506(a), 506(b), 1111(b) or any other provisions
of the Bankruptcy Code to file a claim for the full amount of the Debt secured
by the Mortgage or to require that all collateral shall continue to secure all
of the Debt owing to Payee in accordance with the Loan Documents.
10. This Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Payee, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought. Whenever used, the
singular number shall include the plural, the plural the singular, and the
words "PAYEE" and "MAKER" shall include their respective successors, assigns,
heirs, executors and administrators. If Maker consists of more than one person
or party, the obligations and liabilities of each such person or party shall be
joint and several.
11. Maker and all others who may become liable for the
payment of all or any part of the Debt do hereby severally waive presentment
and demand for payment, notice of dishonor, protest, notice of protest, notice
of nonpayment, notice of intent to accelerate the maturity hereof and notice of
acceleration. No release of any security for the Debt or any person liable for
payment of the Debt, no extension of time for payment of this Note or any
-4-
<PAGE> 5
installment hereof, and no alteration, amendment or waiver of any provision of
the Loan Documents made by agreement between Payee and any other person or
party shall release, modify, amend, waive, extend, change, discharge, terminate
or affect the liability of Maker and any other person or party who may become
liable under the Loan Documents for the payment of all or any part of the Debt.
12. The remedies of the holder hereof as provided in this
Note or in the Mortgage, the Assignment of Leases or the other Loan Documents
shall be cumulative and concurrent, and may be pursued singly, successively, or
together at the sole discretion of the holder hereof, and may be exercised as
often as occasion therefor shall occur; and the failure to exercise any such
right or remedy shall in no event be construed as a waiver or release thereof.
Nothing herein contained shall be construed as limiting the holder of this Note
to the remedies mentioned above.
13. Maker (and the undersigned representative of Maker,
if any) represents that Maker has full power, authority and legal right to
execute, deliver and perform its obligations pursuant to this Note, the Loan
Agreement, the Mortgage and the other Loan Documents and that this Note, the
Loan Agreement, the Mortgage and the other Loan Documents constitute valid and
binding obligations of Maker subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting rights of creditors generally and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or law).
14. If any term or provision of this Note or the
application thereof to any person or circumstance shall to any extent be
invalid, illegal or unenforceable, the remainder of this Note or the
application of such term or provision to persons or circumstances other than
those as to which it is invalid, illegal or unenforceable shall not be affected
thereby.
15. All notices or other communications required or
permitted to be given pursuant hereto shall be given and shall be effective in
the manner specified in the Loan Agreement, directed to the parties at their
respective addresses as provided therein.
16. MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY
TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO
THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH
IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.
-5-
<PAGE> 6
17. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
-6-
<PAGE> 7
Maker has duly executed this Promissory Note the day and year first
above written.
MALIBU CENTERS, INC., a Delaware corporation
By:
----------------------------------------
Name:
Title:
Pay to the order of ,
------------------------------------------------
without recourse.
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
----------------------------------------
Name:
Title:
-7-
<PAGE> 8
EXHIBIT A
DEFINITIONS
"DETERMINATION DATE" shall mean the date which is two
Eurodollar Business Days prior to the first day of a calendar month.
"EURODOLLAR BUSINESS DAY" shall mean a Business Day on which
banks in the City of London, England, are open for interbank or foreign
exchange transactions.
"LIBOR" shall mean the rate (expressed as a percentage per
annum) for deposits in U.S. dollars, for a one-month period, that appears on
Telerate Page 3750 (or the successor thereto) as of 11:00 a.m., London, England
time, on the related Determination Date. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London, England time, on the related
Determination Date, LIBOR shall be the arithmetic mean of the offered rates
(expressed as a percentage per annum) for deposits in U.S. dollars for a
one-month period that appear on the Reuters Screen LIBOR Page as of 11:00 a.m.,
London, England time, on such Determination Date, if at least two such offered
rates so appear. If fewer than two such offered rates appear on the Reuters
Screen LIBOR Page as of 11:00 a.m., London, England time, on such Determination
Date, Payee shall request the principal London, England office of any four
major reference banks in the London interbank market selected by Payee to
provide such bank's offered quotation (expressed as a percentage per annum) to
prime banks in the London interbank market for deposits in U.S. dollars for a
one-month period as of 11:00 a.m., London, England time, on such Determination
Date, for amounts of not less than U.S. $1,000,000. If at least two such
offered quotations are so provided, LIBOR shall be the arithmetic mean of such
quotations. If fewer than two such offered quotations are so provided, Payee
shall request any three major banks in New York City selected by Payee to
provide such bank's rate (expressed as a percentage per annum) for loans in
U.S. dollars to leading European banks for a one-month period as of
approximately 11:00 a.m., New York City time, on the applicable Determination
Date for amounts of not less than U.S. $1,000,000. If at least two such rates
are so provided, LIBOR shall be the arithmetic mean of such rates. If fewer
than two such rates are so provided, then LIBOR shall be LIBOR as in effect on
the Eurodollar Business Day immediately preceding the applicable Determination
Date. LIBOR shall be determined in accordance with this paragraph by Payee or
its agent.
