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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1998
------------------------------------
MALIBU ENTERTAINMENT WORLDWIDE, INC.
717 North Harwood, Suite 1650
Dallas, Texas 75201
(214) 210-8701
------------------------------------
Incorporated in Georgia SEC File No.: 0-22458 IRS Employer Id.
No.: 58-1949379
------------------------------------
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 November 11, 1998, 48,455,258 shares of the Company's Common Stock
were outstanding.
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Current
Cash and cash equivalents $ 269,844 $ 5,270,843
Restricted cash 1,629,264 1,302,724
Inventories 1,897,985 1,976,524
Current portion of notes receivable 80,134 79,927
Assets held for sale 1,615,217 3,002,672
Other current assets 1,617,042 1,019,946
---------------- ----------------
Total current assets 7,109,486 12,652,636
---------------- ----------------
Property and equipment, less accumulated
depreciation 114,991,301 116,125,918
---------------- ----------------
Other noncurrent
Investments in and advances to limited partnerships 2,389,326 2,180,410
Notes receivable 29,691 41,823
Other assets 235,479 163,805
Debt issuance costs, less accumulated amortization 2,014,899 3,155,526
Intangible assets, less accumulated amortization 1,006,094 1,029,986
---------------- ----------------
Total other noncurrent assets 5,675,489 6,571,550
---------------- ----------------
$ 127,776,276 $ 135,350,104
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 23,939,025 $ 1,060,411
Current portion of notes payable to shareholder 10,000,000 --
Accounts payable 2,772,157 5,623,907
Accrued expenses 7,696,380 6,719,027
Accrued expenses related to assets held for sale 750,556 1,073,714
---------------- ----------------
Total current liabilities 45,158,118 14,477,059
Line credit 7,500,000 7,500,000
Term loan revolver 10,000,000 10,000,000
Notes payable to shareholder 49,496,843 48,301,668
Notes payable 5,256,040 28,836,505
Accrued interest due to shareholder 4,258,325 1,094,781
Other accrued expenses 3,136,639 4,403,856
---------------- ----------------
Total liabilities 124,805,965 114,613,869
---------------- ----------------
Shareholders' equity
Common stock, 100,000 shares authorized with no par
value; 48,483,386 and 48,376,776 shares issued and
outstanding 141,607,037 141,212,037
Outstanding warrants 2,085,100 2,085,100
Notes receivable from employees (6,175,413) (5,864,523)
Accumulated deficit (134,546,413) (116,696,379)
---------------- ----------------
Total shareholders' equity 2,970,311 20,736,235
---------------- ----------------
$ 127,776,276 $ 135,350,104
================ ================
</TABLE>
2
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Entertainment revenue $ 14,066,130 $ 16,877,423 $ 37,209,422 $ 35,423,138
------------ ------------ ------------ ------------
OPERATING EXPENSES
Entertainment expenses 11,689,027 18,313,667 32,884,454 38,169,449
General and administrative expenses 1,688,899 2,092,635 5,253,403 6,342,107
Other expenses 175,597 166,619 531,503 504,152
Depreciation and amortization 2,547,057 3,530,115 7,505,250 6,250,094
------------ ------------ ------------ ------------
Total operating expenses 16,100,580 24,103,036 46,174,610 51,265,802
------------ ------------ ------------ ------------
Operating loss (2,034,450) (7,225,613) (8,965,188) (15,842,664)
OPERATING (EXPENSE) INCOME
Interest expenses (3,313,895) (2,302,632) (9,289,802) (3,709,357)
Interest income 113,071 172,509 391,985 475,089
Office closing expense -- (2,245,000) -- (2,245,000)
Other (26,419) 102,018 12,971 37,129
------------ ------------ ------------ ------------
Net loss $ (5,261,693) $(11,498,718) $(17,850,034) $(21,284,803)
============ ============ ============ ============
Basic and diluted loss per share of common stock $ (0.11) $ (0.24) $ (0.37) $ (0.54)
============ ============ ============ ============
Weighted average number of shares of common stock
used in calculating net loss per share 48,483,386 48,531,104 48,483,386 39,773,194
============ ============ ============ ============
</TABLE>
3
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $(17,850,034) $(21,284,803)
Adjustments to reconcile net loss to net
cash used by operating activities
Equity in net losses of limited partnerships,
net of tax -- (23,331)
Depreciation and amortization 7,505,250 6,250,094
Amortization of loan costs 1,140,627 844,562
Gain on sale of property and equipment (36,868) (60,460)
Changes in assets and liabilities
Decrease (increase) in inventories 78,539 (823,581)
Increase in other assets (668,770) (991,630)
Increase in debt issuance costs and
intangible assets (8,174) (2,416,301)
(Decrease) increase in accounts payable (2,851,750) 6,817,994
(Decrease) increase in accrued expenses (289,864) 2,220,818
Increase in accrued interest due shareholder 3,163,544 479,610
Decrease in accrued expenses related to
assets held for sale and other (323,158) (777,947)
------------ ------------
Cash used by operating activities (10,140,658) (9,764,975)
------------ ------------
Investing activities:
Purchase of property and equipment (6,482,531) (57,007,460)
Proceeds from sale of property and
equipment 1,568,287 4,313,239
Increase in notes receivable -- (68,750)
Principal receipts under notes receivable 11,925 135,633
Increase in investments in and advances to
limited partnerships (208,916) (607,868)
Increase in restricted cash (326,540) (1,325,930)
------------ ------------
Cash used in investing activities (5,437,775) (54,561,136)
------------ ------------
Financing activities:
Proceeds from borrowings 11,195,177 52,341,614
Payments of borrowings (701,853) (4,232,498)
Decrease in stock subscription receivable -- 16,076,260
Increase in interest receivable on notes
receivable from employees (310,890) (314,446)
Issuance of common stock 395,000 --
Purchase of stock -- (17,280)
Payment of contingent liability for stock
price guarantee -- (777,861)
------------ ------------
Cash provided by financing activities 10,577,434 63,075,789
------------ ------------
Decrease in cash and cash equivalents (5,000,999) (1,250,322)
Cash and cash equivalents, beginning of period 5,270,843 2,583,735
------------ ------------
Cash and cash equivalents, end of period $ 269,844 $ 1,333,413
============ ============
Supplemental non-cash disclosures:
Cash paid for interest $ 4,099,623 $ 3,001,162
============ ============
</TABLE>
4
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (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 material 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. Operating results for the nine-month period
ended September 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998.
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, 1997.
NOTES PAYABLE TO SHAREHOLDER
During the nine months ended September 30, 1998, the Company increased
its outstanding borrowings from MEI Holdings, L.P., the Company's largest
shareholder, by $ 11.2 million (plus accrued interest of $3.1 million), to
$63.8 million (including accrued interest) as of September 30, 1998.
ASSETS HELD FOR SALE
In June 1998, the Company sold a property held for sale for net proceeds
of $1.4 million, which approximated the book value of the property. As of
September 30, 1998, the Company is holding for sale two properties having an
aggregate book value of $1.6 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Noncomparability
Among other transactions and actions, during June 1997, the Company
opened its three SpeedZones and, during the second quarter of 1997, closed
four family entertainment centers ("FECs") and disposed of 12 other FECs.
During 1997 and the first nine months of 1998, the Company's capital
expenditures totaled $63.2 million and $6.5 million, respectively, and the
Company disposed of certain non-strategic assets for aggregate net proceeds of
$6.1 million. In light of the foregoing and the seasonal nature of the
Company's business, period-to-period
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comparisons of the Company's results of operations and the results of
operations for any interim period are not necessarily indicative of the
Company's future results of operations.
Results of Operations
For the three months ended September 30, 1998, the Company had a net
loss of $5.3 million ($0.11 per share), approximately one-half of the
Company's net loss of $11.5 million ($0.24 per share) for the comparable
period last year. For the nine months ended September 30, 1998, the Company
had a net loss of $17.9 million ($0.37 per share) as compared to a net loss of
$21.3 million ($0.54 per share) in the comparable period in the prior year.
Operating revenue decreased by $2.8 million (17%) for the three months
ended September 30, 1998 from $16.9 million for the three months ended
September 30, 1997 to $14.1 million for the three months ended September 30,
1998. The decrease in operating revenues was principally attributable to a
decline in park traffic resulting from a reduction, on a comparative basis, in
advertising spending during the third quarter 1998 from $3.3 million to $0.9
million and the closing of 16 FECs in 1997. Operating revenue increased by
$1.8 million (5%) for the nine months ended September 30, 1998, from $35.4
million for the nine months ended September 30, 1997 to $37.2 million for the
nine months ended September 30, 1998. The increase in the year-to-date
operating revenue was primarily due to an increase in entertainment revenue
($4.9 million) attributable to the three FECs that were converted to
SpeedZones in June 1997. The increase was partially offset by the decrease in
the revenues from FECs that were sold in May 1997 ($ 1.6 million), three FECs
closed in the second quarter 1997 pending final disposition ($0.6 million) and
revenue declines in other FECs due principally to a reduction in advertising
expenditures.
Entertainment expenses decreased by $6.6 million (36%) for the quarter
ended September 30, 1998 to $11.7 million from $18.3 million for the
comparable quarter in the prior year due principally to reductions in staffing
and advertising expenditures in the third quarter of this year, grand opening
incurred in 1997 for the redeveloped SpeedZones and improved operations.
Entertainment expenses for the nine months ended September 30, 1998 decreased
by $5.3 (14%) million to $ 32.9 million from $38.2 million for the comparable
period last year primarily as a result of reductions in advertising
expenditures this year and grand opening costs incurred in 1997 for the
redeveloped SpeedZones and by the decrease in expenses from the FECs that were
sold in May 1997 ($1.6 million) and the three FECs closed during 1997 pending
final disposition ($0.8 million). These decreases were partially offset by
entertainment expenses associated with the SpeedZones which were operated
throughout the nine months ended September 30, 1998 but were only open for
operation last year beginning in June 1997 ($0.8 million).
General and administrative expenses decreased $0.4 million (19%) for the
quarter ended September 30, 1998 and $1.1 million (17%) for the nine months
ended September 30, 1998 primarily as a result of a reduction in fees
associated with the development of the SpeedZone concept.
Depreciation and amortization for the quarter ended September 30, 1998
decreased by $1.0 million from the 1997 third quarter (from $3.5 million to
$2.5 million) due to the reduction in depreciation for the parks that were
written down to comply with SFAS No. 121 at the end of 1997. For the nine
months ended September 30, 1998, depreciation and amortization increased by
$1.3
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<PAGE> 7
million from the 1997 third quarter (from $6.2 million to $ 7.5 million). The
increase for the nine months ended September 30, 1998 was primarily due to an
increase in depreciation for the Company's three SpeedZones ($2.6 million) and
on games purchased in the latter part of 1997 ($1.1 million). The increases
were partially offset by a reduction in depreciation for the FECs that were
written down to comply with SFAS No. 121 at the end of 1997 ($2.4 million).
Interest expense increased by $1.0 million for the quarter ended
September 30, 1998 and by $ 5.6 million for the nine months ended September
30, 1998, as compared to the comparable period in 1997, primarily due to the
increase in the outstanding balance of indebtedness incurred to construct the
SpeedZone parks and finance operating shortfalls.
In 1997, the Company recognized $2.2 million of one-time costs in
connection with the relocation of its corporate headquarters.
In connection with its proposed recapitalization plan described below,
the Company intends to seek further to reduce overhead and operating expenses,
particularly this winter. In this regard, staff reductions implemented this
month are expected to save $1.0 million annually (after one-time severance
costs), and the Company intends to pursue other expense-saving measures.
In this regard, the Company is engaged in discussions to amend the terms of
its contract to purchase additional lanes relating to the Company's Top
Eliminator dragster attraction (which may involve the Company's payment of a
substantial one-time fee).
Liquidity and Capital Resources
The Company's internally generated cash has been insufficient to fund
its working capital, debt service and capital expenditure requirements for the
past several years and the Company has therefore funded its operations and
capital expenditures principally through external financing. During the nine
months ended September 30, 1998, the Company financed its operations through a
combination of the utilization of $5.0 million of cash on hand as of the
beginning of the year, debt financing provided by the Company's largest
shareholder ($11.2 million) and the sale in June 1998 of a property held for
sale for net proceeds of $1.4 million. The Company's principal uses of cash
during the first nine months of 1998 were to finance operations ($10.1
million) and capital investment ($6.5 million).
At the end of 1996, the Company adopted a new business plan, a key
component of which was the development and roll-out of the Company's SpeedZone
concept. During 1997 and the first nine months of 1998, the Company's total
capital investment for the development of the SpeedZone parks and for other
parks was $69.7 million, before net proceeds from the sale of nonstrategic
assets of $6.1 million, and the Company repaid or refinanced a total of $80.3
million of indebtedness. The Company's largest shareholder provided $63.8
million of debt and equity capital for these purposes and operating
short-falls.
$31.4 million of the Company's $110.5 million of total debt at September
30, 1998 (including accrued interest) matures in January 1999 (the "Current
Debt"). The Current Debt includes $21.4 million of secured debt from a
third-party lender and a $10.0 million loan from that lender through the
Company's largest shareholder. The $10.0 million of Current Debt and an
additional $11.0 million of indebtedness (together, the "Pass-Through Debt")
was advanced to the Company's largest shareholder and reloaned to the Company
as an accommodation to the Company and the third-party lender so that the
largest shareholder's equity interests in the Company effectively supported
that portion of the third-party financing. The current terms of the Company's
bank debt (totalling $17.5 million at September 30, 1998) require monthly
principal amortization payments of $500,000 commencing in December 1998
because the Current Debt had not been refinanced or the maturity date deferred
by November 1998.
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<PAGE> 8
The Company had expected that its combination with Houlihan's Restaurant
Group proposed last summer would enhance the Company's ability to refinance a
substantial amount of its debt, including the Current Debt and Houlihan's
acquisition debt ($91 million at September 30, 1998), as well as enable the
Company to raise additional capital resources with which to pursue its growth
strategy. The deterioration of the credit and equity markets commencing in the
third quarter of this year has made raising new capital extremely difficult,
and the Company presently believes that it would not be able to complete the
anticipated refinancings in the current capital markets environment. In
addition, the erosion of public equity multiples, particularly for the
restaurant industry and for other companies with a substantial portion of
their revenues deriving from food and beverage operations, negatively affected
Houlihan's valuation (particularly given Houlihan's $91 million of acquisition
debt). Accordingly, the Company, based on the recommendation of its directors
who are not employed by the Company or entities affiliated with its largest
shareholder, elected not to move forward with the possible combination. As a
result, the plan to combine Houlihan's with Malibu has been terminated, and
the Company has decided to pursue a recapitalization plan on a stand-alone
basis as described below.
If the recapitalization plan is completed as currently contemplated,
the Company believes that its operations would become self-funding, other than
capital required for development or redevelopment of new parks and major
renovations of existing parks. The Company's recapitalization plan has four
principal components:
o Conversion of $45.6 Million of Debt into Equity: All of the
Company's debt to its largest shareholder (totaling $45.6 million,
including accrued interest, as of September 30, 1998), other than
the Pass-Through Debt, would be converted into convertible
preferred stock of the Company with a pay-in-kind feature for at
least two years, subject to the modification of the Current Debt
described below;
o $12 Million of New Equity Capital: In connection with the proposed
recapitalization plan, the Company's largest shareholder advanced
an additional $2.0 million to permit the Company to fund current
obligations and, if the Current Debt is modified as described
below, would make available up to an additional $10 million in
equity capital to the Company in exchange for shares of convertible
preferred stock to provide the Company with capital which it
currently expects will be sufficient to carry it through its
off-peak period;
o Elimination of Bank Debt Amortization: The $500,000 per month
principal amortization requirement under the Company's bank debt
scheduled to commence in December 1998 would be eliminated; and
o Conversion or Modification of Senior Debt: The Current Debt and the
additional $11.0 million of Pass-Through Debt would be either
modified so as to extend the maturity thereof and add an interest
accrual feature or converted into convertible preferred stock with
a pay-in-kind feature.
The Company has had substantive discussions with all parties relating to the
recapitalization plan and its Board of Directors has approved it in concept.
However, the terms thereof and documents providing for it have not been
definitively agreed to as of the date of this Report. While the Company intends
to seek to complete the recapitalization in the fourth quarter of this year,
there can be no assurance that it will be successful in so doing, and the
Company's majority shareholder has no legal obligation to fund the Company's
operating and capital requirements for this purpose or in the future. In this
regard, the Company's largest shareholder has informed the Company that it is
not willing to invest additional capital in the Company unless the
recapitalization and proposed modifications of the Company's Top Eliminator
contract are completed on terms satisfactory to it, and that, after the
recapitalization is completed, it has no present intention to provide more
capital to fund operations or capital expenditures. If the Company is unable to
refinance or restructure its indebtedness pursuant to the proposed
recapitalization plan or otherwise, the Company would be forced to seek to
obtain additional capital resources from other sources because the Company's
present capital resources are not sufficient to fund its existing working
capital and debt service requirements. There can be no assurance that the
Company will be able to obtain such additional capital resources.
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The Company's growth strategy currently contemplates the development in
1999 of at least one new SpeedZone based on a modified prototype which is
expected to incorporate substantial indoor racing attractions, and the
redevelopment in 1999 of at least one of the Company's existing FECs into a
modified family park concept. It is currently anticipated that the Company's
business plan will focus on the development of new SpeedZones as well as the
redevelopment of existing FECs into SpeedZones or family parks; the Company
also expects to pursue acquisitions of existing parks. Any such actions
would, however, require the Company to obtain additional capital resources
even if the recapitalization plan described above is completed. As indicated
above, there can be no assurance that the recapitalization plan will be
implemented or that these capital resources will be available or as to the
terms thereof.