<PAGE> 1
Exhibit 10.17
GUARANTY
GUARANTY, dated June 27, 1997, of MEI HOLDINGS, L.P., a
Delaware Limited Partnership (the "Guarantor"), in favor of NOMURA ASSET
CAPITAL CORPORATION, a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, Malibu Centers, Inc., a Delaware corporation
("Borrower"), has entered into a Loan Agreement, dated as of the date hereof
(as at any time amended, modified or supplemented, the "Loan Agreement"), with
Lender, pursuant to which the Lender has agreed to make a Loan (as defined in
the Loan Agreement) to the Borrower; and
WHEREAS, the Guarantor owns approximately 81% of all the
outstanding common stock of Malibu Entertainment Worldwide, Inc., a Delaware
corporation, ("Malibu") the ultimate parent of the Borrower; and
WHEREAS, the Guarantor will derive economic benefits from the
making of the Loan to Borrower by the Lender; and
WHEREAS, in connection with the making of the Loan under the
Loan Agreement, and as a condition precedent thereto, the Lender is requiring
that the Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, as partial security for a separate loan made from
Lender to Guarantor, Lender is the holder of that certain Pledge and Security
Agreement, dated as of June 5, 1997, between Lender and Guarantor (the
"Original Pledge"); and
WHEREAS, in connection with the making of the Loan under the
Loan Agreement, and as a condition precedent thereto, the Lender is requiring
that the Guarantor and the Lender amend and restate the Original Pledge
pursuant to the terms of that certain Amended and Restated Pledge and Security
Agreement, between the Lender and the Guarantor, dated as of the date hereof
(the "Security Agreement") such that the Original Pledge as amended and
restated by the Security Agreement will secure, amongst other things, this
Guaranty.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, and to induce the Lender to provide the Loan
under the Loan Agreement, it is agreed as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein shall
have the meanings assigned to them in the Security Agreement and if not found
therein then in the Loan Agreement, unless the context otherwise requires or
unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Guaranty as the same
may be in effect at the time such reference becomes operative.
SECTION 2. GUARANTY.
2.1 Guaranty. The Guarantor hereby guarantees to the Lender,
and Lender's successors and assigns, the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest on the Loan made by the Lender to, and under the Note held by the
Lender of, the Borrower and all other amounts from time to time owing to the
Lender by the Borrower under the Loan Agreement, the Note, and any of the other
Loan Documents (such obligations being herein collectively called the
"Guaranteed Obligations"). The Guarantor hereby further agrees that, if the
Borrower shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Guarantor
will promptly pay the same, without any demand or notice whatsoever, and that
in the case of any extension of time of payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.
2.2 Obligations Unconditional. The obligations of the
Guarantor under Section 2.1 hereof are absolute and unconditional, irrespective
of the value, genuineness, validity, regularity or enforceability of the Loan
Agreement, the Note or any other Loan Document, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 2.2
2
<PAGE> 3
that the obligations of the Guarantor hereunder shall be absolute and
unconditional, under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not affect the liability of the Guarantor under
this Guaranty:
(i) at any time or from time to time, without
notice to the Guarantor, the time for any performance of or compliance
with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the
provisions of the Loan Agreement or the Note or any other agreement or
instrument referred to herein or therein shall be done, other than
full performance or payment of the Guaranteed Obligations, or omitted;
(iii) the maturity of any of the Guaranteed
Obligations shall be accelerated, or any of the Guaranteed Obligations
shall be modified, supplemented or amended in any respect, or any
right under the Loan Agreement or the Note or any other agreement or
instrument referred to herein or therein shall be waived or any other
guarantee of any of the Guaranteed Obligations or any security
therefor shall be released or exchanged in whole or in part or
otherwise dealt with; or
(iv) any lien or security interest granted to, or
in favor of, the Lender as security for any of the Guaranteed
Obligations shall fail to be perfected.