Impact of Year 2000 Issues
The Company is currently studying what, if any, measures are necessary
to resolve any potential impact of the year 2000 problem on the processing of
date-sensitive information by its computer systems. The year 2000 problem is
the result of computer programs being written using two digits (rather than
four) to define the applicable year. Any of the Company's programs that have
time-sensitive information may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
The Company relies on a significant number of computer programs and
computer technologies (collectively, "IT") and non-IT Systems for its key
operations, including product design, point of sales systems, race car timing
and safety systems, finance and various administrative functions. The Company
has engaged a year 2000 consultant to evaluate the current systems and prepare
a plan for addressing compliance. The systems to be reviewed by the consultant
are as follows:
Application Systems: Includes vendor supplied IT systems and
IT applications developed and maintained
by the Company
Infrastructure Systems: Includes all IT hardware and software
platforms
Embedded Systems: Includes all IT and non-IT systems
containing computer chips
The consultant, as part of its services, will request confirmation from
all vendors of their products' status relative to year 2000 compliance. The
consultant will audit the Company's systems and provide a report to the
Company identifying information, compliance requirements and criticality of
each system. The consultant's review is expected to be complete by the end of
this year, which management believes will allow the Company sufficient time to
resolve any issues which are identified. Once the results of the review are
available, the Company will decide what actions are appropriate. Based on
preliminary information, costs of assessing the issue or addressing potential
problems are not expected to be material, nor is the year 2000 issue expected
to have a material adverse effect on the Company. However, the ability of
third parties with which the Company transacts business adequately to address
their year 2000 issues is outside the Company's control. There can be no
assurance that the failure of the Company or such third parties to adequately
address their respective year 2000 issues will not have a material adverse
effect on the Company.
Legal Proceedings
Due to the nature of the attractions at the Company's parks, the Company
has been, and will likely continue to be, subject to a significant number of
personal injury lawsuits, certain of which may involve claims for substantial
damages. The Company also is from time to time a party to other claims and
legal proceedings, and is subject to environmental, zoning and other legal
requirements. As of the date of this Report, the Company does not believe that
any such matter is reasonably likely to have a material adverse effect on the
Company's financial position or results of operations. However, there
necessarily can be no assurance in this regard or that the Company will not be
subject to material claims or legal proceedings or requirements in the future.
9
<PAGE> 10
Forward-Looking Statements
This Report (including the documents incorporated by reference herein)
contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) and information relating to
the Company that is based on the beliefs of the Company's management, as well
as assumptions made by and information currently available to management.
When used herein, words such as "anticipate," "believe," "estimate,"
"expect," "intend" and similar expressions, as they relate to the Company,
the proposed recapitalization plan or the Company's business plans for the
future, 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, including as to the Company's
recapitalization plan described above, the Company's capital resources
generally and conditions in the capital markets; the Company's operations and
results of operations and other risks, including competitive, economic, legal
and regulatory risks that typically accompany businesses like that in which
the Company is engaged. Should one or more of these assumptions prove
incorrect, actual results or outcomes may vary materially from those
described herein as anticipated, believed, estimated, expected or intended.
Accordingly, shareholders are cautioned not to place undue reliance on such
forward-looking statements.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company's 1998 shareholders meeting, which had been deferred pending
the Houlihan's transaction, will be held on December 15, 1998 at the Company's
SpeedZone park in Dallas, Texas.
The Securities and Exchange Commission recently amended Rule 14a-4 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
provide that a proxy may confer discretionary authority to vote on a proposal
for an annual meeting of stockholders if the proponent fails to notify the
Company at least 45 days prior to the month and day of mailing the prior
year's proxy statement. For purposes of the Company's 1999 annual meeting of
stockholders, management may use its discretionary voting authority to vote on
any proposal with respect to which the Company receives notice after March 31,
1999, even if such proposal is not discussed in the proxy statement for the
1999 annual meeting of stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description
----------- -----------
10(a) Employment Agreement between the Company and Richard N.
Beckert
10(b) Amendment No. 5 to Consolidated, Amended and Restated Loan and
Security Agreement between the Company and Foothill Capital
Corporation
10(c) Reaffirmation and Ratification of Guaranty by MEI Holding,
L.P., in favor of Nomura Asset Capital Corporation
10(d) Letter Agreement re Term Extension between Malibu Centers Inc.
and Nomura Asset Capital Corporation
10(e) Letter Agreement re Loan between Malibu Centers, Inc. and
Nomura Asset Capital Corporation
10(f) Second Reaffirmation and Ratification of Guaranty by Malibu
Centers, Inc. in favor of Nomura Asset Capital Corporation
27 Financial Data Schedule (for SEC purposes only)
(b) No reports of Form 8-K were filed during the period covered by this
Report.
10
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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 N. Beckert
--------------------------------
Richard N. Beckert
Chief Executive Officer
By: /s/ Richard M. FitzPatrick
--------------------------------
Richard M. FitzPatrick
Chief Financial Officer
November 16, 1998
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10(a) Employment Agreement between the Company and Richard N.
Beckert
10(b) Amendment No. 5 to Consolidated, Amended and Restated Loan and
Security Agreement between the Company and Foothill Capital
Corporation
10(c) Reaffirmation and Ratification of Guaranty by MEI Holding,
L.P., in favor of Nomura Asset Capital Corporation
10(d) Letter Agreement re Term Extension between Malibu Centers Inc.
and Nomura Asset Capital Corporation
10(e) Letter Agreement re Loan between Malibu Centers, Inc. and
Nomura Asset Capital Corporation
10(f) Second Reaffirmation and Ratification of Guaranty by Malibu
Centers, Inc. in favor of Nomura Asset Capital Corporation
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
<PAGE> 1
EXHIBIT 10(a)
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") is made and
entered into effective as of the 17th day of August, 1998 (the "Effective
Date"), by and between Malibu Entertainment Worldwide, Inc., a Georgia
corporation (the "Company"), and Richard N. Beckert (the "Executive").
R E C I T A L S:
A. The Company desires to provide for the employment of the Executive,
subject to the terms and conditions herein provided; and
B. The Executive is willing to commit himself to serve the Company in
the capacity hereinafter stated, subject to the terms and conditions herein
provided.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto hereby consent and agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Company, pursuant to the terms and
conditions set forth herein.
2. TERM. The initial term of employment of the Executive by the Company
pursuant to the terms of this Agreement will commence on the Effective Date
hereof (the "Commencement Date") and, subject to earlier termination pursuant to
Section 6, expire on the fourth annual anniversary thereof (the "Initial
Termination Date"). Notwithstanding the previous sentence, this Agreement and
the employment of the Executive will be automatically renewed, subject to
Section 6, for successive one-year periods upon the terms and conditions set
forth herein, commencing on the Initial Termination Date, and on each succeeding
fiscal year end of the Company thereafter, unless either party to this Agreement
gives the other party written notice of such party's intention to terminate this
Agreement and the employment of the Executive at least 30 days prior to the end
of such initial or extended term. For purposes of this Agreement, "Employment
Period" will include the initial term and any extension thereof. Following the
expiration of the Employment Period, Executive will be an "at will" employee of
the Company.
3. POSITIONS AND DUTIES. (a) During the Employment Period, the
Executive will be the President and Chief Executive Officer of the Company with
responsibility for the day-to-day direction and administration of the business
and affairs of the Company, subject, however, to legal limitations and to the
direction of the Board of Directors of the Company. At the Company's request,
the Executive will serve, without additional compensation, as an officer or
director, or both, of any subsidiary or affiliate of the Company or any other
entity in which the Company has an equity interest. If the Executive serves in
any such capacity, the Company will indemnify the Executive from liabilities in
connection with serving in any such capacity to the
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same extent as the Executive is indemnified in the performance of his duties as
an officer and director of the Company. In the event the Executive is
compensated for serving as an officer or director, or both, of any subsidiary,
division or affiliate of the Company or any other entity in which the Company
has an equity interest, such compensation will be deemed to be earned by the
Company and will be paid to the Company by the Executive. During the Employment
Period, Executive shall exercise his best efforts, and subject to the prior two
sentences, devote all of his full-time business and professional time,
attention, skill and efforts to the best interest of the Company and faithful
performance of his duties under this Agreement as they may be modified from time
to time. Executive's management of his personal affairs, service on behalf of
charitable organizations and performance of the duties of any political office
to which he is elected or appointed shall not constitute a breach of this
Agreement so long as such activities do not interfere with the efforts required
hereunder of the Executive toward the best interests of the Company or the
performance of the duties hereunder.
(b) The Company will use reasonable best efforts to cause the
Executive to be elected as a member of the Board of Directors of the Company
throughout the Employment Period and include the Executive in the management
slate for election as a director at each shareholders' meeting at which his term
as a director would otherwise expire. The Company will use reasonable best
efforts to cause the Executive to be appointed to serve as a member of the
Executive Committee of the Board of Directors of the Company for each year he is
elected as a director. As of the date hereof, the Board of Directors of the
Company has elected the Executive to the Board of Directors and appointed the
Executive to the Executive Committee, each conditioned only upon the Executive's
commencement of employment hereunder and effective as of the Effective Date. The
Executive acknowledges that no commitment has been made with respect to his
membership on the Board of Directors of Newco (as defined below).
(c) The Company has publicly announced a proposed transaction
(the "Combination") pursuant to which, among other transactions, the Company and
Houlihan's Restaurant Group, Inc. ("Houlihan's") will become subsidiaries of a
newly formed holding company ("Newco"). The Executive will serve in such
capacities for Newco as Newco may from time to time request provided that such
service is not materially inconsistent with Executive's position and
responsibilities contemplated hereby.
4. COMPENSATION AND RELATED MATTERS. (a) ANNUAL BASE SALARY. During the
Employment Period, the Company shall pay the Executive an annual base salary
(the "Annual Base Salary") of $275,000, subject to increase or decrease with
respect to any calendar year beginning on or after January 1, 2000 as the Board
of Directors of the Company or, if the Combination occurs, of Newco or the
Compensation Committee thereof (together, the "Board") may determine in its sole
discretion, based on annual reviews. All payments of Annual Base Salary shall be
payable in substantially equal semi-monthly installments and, as nearly as
practicable, on the fifteenth and last days of each month in arrears. The
Company's compensation of the Executive by payments of the Annual Base Salary
pursuant to this Section 4(a) shall not be deemed exclusive and shall not
preclude the Executive from participating in any other compensation or benefit
plan of the Company, nor shall such compensation in any way limit or
reduce any other obligation of the Company hereunder; and no other compensation,
benefit or
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payment hereunder shall in any way limit or reduce the obligation of the Company
to pay the Executive's Annual Base Salary hereunder.
(b) BONUS. In addition to the Annual Base Salary set forth in
Section 4(a) hereof and any other amounts payable to the Executive under any
other provision of this Agreement, the Company shall pay to the Executive no
later than 10 days after the Executive executes this Agreement, a lump sum cash
payment of $11,600 and for the year ended December 31, 1998, the Company shall
pay the Executive no later than April 15, 1999, a lump sum cash payment of
$103,125. During the Employment Period for the calendar years beginning on or
after January 1, 1999, the Executive will be eligible to receive an annual
performance bonus in an amount up to 100% of the Executive's then-current Annual
Base Salary provided no Date of Termination has occurred on or prior to December
31st of the applicable calendar year (pro rated in the event of any partial
calendar year). Such annual bonus (the "Annual Bonus") will be determined by the
Board in its sole discretion after the end of each calendar year, based upon
performance objectives established by the Board after consultation with the
Executive relating to (i) achievement of budgetary goals, (ii) guest and
employee satisfaction levels, (iii) the achievement of organizational
objectives, and (iv) any other items established by the Board. The Annual Bonus
shall be payable in a lump sum in cash on April 15 of the following year (the
"Bonus Payment Date").
(c) EXPENSES. During Employment Period, the Company shall
promptly reimburse the Executive for all reasonable expenses incurred by the
Executive in performing services hereunder, including, but not limited to, all
expenses of travel and all living expenses while away from home on business or
at the request of and in the service of the Company, provided that all such
expenses are incurred and accounted for in accordance with the policies and
procedures established from time to time by the Company.
(d) OTHER BENEFITS. Except as otherwise provided in this
Agreement, during the Employment Period, Executive shall be entitled, pursuant
to the terms thereof, to full participation in all of the employee benefit plans
and arrangements maintained by the Company for its executives and key management
employees from time to time. Executive shall be entitled to paid vacation in
accordance with the Company's standard employment policies and practices for
executive employees, as the same may be in effect from time to time. Nothing
paid to the Executive under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the amounts payable to
the Executive pursuant to Sections 4(a) and 4(b) . All employee benefits and
arrangements provided under this Section 4(d) shall terminate concurrently with
the Date of Termination (as defined in Section 6(g) below) of the Executive's
employment under this Agreement for any of the circumstances set forth in
Section 6, unless provided for otherwise herein. Any payments or benefits
payable to the Executive under this subsection (d) in respect of any calendar
year during which the Executive is employed by the Company for less than the
entire year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which the Executive is so employed.
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5. OPTIONS. The Company has concurrently herewith granted the Executive
non-qualified options to purchase 1,000,000 shares of Common Stock of the
Company, pursuant to an Agreement dated as of the date hereof.
6. TERMINATION. The Executive's employment hereunder may be terminated
without any breach of this Agreement under the circumstances set forth in this
Section 6. Section 7 of this Agreement sets forth the compensation to be paid to
the Executive upon termination of employment. In the event of any termination of
employment , the Executive's sole rights will be as provided in Section 7 hereof
and the company will have no other liabilities or obligations hereunder or
otherwise.
(a) TERMINATION UPON DEATH. The Executive's employment
hereunder shall terminate automatically upon his death.
(b) TERMINATION UPON DISABILITY. If the Company determines in
good faith that the Disability of the Executive has occurred pursuant to the
definition of "Disability" set forth below, the Company may give the Executive
written notice of its intention to terminate the Executive's employment. If the
Company delivers written notice to the Executive pursuant to the preceding
sentence, and the Executive shall have been continuously absent from his duties
hereunder on a full-time basis for substantially the entire period of one
hundred eighty (180) days during any twelve-month period, and within thirty (30)
days after written notice of termination is received by the Executive (which
receipt shall occur after the expiration of such one hundred eighty (180)-day
period), the Executive shall not have returned to full-time performance of his
duties hereunder, then the Executive's employment hereunder shall terminate
effective on the 30th day after such notice of termination is received by the
Executive. For purposes of this Agreement, "Disability" means incapacity of the
Executive due to physical or mental illness which renders the Executive
incapable, in the judgment of the Board, of performing the essential functions
of his job with or without accommodation.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate the Executive's employment hereunder when Cause exists. For purposes
of this Agreement, "Cause" shall mean that the Board shall have determined that
any of the following acts or events have occurred:
(i) the Executive shall have been convicted of or
admitted or pled nolo contendre to an act of fraud, theft or dishonesty
or any other crime or offense involving moral turpitude or likely to
affect adversely the Company or its assets, operations, prospects or
goodwill; or
(ii) the Executive shall harass any employee of the
Company based on race, age, sex, religion, color, national origin or
other factor prohibited by law; or
(iii) the Executive shall violate or breach any of
the terms and provisions of Sections 8(a), 8(b), 12 or 16 of this
Agreement; or
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(iv) the repeated failure by the Executive to
substantially perform his obligations and responsibilities under this
Agreement (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness), and which is not
remedied within fifteen (15) days after a Notice of Termination is
received by the Executive that specifically identifies the manner in
which the Company in good faith believes that the Executive has
repeatedly failed to substantially perform his obligations under this
Agreement.
The Company may suspend the Executive's employment under this
Agreement, with or without continuation of compensation provided otherwise to be
paid hereunder, for such period of time as the Board may deem appropriate if the
Executive is arrested, indicted or otherwise accused in a criminal proceeding or
an internal investigation relating to any act listed in (i) or (ii) of this
subsection (c).
(d) OTHER TERMINATION BY THE COMPANY. In addition to the
foregoing, the Company may terminate the Executive's employment under this
Agreement for any other reason or for no reason at any time upon giving Notice
of Termination to the Executive.
(e) TERMINATION BY THE EXECUTIVE.
(i) The Executive may terminate his employment
hereunder for any reason, including for Good Reason. For purposes of
this Agreement, "Good Reason" shall exist if within six months after
the occurrence of a Change of Control the Executive is assigned to
duties at the Company or Newco inconsistent in any material respect
(unless in the nature of a promotion) with the Executive's position in
the Company immediately prior to such change (including, but not
limited to, the Executive's status, offices and titles), or a
significant adverse alteration or diminution in the nature or status of
the Executive's authority, duties or responsibilities from those in
effect immediately prior to such change, other than an isolated,
insubstantial and inadvertent action that is fully corrected within ten
(10) days after receipt of written notice from the Executive; provided,
however, that Good Reason will not exist and the Executive will not be
entitled to the payments pursuant to Section 7(e) if effective
immediately following a Change of Control of the Company, Newco or an
operating subsidiary thereof expressly assumes the obligations of the
Company set forth in this Agreement and Newco offers the Executive a
comparable position of employment with Newco or such operating
subsidiary.
(ii) For the purposes of this Agreement, a "Change of
Control" shall mean any "person" or "group" (within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a Hampstead Affiliate or, as
to the Company if the Combination occurs, Newco becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of the combined voting power of the Company's or
Newco's then-outstanding voting securities entitled to vote generally
in the election of directors ("Voting Stock"), whether directly by a
stock purchase or indirectly through a merger, consolidation,
recapitalization or similar transaction, provided, however, that no
such
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event will constitute a "Change of Control" until such time as
Hampstead Affiliates have sold for cash or cash equivalents at least
50% of the Voting Stock (or, if applicable, the securities into which
Voting Stock is converted in any merger, consolidation,
recapitalization or similar transaction) owned by them as of, if the
Combination does not occur, the date hereof, or if the Combination does
occur, the date on which the Combination is effected and (B) "Hampstead
Affiliate" means, collectively, The Hampstead Group L.L.C., HR Funding,
L.P., HR Interests, L.L.C. and any person that directly, or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with, Hampstead Group L.L.C., HR Funding L.P. or
HR Interests L.L.C. and for purposes of the definition of "Hampstead
Affiliate", in addition to any other circumstances in which control
with respect to a Hampstead Affiliate exists, control with respect to a
Hampstead Affiliate will be deemed to exist through beneficial
ownership of 30% or more of a person's voting securities.
(f) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to subsection (a) hereof) shall be communicated by written Notice of Termination
to the other party. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined in Section 6(g)) is other than the date of receipt of such notice,
specifies the Date of Termination (defined below).
(g) DATE OF TERMINATION. "Date of Termination" shall mean (i)
if the Executive's employment is terminated by his death, the date of his death,
(ii) if the Executive's employment is terminated pursuant to subsection (b)
hereof (relating to disability), 15 days after Notice of Termination is received
by the Executive (provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such 15-day period), (iii)
if the Executive's employment is terminated by the Executive for any other
reason, five days after receipt of the Notice of Termination, and (iv) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination.