The Guarantor hereby expressly waives, to the extent permitted by applicable
law, diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Lender exhaust any right, power or
remedy or proceed against the Borrower under the Loan Agreement or the Note or
any other agreement or instrument referred to herein or therein, or against any
other Person under this Guaranty or any other guarantee of, or security for,
any of the Guaranteed Obligations.
Guarantor represents, warrants and agrees that, as of the date of this
Guaranty, its obligations under this Guaranty are not subject to any offsets or
defenses, of any kind, against the Lender. Guarantor further agrees that its
obligations under this Guaranty shall not be subject to any counterclaims,
offsets or defenses.
3
<PAGE> 4
2.3 Reinstatement. The obligations of the Guarantor under
this Guaranty shall be automatically reinstated if and to the extent that, for
any reason, any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Guarantor agrees that it
will indemnify the Lender on demand for all reasonable out-of-pocket costs and
expenses (including, without limitation, reasonable fees of counsel) actually
incurred by the Lender in connection with such rescission or restoration.
2.4 Subrogation. The Guarantor hereby agrees that until the
payment and satisfaction in full of all Guaranteed Obligations, it shall not
exercise any right or remedy arising by reason of any performance by it of its
guarantee hereunder, whether by subrogation or otherwise, against the Borrower
or any other guarantor of any of the Guaranteed Obligations or any security for
any of the Guaranteed Obligations.
2.5 Remedies; Other. The Guarantor agrees that, as between
the Guarantor and the Lender, the obligations of the Borrower under the Loan
Agreement and the Note may be declared to be forthwith due and payable as
provided in the Loan Agreement (and shall be deemed to have become
automatically due and payable in the circumstances provided in the Loan
Agreement) for purposes of Section 2.1 hereof, notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such
obligations from becoming automatically due and payable) as against the
Borrower and that, in the event of such declaration (or such obligations being
deemed to have become automatically due and payable), such obligations (whether
or not due and payable by the Borrower) shall forthwith become due and payable
by the Guarantor for purposes of said Section 2.1. If the Lender shall bring
an action to enforce this Guaranty, it shall be entitled to recover reasonable
out-of-pocket costs and attorney fees incurred in such action, including but
not limited to reasonable costs and fees incurred in connection with any
provisional remedies, appeal, confirmation, petition for full faith and credit,
or execution after judgment.
2.6 Continuing Guarantee. The guarantee provided in this
Guaranty is a continuing guarantee, and shall apply to all Guaranteed
Obligations whenever arising.
2.7 Existence; Compliance with Law. Guarantor (i) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the state of its organization; (ii) is duly qualified to do
business and is in good standing under the laws of
4
<PAGE> 5
each jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification (except for jurisdictions in which
such failure so to qualify or to be in good standing would not have a
materially adverse effect on (A) the business, operations, prospects or
financial condition of the Guarantor, (B) Guarantor's ability to pay the
Guaranteed Obligations in accordance with the terms hereof, or (C) the
Collateral, Lender's Liens on the Collateral pursuant to the Security Agreement
or the priority of any such Lien); (iii) has the requisite power and authority
and the legal right to own, pledge, mortgage and operate its properties, to
lease the property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted; (iv) has all material licenses,
permits, consents or approvals from or by, and has made all material filings
with, and has given all material notices to, all governmental authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct where failure to do so would have a materially adverse effect on (A)
the business, operations, prospects, assets or financial or other condition of
such Guarantor, (B) such Guarantor's ability to pay the Guaranteed Obligations
in accordance with the terms hereof, or (C) the Collateral, Lender's Liens on
the Collateral pursuant to the Security Agreement or the priority of any such
Liens; (v) is in compliance with its limited partnership agreement and
certificate of limited partnership; and (vi) is in compliance with all
applicable provisions of law where the failure to comply would have a
materially adverse effect on (A) the business, operations, prospects, assets or
financial or other condition of such Guarantor, (B) such Guarantor's ability to
pay the Guaranteed Obligations in accordance with the terms hereof, or (C) the
Collateral, Lender's Liens on the Collateral pursuant to the Security Agreement
or the priority of any such Liens.