7. COMPENSATION UPON TERMINATION. (a) TERMINATION UPON DEATH. If the
Executive's employment is terminated by reason of his death, the Company shall
(i) pay the Executive all salary payments accrued through the Date of
Termination and then unpaid and (ii) pay to the Executive in accordance with
Section 4(b) the Annual Bonus to be determined in accordance with Section 4(b),
prorated to the Date of Termination but without accelerating the Bonus Payment
Date. The accrued, but unpaid salary portion of such compensation shall be paid
to the Executive or the Executive's estate within 15 days after the Date of
Termination. Other than the foregoing, the Company shall have no further
obligations to the Executive under this Agreement in the case of the termination
of the Executive's employment by reason of death or Disability.
(b) TERMINATION UPON DISABILITY. Notwithstanding any provision
herein to the contrary, during any portion of the Employment Period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness ("Disability Period"),
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the Executive shall continue to receive his base salary at seventy percent (70%)
of the rate then in effect less any sums payable to the Executive under any
disability insurance plan or policy of the Company then in effect until the
Executive's employment is terminated pursuant to Section 6(b). If the
Executive's employment is terminated by reason of Disability of the Executive as
set forth in Section 6(b) hereof, the Company shall (i) pay to the Executive all
salary payments accrued through the Date of Termination and then unpaid, (ii)
continue to pay to the Executive for a period of one (1) year following such
Date of Termination the Executive's base salary at seventy percent (70%) of the
rate in effect at such Date of Termination less any sums payable to the
Executive under any disability insurance plan or policy of the Company then in
effect and (iii) pay to the Executive in accordance with Section 4(b) the Annual
Bonus to be determined in accordance with Section 4(b), prorated to the Date of
Termination but without accelerating the Bonus Payment Date. The accrued but
unpaid salary portion of such compensation shall be paid to the Executive in
lump sum in cash within thirty (30) days of the Date of Termination. Other than
the payment of such compensation provided for in this subsection, the Company
shall have no further obligations to the Executive under this Agreement in the
case of termination for Disability.
(c) TERMINATION FOR CAUSE. If the Executive's employment shall
be terminated prior to the end of the Employment Period (i) at any time when
Cause exists or (ii) by the Executive for any reason other than Good Reason, the
Company shall pay the Executive all salary payments accrued through the Date of
Termination and then unpaid but Executive shall not be entitled to receive any
severance benefits whatsoever even if such benefits are generally made available
by the Company to its resigning or terminated executives or key management
employees. Other than the payment of such compensation provided for in this
subsection, the Company will have no further obligation to the Executive under
this Agreement in the case of a termination of employment referred to in this
subsection.
(d) TERMINATION OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If
(A) the Executive's employment shall be terminated by the Company hereunder in
circumstances to which none of Sections 7(a), (b), (c) or (e) apply, then
(i) the Company shall continue to pay the Executive
his Annual Base Salary through the Date of Termination;
(ii) for a period commencing on the Date of
Termination and ending on the second anniversary thereof (such period,
the "Two-Year Severance Period"), the Executive will receive annually
an amount equal to (A) if the Date of Termination occurs after December
31, 2000, the average of the Annual Base Salary plus the Annual Bonus
paid for each of the prior two calendar years, (B) if the Date of
Termination occurs on or before December 31, 2000 but after December
31, 1999, the Annual Base Salary plus the Annual Bonus paid to the
Executive for the calendar year 1999, and (C) if the Date of
Termination occurs on or before December 31, 1999, the Annual Base
Salary then in effect plus $150,000. Such payments will be made in
substantially equal semi-monthly installments and, as nearly as
practicable, on the fifteenth and last days of each month in arrears,
provided however, if the Company so elects, such payments may be paid
in a
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lump sum equal to the present value (calculated using a 9% discount
rate) of such periodic payments.
(iii) for the Two-Year Severance Period, the Company
will continue to provide the Executive with the welfare benefits that
he was receiving from the Company immediately prior to the Date of
Termination on the same terms and conditions (including employee
contributions toward the premium payments) under which the Executive
was entitled to participate immediately prior to the Date of
termination. Such benefits may be modified or terminated by the Company
following the Date of Termination provided such change is applicable to
senior executives of the Company generally and the Company's obligation
to provide benefits pursuant to this subsection will terminate when the
Executive commences any other employment during the TwoYear Severance
Period.
Other than the payment of the compensation and severance provided for in (i) and
(ii) of this subsection (d), the Company shall have no further obligation to the
Executive under this Agreement in the case of a termination of employment
referred to in this subsection (d).
(e) TERMINATION UPON GOOD REASON OR CHANGE OF CONTROL. If the
Executive shall terminate his employment for Good Reason or the Company
terminates his employment within six months of a Change of Control at a time
when Cause does not exist, then
(i) the Company shall continue to pay the Executive
his Annual Base Salary through the Date of Termination; and
(ii) in lieu of any further salary payments or other
benefits to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive a
lump sum severance payment in an amount equal to two times the
Executive's then-current Annual Base Salary. Such payment to be made
within 10 calendar days following the Termination Date; provided,
however, the severance payments provided to be made by this subsection
shall be reduced dollar for dollar by the pretax amount of any
compensation or income earned or received by Executive for services
rendered or advice given by him to others, including, without
limitation, compensation or income earned or received as the result of
employment or consulting services during the severance pay periods
provided for in this subsection. Upon request, Employee will provide
the Company with such information and documentation as the Company may
reasonably request in order to confirm the amount of such other
compensation or income;
Other than the payment of the compensation and severance provided for in (i) and
(ii) of this subsection (e), the Company shall have no further obligation to the
Executive under this Agreement in the case of a termination of employment
referred to in this subsection (e).
(f) LIMITATION ON PAYMENTS. Other than payments specifically
provided for in this Section 7, the Company will have no further obligation to
the Executive upon termination of the Executive's employment for any reason
whether by the Company or the Executive.
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(g) ENTITLEMENT TO OFFSET. The Company shall be entitled to
offset any amounts owing by Executive to Company, whether under this Agreement
or otherwise, against any payments provided for in this Agreement to be made by
the Company to the Executive. The Executive or, if applicable, his estate or
other legal representatives shall, as a condition to the Executive's right to
receive the compensation and severance pay provided for by subsections (d) and
(e) above, execute and deliver to the Company a release and discharge of the
Company and its Affiliates and all persons in privity with them from any and all
claims or causes of action, of any kind whatsoever, federal or state, at common
law, statutory, or otherwise which the Executive or his estate or legal
representatives had, may then have or in the future may have against the Company
and its Affiliates and all persons in privity with them, known or unknown,
directly or indirectly related to the Executive's employment by the Company or
the termination of such employment, including, but not limited to, claims under
applicable workers compensation acts, human rights acts, Title VII of Civil
Rights Act of 1964 as amended, the Age Discrimination in Employment Act, and the
Americans With Disabilities Act. Such release shall in form and substance be in
compliance with applicable law and shall be conditioned upon the receipt by the
Executive or his estate or other legal representatives of such severance
payments.
(h) LIMITATION ON PARACHUTE PAYMENTS. Anything in this
Agreement to the contrary notwithstanding, if it shall be determined that any
payment or distribution by the Company or any of its affiliates to or for the
benefit of the Executive hereunder would be subject to the excise tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 (the
"Code") (or any successor provision thereto) but for the application of this
Section 7(h), then the payments and benefits to be provided hereunder will be
reduced to the minimum extent necessary so that no portion thereof shall be
subject to Excise Tax but only if by reason of, and giving effect to such
reduction, the Executive's net after-tax benefit will exceed the Executive's net
after-tax benefit if such reduction were not made. In the event that any
reduction is required by this Section 7(h) in the payments and benefits
hereunder, such reduction will first be made in the payments to be received
under Section 7(c).
8. NONCOMPETITION; CONFIDENTIAL INFORMATION (a) During the Employment
Period and for a period of two (2) years following the expiration of the
Employment Period or, if sooner, the Date of Termination of employment of
Executive under this Agreement, Executive shall not engage in any Competitive
Activity. For purposes of this Agreement, the term "Competitive Activity" means
the Executive's participation, without the written consent of the Board of
Directors of the Company, in the management of any business enterprise, over 25%
of the gross revenue for the immediately preceding fiscal year of which was
derived from operations in the racing-based, theme or family park business or
any other business carried on by the Company at the Date of Termination in which
the Company competes or in which the Company intends to compete pursuant to a
business plan or other plan of action adopted by the Company (formally or
informally) prior to the Date of Termination. Notwithstanding the foregoing, the
restrictions in this Section 8(a) shall (i) apply for a one (1) year period
instead of two (2) years if the Executive terminates his employment for Good
Reason or if the Company terminates the Executive's employment within six months
after a Change of Control.
(b) Executive hereby acknowledges that he has and will
continue to have access to confidential and proprietary information of the
Company and its Affiliates (including,
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but not limited to, pricing strategies, program materials, financial statements
and results, employee lists, terms of agreements between the Company and
employees, customers and suppliers, marketing methods and concepts, development
ideas and strategies, personnel training and development programs, proprietary
computer and systems software, proprietary data and strategic business plans)
and that such information constitutes valuable, special and unique property of
the Company and its Affiliates. The Executive agrees not to use (except in the
course of the performance of his duties hereunder) or disclose, either while in
the Company's employ or following termination of his employment with the Company
for any reason, to any person not employed on a full-time basis by the Company
or its Affiliates, or not engaged to render services to the Company or its
Affiliates, except with the prior written consent of an officer authorized to
act in the matter by the Board of Directors of the Company, any such
confidential and proprietary information of the Company, provided, however, that
this provision shall not preclude the Executive from the use or disclosure of
information known generally to the public or from disclosure required by law or
court order. If Executive becomes legally compelled to disclose any confidential
information, Executive will provide the Company with prompt notice thereof so
that the Company may seek a protective order or other appropriate remedy, and
Executive shall cooperate with the Company in that effort. If such protective
order or other remedy is not obtained, Executive will (i) furnish that portion
of the confidential information that Executive is advised by written opinion of
the counsel is legally required, and (ii) exercise his best efforts to obtain
reliable assurance that confidential treatment will be accorded to such
information. The agreement made in this Section 8(b) shall be in addition to,
and not in limitation or derogation of, any obligations otherwise imposed by law
or by separate agreement upon the Executive in respect of confidential
information of the Company.
(c) It is acknowledged and agreed by Executive and Company
that the covenants contained in this Section 8 are reasonable as to time, area,
scope and/or necessary to protect the Company and its business. Nevertheless, it
is further agreed that such covenants shall be regarded as divisible and shall
be operative as to time, area and scope to the extent that it may be so
operative, and if any part of the covenants are declared invalid or
unenforceable as to time, area or scope, the validity or enforceability of the
remainder shall not be affected.
(d) In the event of a breach or a threatened breach by
Executive of any provisions of this Section 8, Company shall be entitled to
injunctive relief restraining Executive from breaching such provisions. Nothing
herein shall prohibit the Company from pursuing any other remedy available to it
for such breach or threatened breach, including the recovery of damages from
Executive.
9. SUCCESSORS AND BINDING AGREEMENT. This Agreement will be binding
upon and inure to the benefit of and be enforceable by the Company and any
successor to the Company, but will not otherwise be assignable, transferable or
delegable by the Company. This Agreement and all rights of the Executive
hereunder shall, subject to the terms and conditions hereof, inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amounts would still
be payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid subject to and in accordance
with the terms and conditions of this Agreement to the Executive's devisee,
legatee, or other
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designee or, if there be no such designee, to the Executive's estate. This
Agreement is personal in nature and neither of the parties hereto may, without
the consent of the other, assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly provided herein. Without
limiting the generality or effect of the foregoing, the Executive's right to
receive payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other than by
a transfer by the Executive's will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this
Section 9, the Company will have no liability to pay any amount so attempted to
be assigned, transferred or delegated.
10. NOTICE. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States (certified mail, return receipt requested,
postage prepaid), addressed as follows:
If to the Executive: Richard N. Beckert
If to the Company: Malibu Entertainment Worldwide, Inc.
717 North Harwood
Suite 1650
Dallas, Texas 75201
Attn: Chief Financial Officer
with copy to: The Hampstead Group, L.L.C.
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75021
Attention: Kym Irvin
Fax No. (214) 220-4949
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. REPRESENTATION BY COUNSEL. Executive acknowledges that he has
sought and obtained separate and independent legal counsel as to the negotiation
of this Agreement and Executive's agreement with its terms and provisions and
that Executive, with advice of such counsel, has carefully read and reviewed all
the terms and conditions of this Agreement and that Executive executes and
delivers this Agreement voluntarily because of the rights and benefits granted
to Executive hereunder.
12. NO CONFLICTING AGREEMENTS. Executive represents and warrants to the
Company that Executive is not a party to any agreement, contract or covenant
limiting the freedom of Executive (or any company employing Executive) to
perform the services contemplated herein. Executive further represents and
warrants to the Company that Executive is not a party to any agreement, contract
or covenant imposing upon Executive or his employer any duty with respect
11
<PAGE> 12
to confidential or proprietary information or with respect to the solicitation
or hiring of any person that would be applicable to the Company as presently
operated. Executive further represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Executive and the
current operations of the Company do not and will not conflict with, or
constitute a breach or default under, or give rise to any right of termination,
cancellation or acceleration under, any term or provision of any contract,
agreement or other instrument or obligation to which Executive is a party or by
which Executive is bound. The Executive agrees that he is not entitled to
indemnification from the Company pursuant to the Company's bylaws or any other
agreement or to coverage under any insurance policy providing for coverage of
claims against officers or directors of the Company in the event of any claim,
action or proceeding being brought against the Executive by reason of the
existence of any agreement, contract, instrument or other obligation which would
cause a breach or inaccuracy of the representations and agreements of Executive
contained in this Section 12 or by reason of the Company asserting a claim for
indemnity under this Section 12 against the Executive.
13. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such other executive officer of the
Company as may be specifically designated by the Board of Directors of the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to its conflicts of law
principles. In the event of a lawsuit by any party to enforce the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
costs, expenses and attorney's fees from the other party. Executive and the
Company shall execute and deliver to one another such other agreements as may be
reasonably necessary or appropriate to comply with the purposes and intent of
this Agreement.
14. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. NONSOLICITATION. During the Employment Period and for a period of
two (2) years following the expiration of the Employment Period or, if sooner,
the Date of Termination of employment of Executive under this Agreement,
Executive shall not (1) solicit to hire any person who is employed by the
Company or any Affiliate (or who was employed by the Company or any Affiliate
within a period of one year prior to the expiration or termination of employment
of Executive) or (2) encourage such a person to leave the employment of the
Company or any Affiliate or (3) assist or provide information in connection with
any party's soliciting or hiring of
12
<PAGE> 13
or consideration of employment of such persons. Notwithstanding the foregoing,
the restrictions in this Section 16 shall (i) apply for a one (1) year period
instead of two (2) years if the Executive terminates his employment for Good
Reason or if the Company terminates the Executive's employment within six months
after a Change of Control other than for Cause or death or Disability or the
Executive terminates his employment after the end of the Employment Period.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By:
-----------------------------------------------------
Name:
---------------------------------------------------
Title:
--------------------------------------------------
EXECUTIVE
--------------------------------------------------------
Richard N. Beckert
14
<PAGE> 1
EXHIBIT 10(b)
AMENDMENT NUMBER FIVE TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER FIVE TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (THIS "AMENDMENT"), is entered into as of
June 30, 1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("MEWI"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA MANAGEMENT
COMPANY, a Georgia corporation ("MMC"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA PARTNERS I,
INC., a Georgia corporation ("MPI"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX
CORPORATION, a Delaware corporation ("MGPC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MIAMI CASTLE
MGPC, INC., a Florida corporation ("Miami"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TEMPE MGPC, INC.,
an Arizona corporation ("Tempe"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, TUCSON MGPC, INC., an Arizona
corporation ("Tucson"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, FRESNO MGPC, INC., a California
corporation ("Fresno"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, NORTH HOLLYWOOD CASTLE MGPC, INC., a
California corporation ("NHC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS MGPC, INC., a
California corporation ("PH"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS SHOWBOAT MGPC,
INC., a California corporation ("PHS"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDONDO BEACH CASTLE
MGPC, INC., a California corporation ("RBC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD CITY
CASTLE MGPC, INC., a California corporation ("RCC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD
CITY MGPC, INC., a California corporation ("RC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN DIEGO
MGPC, INC., a California corporation ("San Diego"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DENVER
MGPC, INC., a Colorado corporation ("Denver"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, ORLANDO CASTLE
MGPC, INC., a Florida corporation ("OC"), with its chief executive office
located at 717 North Harwood, Suite
-1-
<PAGE> 2
1650, Dallas, Texas 75201, ORLANDO MGPC, INC., a Florida corporation
("Orlando"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, TAMPA CASTLE MGPC, INC., a Florida corporation
("TC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, TAMPA MGPC, INC., a Florida corporation ("Tampa"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, LENEXA MGPC, INC., a Kansas corporation ("Lenexa"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, MT. LAUREL MGPC, INC., a New Jersey corporation ("Mt.Laurel"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, CINCINNATI MGPC, INC., an Ohio corporation ("Cincinnati"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
PORTLAND MGPC, INC., an Oregon corporation ("Portland"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
AUSTIN MGPC, INC., a Texas corporation ("Austin"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DALLAS
CASTLE MGPC, INC., a Texas corporation ("DC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DALLAS MGPC,
INC., a Texas corporation ("Dallas"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, HOUSTON CASTLE MGPC, INC., a
Texas corporation ("HC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, HOUSTON II MGPC, INC., a Texas
corporation ("Houston"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO CASTLE MGPC, INC., a Texas
corporation ("SAC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO MGPC, INC., a Texas
corporation ("San Antonio"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA DEVELOPMENT COMPANY, a
Georgia corporation ("MDC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX DESIGN &
MANUFACTURING, INC., a California corporation ("MGPDMI"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation ("MGPFSI"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, OFF TRACK MANAGEMENT, INC., a California corporation ("Off
Track"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, MGP SPECIAL, INC., a California corporation
("Special"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida
corporation ("Amusement"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX CONSULTING, INC., a
California corporation ("Consulting"), with its
-2-
<PAGE> 3
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation ("MMEII"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MOUNTASIA - MEI LIMITED COMPANY, INC., a California
corporation ("MMEILC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA, INC., a
California corporation ("MCNC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA
LIMITED PARTNERSHIP, a California limited partnership ("MMEICLP"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
("MMEIMCI"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, AMUSEMENT CO., INC., a Delaware corporation ("ACI"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
("ACPI"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a
Texas corporation ("MFEC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201.