2.8 Executive Offices. Guarantor's executive office and
principal place of business are the same as set forth in Section 3.4 hereof
(with respect to notices).
2.9 Power; Authorization; Enforceable Obligations. The
execution, delivery and performance of this Guaranty by the Guarantor are
within Guarantor's powers, have been duly authorized by all necessary or proper
action, including the consent of partners where required, are not in
contravention of any provision of Guarantor's certificate of limited
partnership or limited partnership agreement, will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
to which the Guarantor is subject or by which the Guarantor is bound, will not
conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which the Guarantor is a party or by which the Guarantor or any of its property
is bound, will not result in the creation or imposition of any Lien upon any of
the
5
<PAGE> 6
property of the Guarantor, and the same do not require the consent or approval
of any governmental body, agency, authority or any other Person except those
already obtained. At or prior to the Closing Date, this Guaranty shall have
been duly executed and delivered for the benefit of or on behalf of Guarantor,
and shall then constitute a legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the rights of creditors generally or by the application
of general equity principles.
2.10 Benefit of Guaranty. The provisions of this Guaranty
are for the benefit of the Lender and Lender's successors and transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
the Borrower and the Lender, the obligations of Borrower under the Loan
Documents. In the event all or any part of the Guaranteed Obligations are
transferred, endorsed or assigned by the Lender to any Person or Persons any
reference to "Lender" herein shall be deemed to refer equally to such Person or
Persons.
2.11 Further Assurances. The Guarantor agrees, upon the
written request of the Lender, to execute and deliver to the Lender, from time
to time, any additional instruments or documents reasonably considered
necessary by the Lender to cause this Guaranty to remain valid and effective in
accordance with its terms.
2.12 Payments Free And Clear Of Taxes. All payments required
to be made by the Guarantor hereunder shall be made to the Lender, free and
clear of, and without deduction for, any and all present and future taxes,
withholdings, levies, duties, and other governmental charges ("Taxes"),
excluding such income and franchise taxes of the United States and any
political subdivision thereof which would otherwise have been payable by Lender
if Borrower had paid the Guaranteed Obligations to Lender in accordance with
the terms of the Loan Documents. Upon request by Lender, the Guarantor shall
furnish to Lender a receipt for any Taxes paid by such Guarantor pursuant to
this Section 2.12 or, if no Taxes are payable with respect to any payments
required to be made by the Guarantor hereunder, either a certificate from each
appropriate taxing authority or an opinion of counsel acceptable to the Lender,
in either case stating that such payment is exempt from or not subject to
Taxes. If Taxes are paid by the Lender, such Guarantor will, upon demand of
the Lender, and whether or not such Taxes shall be correctly or legally
asserted, indemnify the Lender for such payments, together with any interest,
penalties and expenses in connection therewith plus interest thereon at the
rate specified in the Loan Agreement.
6
<PAGE> 7
2.13 Limitation of Guaranty. Any term or provision of this
Guaranty or any other Loan Document to the contrary notwithstanding, the
maximum aggregate amount of the Guarantied Obligations for which the Guarantor
shall be liable shall not exceed the maximum amount for which such Guarantor
can be liable without rendering this Guaranty or any other Loan Document, as it
relates to such Guarantor, voidable under Section 548 of the United States
Bankruptcy Code or any comparable provision of any state law or any applicable
law relating to fraudulent conveyance or fraudulent transfer.
SECTION 3. MISCELLANEOUS.
3.1 Entire Agreement; Amendments. This Guaranty, together
with the other Loan Documents, constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements relating to a guaranty of the loans and advances under the Loan
Documents and/or the Guaranteed Obligations and may not be amended or
supplemented except by a writing signed by the Guarantor and the Lender.
3.2 Headings. The headings in this Guaranty are for
convenience of reference only and are not part of the substance of this
Guaranty.
3.3 Severability. In the event that any one or more of the
provisions contained in this Guaranty shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision or provisions in every other respect
and the remaining provisions of this Guaranty shall not be in any way impaired.
3.4 Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Guaranty) shall be given or made by telecopy, or in
writing and telecopied (with confirmation), mailed or delivered to the intended
recipient at the address specified below; or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Guaranty, all such communications shall be
deemed to have been duly given when transmitted by telecopier (with
confirmation of receipt), or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid. The giving
of any notice required hereunder may be waived in writing by the party entitled
to receive such notice.