WHEREAS Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August 22,
1996, (as amended to date, the "Loan Agreement");
WHEREAS Borrower has requested Foothill to amend the Loan
Agreement and the other Loan Documents to (i) permanently amend the definition
of Adjusted Net Worth, (ii) revise the financial covenants with respect to the
minimum Debt Service Ratio, the maximum Total Liabilities to Adjusted Net Worth
Ratio, the minimum Adjusted Net Worth, and the minimum Interest Coverage Ratio,
and (iii) waive Borrower's failure to comply with the requirements of Sections
2.12, 7.19(a), and 7.19(d) of the Loan Agreement;
WHEREAS Foothill is willing to so amend the Loan Agreement and
waive Borrower's failure to comply with the requirements of Sections 2.12,
7.19(a), and 7.19(d) of the Loan Agreement in accordance with the terms hereof
upon Borrower's payment of an Amendment Fee of $15,000 and subject to the other
terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
-3-
<PAGE> 4
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is
amended by deleting each of the following definitions in their entirety and
substituting the following in lieu thereof:
"Adjusted Net Worth means, as of any date of
determination, the sum of (a) the difference of (i) Borrower's total
stockholder's equity, minus (ii) the sum of (w) all Intangible Assets
of Borrower, (x) all of Borrower's prepaid expenses, (y) all amounts
due to Borrower from non-Borrower Affiliates, calculated on a
consolidated basis, and (z) all investments in partnerships or joint
ventures, plus, without duplication of any amount included in clause
(a), (b) the aggregate issue price of outstanding preferred Securities
and the aggregate principal amount of Existing Subordinated Debt of
MEWI."
"Fifth Amendment means that certain Amendment Number
Five to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of June 30, 1998, between Foothill and Borrower."
"Fifth Amendment Closing Date means June 30, 1998."
"Relevant Measuring Period means, with respect to June
30, 1998, the three months then ended, with respect to September 30,
1998, the six months then ended, with respect to December 31, 1998, the
nine months then ended, and, with respect to any date thereafter, the
twelve months then ended."
b. Clause (a) of Section 7.19 of the Loan Agreement
hereby is amended and restated in its entirety as follows:
"(a) Debt Service Ratio. A Debt Service Ratio
for the Relevant Measuring Period of not less than the relevant amount
set forth in the following table, measured on a fiscal quarter-end
basis:
--------------------------------------------------------------------------
Period Ending Minimum Ratio
==========================================================================
6/30/98 0.0 : 1
--------------------------------------------------------------------------
9/30/98 0.0 : 1
--------------------------------------------------------------------------
12/31/98 0.0 : 1
--------------------------------------------------------------------------
3/31/99 0.0 : 1
--------------------------------------------------------------------------
6/30/99 0.0 : 1
--------------------------------------------------------------------------
9/30/99 1.0 : 1
--------------------------------------------------------------------------
As of the end of each quarter 1.0 : 1 "
thereafter
--------------------------------------------------------------------------
-4-
<PAGE> 5
c. Clause (b) of Section 7.19 of the Loan Agreement
hereby is amended and restated in its entirety as follows:
"(b) Total Liabilities to Adjusted Net Worth
Ratio. A ratio of Borrower's total liabilities (exclusive of Existing
Subordinated Debt) divided by Adjusted Net Worth of 2.0:1.0, or less,
measured on a fiscal quarter-end basis;"
d. Clause (c) of Section 7.19 of the Loan Agreement
hereby is amended and restated in its entirety as follows:
"(c) Adjusted Net Worth. Adjusted Net Worth of
at least $40,000,000, measured on a fiscal quarter-end basis; and"
e. Clause (d) of Section 7.19 of the Loan Agreement
hereby is amended and restated in its entirety as follows:
"(b) Interest Coverage Ratio. An Interest
Coverage Ratio for the Relevant Measuring Period most recently ended of
not less than the relevant amount set forth in the following table,
measured on a fiscal quarter-end basis:
--------------------------------------------------------------------------
Period Ending Minimum Ratio
==========================================================================
6/30/98 0.0 : 1
--------------------------------------------------------------------------
9/30/98 0.0 : 1
--------------------------------------------------------------------------
12/31/98 0.0 : 1
--------------------------------------------------------------------------
3/31/99 0.0 : 1
--------------------------------------------------------------------------
6/30/99 0.0 : 1
--------------------------------------------------------------------------
9/30/99 2.0 : 1
--------------------------------------------------------------------------
As of the end of each quarter 2.0 : 1 "
thereafter
--------------------------------------------------------------------------
-5-
<PAGE> 6
2. Conditions Precedent to the Effectiveness of this
Amendment. The effectiveness of this Amendment is subject to the fulfillment, to
the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
b. After giving effect hereto, no Event of Default or
event which with the giving of notice or passage of time would constitute an
Event of Default shall have occurred and be continuing on the date hereof, nor
shall result from the consummation of the transactions contemplated herein;
c. No injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower, Foothill, or any of their
Affiliates;
d. No material adverse change shall have occurred in
the financial condition of Borrower or in the value of the Collateral that has
not been disclosed to Foothill;
e. Foothill shall have received this duly executed
Amendment, which shall be in full force and effect;
f. Foothill shall have received the Fifth Amendment
Fee of $15,000; and
g. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3. Waiver of Violation of Certain Covenants and Conditions
Subsequent. Pursuant to Borrower's request, Lender hereby agrees to waive the
Events of Default caused by Borrower's failure to comply with:
(a) the provisions of Section 2.12 of the Loan Agreement
requiring the prepayment of Term Loan A, Term Loan B, and the Advances,
as applicable, from any Net Cash Proceeds of any Permitted Disposition
(other than an Ordinary Course Disposition);
-6-
<PAGE> 7
(b) the minimum Debt Service Ratio as of the quarter ending
March 31, 1998 of (4.0):1 as set forth in Section 7.19(a) as a result
of Borrower's actual Debt Service Ratio for this period of (5.76):1;
(c) the minimum Interest Coverage Ratio as of the quarter
ending March 31, 1998 of (5.0):1 as set forth in Section 7.19(d) as a
result of Borrower's actual Interest Coverage Ratio for this period of
(6.64):1; and
(d) the conditions subsequent of the Fourth Amendment
requiring (i) the revision of the Section 7.19 on the basis of
Borrower's business plan within 60 days of the Fourth Amendment Closing
Date, and (ii) the Borrower's entry into such mortgages and deeds of
trust in respect of Borrower's leasehold estates in respect of which a
leasehold mortgage may be granted, as Foothill shall reasonably request
within 90 days of the Fourth Amendment Closing Date.
4. Condition Subsequent. As a condition subsequent to the
effectiveness of this Fifth Amendment, within 60 days of the Fifth Amendment
Closing Date, Foothill and Borrower shall have entered into such mortgages and
deeds of trust in respect of Borrower's leasehold estates in respect of which a
leasehold mortgage may be granted, as Foothill shall reasonably request, in form
and substance satisfactory to Foothill in its reasonable discretion, and the
Borrower hereby agrees to make reasonable, good faith, efforts to obtain the
consent of the lessor to the granting of such leasehold mortgages (the failure
by Borrower to so enter into such mortgages and deeds of trust on the expiry of
the 60 day period provided therefor constituting an Event of Default, but the
failure to perform during the period prior to the expiration of the applicable
60 day period provided therefor shall not constitute a Default).
5. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to which it is a party
or by which any of its properties may be bound or affected, and (b) the Loan
Agreement, as amended by this Amendment, constitutes Borrower's legal, valid,
and binding obligation, enforceable against Borrower in accordance with its
terms.
6. Further Assurances. Borrower shall execute and deliver
all financing statements, agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as Foothill may
reasonably request from time to time, to perfect and maintain the perfection and
priority of Foothill's security interests in the Collateral, and to fully
consummate the transactions contemplated under the Loan Agreement and this
Amendment.
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<PAGE> 8
7. Effect on Loan Documents. The Loan Agreement, as
amended hereby, and the other Loan Documents shall be and remain in full force
and effect in accordance with their respective terms and each hereby is ratified
and confirmed in all respects. Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or as an amendment of any right, power, or remedy of Lender under the
Loan Agreement, as in effect prior to the date hereof.
8. Miscellaneous.
a. Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Loan Agreement shall mean and
refer to the Loan Agreement as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, and this Amendment.
b. Upon the effectiveness of this Amendment, each
reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, and this
Amendment.
c. This Amendment shall be governed by and construed
in accordance with the laws of the State of California.
d. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
in on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
By:
----------------------------------------
Name:
----------------------------
Title:
---------------------------
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO BEACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
DALLAS MGPC, INC., a Texas corporation
-9-
<PAGE> 10
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a
California limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
By:
----------------------------------------
Name:
-----------------------------
Title:
----------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
-------------------------
Name:
-----------------------
Title:
----------------------
-10-
<PAGE> 1
EXHIBIT 10(c)
REAFFIRMATION AND RATIFICATION
OF GUARANTY
THIS REAFFIRMATION AND RATIFICATION OF GUARANTY
("REAFFIRMATION") made as of the _____ day of October, 1998, by MEI HOLDINGS,
L.P., a Delaware limited partnership, ("MEI" or "GUARANTOR") in favor of NOMURA
ASSET CAPITAL CORPORATION, a Delaware corporation ("LENDER").