7
<PAGE> 8
If to Guarantor, at:
MEI Holdings, L.P.
c/o Hempstead Group
Texas Commerce Tower
2200 Ross Ave., Suite 4200-W
Dallas, Texas 75201
Attn: Daniel A. Decker
Fax #: 214-220-4949
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Robert A. Profusek, Esq.
Fax #: 212-755-7306
If to the Lender to:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attn: Raymond Anthony
Fax #: 212-667-1666
with a copy to:
Weil Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Attn: J. Philip Rosen, Esq.
Fax #: 212-310-8007
8
<PAGE> 9
3.5 Binding Effect. This Guaranty shall bind Guarantor and
shall inure to the benefit of Lender and Lender's respective successors and
permitted assigns. Guarantor may not assign this Guaranty.
3.6 Non-Waiver. The failure of the Lender to enforce any
right or remedy hereunder, or promptly to enforce any such right or remedy,
shall not constitute a waiver thereof, nor give rise to any estoppel against
the Lender, nor excuse Guarantor from its Obligations hereunder. Any waiver of
any such right or remedy by the Lender must be in writing and signed by the
Lender.
3.7 Termination. This Guaranty shall terminate and be of no
further force or effect at such time as the Guaranteed Obligations shall be
paid and performed in full. Upon payment and performance in full of the
Guaranteed Obligations, the Lender shall deliver to Guarantor such documents as
Guarantor may reasonably request to evidence such termination.
3.8 Governing Law. The terms of this Guaranty shall be
governed by, and shall be construed and enforced in accordance with, the laws
of the State of New York (exclusive of any rules as to conflict of laws) and
the laws of the United States applicable therein. Guarantor hereby submits to
the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State Court sitting in the
Borough of Manhattan in New York City for the purposes of all legal proceedings
arising out of or relating to this Guaranty or the transactions contemplated
hereby. The Guarantor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
3.9 Counterparts. This Guaranty may be executed in any
number of counterparts which shall individually and collectively constitute one
agreement.
3.10 Non-Recourse. The Guarantied Obligations are full
recourse obligations of Guarantor. Anything contained herein, in the Note or
in any other Loan Document to the contrary notwithstanding, no recourse shall
be had for the Guarantied Obligations against any partner, agent, director,
officer, or employee of the Guarantor. It is understood that the preceding
sentence shall not (A) in the event of any malfeasance, such as fraud,
9
<PAGE> 10
misappropriation of funds or intentional misrepresentation, estop any Lender
from instituting or prosecuting a legal action or proceeding or otherwise
making a claim against the Person or Persons committing such malfeasance, and
(B) constitute a waiver, release or discharge of any Guaranteed Obligation, and
the same shall continue until paid or discharged in full.
3.11 Secured Obligations. The obligations of Guarantor
hereunder are secured by the Security Agreement.
[signature page follows]
10
<PAGE> 11
IN WITNESS WHEREOF, the Guarantor has executed and delivered
this Guaranty as of the date first above written.
MEI HOLDINGS, L.P., a Delaware limited partnership
By: MEI GENPAR, L.P.
its general partner
By: HH GenPar Partners, its general partner
By: Hampstead Associates, Inc.,
a managing general partner
By:
------------------------------------
Name:
Title:
Accepted and acknowledged by:
NOMURA ASSET CAPITAL CORPORATION, as Lender
By:
---------------------------------
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,441,890
<SECURITIES> 0
<RECEIVABLES> 479,187<F1>
<ALLOWANCES> 0
<INVENTORY> 1,017,778
<CURRENT-ASSETS> 10,037,147
<PP&E> 122,807,617<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 140,607,080
<CURRENT-LIABILITIES> 23,733,284
<BONDS> 46,178,741
0
0
<COMMON> 141,194,654
<OTHER-SE> (71,209,733)
<TOTAL-LIABILITY-AND-EQUITY> 140,607,080
<SALES> 18,545,715
<TOTAL-REVENUES> 18,545,715
<CGS> 0
<TOTAL-COSTS> 27,162,766
<OTHER-EXPENSES> (262,382)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,406,725
<INCOME-PRETAX> (9,761,394)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,761,394)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,786,085)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
<FN>
<F1>Accounts receivable and property and equipment represent net numbers.
</FN>
</TABLE>