W I T N E S S E T H :
WHEREAS, Malibu Centers, Inc., a Delaware corporation ("MCI"
or "BORROWER"), has entered into a Loan Agreement, dated as of June 27, 1997,
as amended by that certain Letter Agreement dated as of March 30, 1998, as
further amended by that certain Letter Agreement dated the date hereof (the
"LOAN AGREEMENT"), pursuant to which Lender made a $21,390,375 loan to Borrower
(the "LOAN");
WHEREAS, in connection with the Loan Agreement Guarantor
executed and delivered a certain Guaranty in favor of Lender, dated as of June
27, 1997 (the "ORIGINAL GUARANTY") as reaffirmed by the Amended and Restated
Loan Agreement dated as of May 8, 1998 (the "REAFFIRMATION", the Reaffirmation
and the Original Guaranty are hereinafter collectively referred to as the
"GUARANTY");
WHEREAS, MEI and MCI have each chosen to exercise each one's
respective option to extend the term of the MEI and MCI loans and to amend the
terms and provisions of the Guaranty.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), the
receipt of which is hereby acknowledged, the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by each of the parties hereto, and in order to reaffirm and ratify
the Guaranty, Guarantor hereby acknowledges, agrees for itself, its successors
and assigns and confirms that all of the above recitals are true, correct and
complete, and Guarantor hereby covenants and agrees with Lender as follows:
1. References to the MEI Guaranty or any guaranty executed by MEI
or MEI Holdings, L.P. in any or all of the Loan Documents (as such term is
defined in the
<PAGE> 2
Loan Agreement), including the MEI Loan Documents (as hereinafter defined)
shall be deemed to include references to such Guaranty as reaffirmed and
ratified by this Reaffirmation.
2. Guarantor acknowledges the continuing validity of its Guaranty
in favor of Lender and represents, warrants and confirms the non-existence of
any offsets, defenses or counterclaims to its obligations thereunder and waives
its right to assert any set-off, counterclaim or crossclaim of any nature
whatsoever in any litigation relating to its Guaranty or otherwise with respect
to the Obligations (provided, however that the foregoing shall not be deemed a
waiver of the right of Guarantor to assert any compulsory counterclaim
maintained in a court of the United States, or of the State of New York if such
counterclaim is compelled under local law or rule of procedure).
3. Guarantor reacknowledges and reaffirms all of the
representations, warranties, terms and obligations contained in the Guaranty,
which shall remain in full force and effect for all the obligations of
Guarantor now or hereafter owing to Lender pursuant to the terms and conditions
of the Guaranty and acknowledges, agrees, represents and warrants that no oral
or other agreements, understandings, representations or warranties exist with
respect to the Guaranty or with respect to the obligations of Guarantor
thereunder except those specifically set forth in this Reaffirmation.
4. Guarantor hereby acknowledges and affirms that the certain
loan between MEI Holdings, Inc. and Lender dated as of June 5, 1997 as amended
by that certain Letter Agreement dated as of June 27, 1997 as amended by that
certain Letter Agreement dated as of March 30, 1998, (the "ORIGINAL LOAN
AGREEMENT") as amended and restated by that certain Amended and Restated Loan
Agreement dated as of May 8, 1998 pursuant to which Lender made an additional
$10,000,000 loan to Borrower (the "AMENDED LOAN AGREEMENT") has been further
amended by that certain Letter Agreement dated as of the date hereof pursuant
to which Lender made an additional $1,034,759 loan to Borrower (the "MEI
LOAN"). Guarantor hereby acknowledges and affirms that the aggregate principal
amount of the MEI Loan is $21,034,759. Guarantor also acknowledges and affirms
that the current outstanding principal amount of the MEI Loan is $21,034,759.
5. Guarantor represents, warrants and confirms that no Material
Adverse Change has occurred since May 8, 1998, that there are no judgments
against it in any of the courts of the United States and that there is no
litigation, active, pending or to the
2
<PAGE> 3
best of its actual knowledge, threatened, against it which might adversely
affect its ability to pay when due any amounts which may become payable in
respect of its Guaranty or the MEI Loan Agreement (hereinafter defined).
6. Guarantor restates all of the representations and warranties
contained in that certain Loan Agreement, dated June 27, 1997, between
Guarantor and Lender, as amended by that certain Letter Agreement dated as of
March 30, 1998, as amended and restated by that certain Amended and Restated
Loan Agreement dated as of May 8, 1998, as further amended by that certain
Letter Agreement dated the date hereof (the "MEI LOAN AGREEMENT") and
represents and warranties to Lender that all of the representations and
warranties contained in the MEI Loan Agreement are true and correct in all
material respects and that no Default (as defined in the MEI Loan Agreement) or
Event of Default (as defined in the MEI Loan Agreement) has occurred or is
continuing and that Guarantor is in compliance in all material respects with
all terms and conditions set forth in the MEI Loan Agreement and in each other
Loan Document (as defined in the MEI Loan Agreement, such documents the "MEI
LOAN DOCUMENTS") on its part to be observed or performed. The MEI Loan
Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Guarantor, including the defense of usury, nor would the operation
of any of the terms of the MEI Loan Documents, or the exercise of any right
thereunder, render the MEI 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 Guarantor has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
7. This Reaffirmation may be executed in any number of duplicate
originals and each such duplicate original shall be deemed to constitute but
one and the same instrument.
8. If Guarantor fails to execute this Reaffirmation, or if such
execution shall prove ineffective for any reason, there shall be no implication
arising out of such failure to sign that Guarantor, is released from any of its
obligations under the Guaranty.
9. Guarantor acknowledges and agrees that it has entered into and
delivered this Reaffirmation of its own free will, voluntarily and without
coercion or duress of any kind, and has been represented in connection herewith
by counsel of its choice and is fully aware of the terms contained in this
Reaffirmation.
3
<PAGE> 4
IN WITNESS WHEREOF, Guarantor has duly executed this Reaffirmation the
day and year 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:
4
<PAGE> 1
EXHIBIT 10(d)
MALIBU CENTERS, INC.
c/o THE HAMPSTEAD GROUP
Texas Commerce Tower
2200 Ross Avenue
Suite 4200-W
Dallas, Texas 75201
October __, 1998
Nomura Asset Capital Corporation
Two World Financial Center, Building B
New York, New York 10281
RE: TERM EXTENSION
Ladies and Gentlemen:
We refer to that certain (i) Loan Agreement in the amount of
$21,390,375, dated as of June 27, 1997, between Malibu Centers, Inc. ("MCI"),
as borrower and Nomura Asset Capital Corporation ("Lender"), as lender, as
amended by that certain Letter Agreement dated as of March 30, 1998 (the "Loan
Agreement") and (ii) Promissory Note in the amount of $21,390,375 dated as of
June 27, 1997 between MCI and Lender (the "Note"). Unless otherwise indicated,
capitalized terms herein shall have the meaning ascribed to them in the Loan
Agreement or in the Note.
This letter (the "Letter") shall serve to modify the Loan
Agreement such that the definition of "Stated Maturity" is hereinafter changed
to January 20, 1999.
The Letter shall also serve to modify the Note such that the
definition of "Maturity Date" is hereinafter changed to January 20, 1999.
<PAGE> 2
If there shall be any inconsistencies between the terms,
covenants, conditions and provisions set forth in the Loan Agreement or the
Note, as applicable, and the terms, covenants, conditions and provisions set
forth in this Letter, then, the terms, covenants, conditions and provisions of
this Letter shall prevail. Whenever possible, the provisions of this Letter
shall be deemed supplemental to and not in derogation of the terms of the Loan
Agreement or the Note, as applicable, and any documents relating thereof.
MCI hereby confirms and ratifies all of the terms and
provisions of the Loan Agreement and the Note as amended by this Letter.
Except as expressly amended hereby, all of the terms of the Loan Agreement and
the Note shall remain in full force and effect.
This agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
2
<PAGE> 3
Please indicate your acceptance of the terms of this letter
agreement by signing in the space provided below.
Very truly yours,
MALIBU CENTERS, INC., a Delaware
corporation
By:
-------------------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
NOMURA ASSET CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
3
<PAGE> 1
EXHIBIT 10(e)
As of October __, 1998
Nomura Asset Capital Corporation
2 World Financial Center
21st Floor
New York, New York 10281
Re: Loan from Nomura Asset Capital Corporation
(together with its successors and assigns,
"Lender") to Malibu Centers, Inc. ("Borrower")
Ladies and Gentlemen:
Borrower and Lender have executed and delivered that certain
Loan Agreement dated as of June 5, 1997 as amended by that certain Letter
Agreement dated March 30, 1998 as further amended by that certain Letter
Agreement dated the date hereof between Borrower and Lender (the "Loan
Agreement"). Capitalized terms not otherwise defined herein shall have their
respective meanings set forth in the Loan Agreement.
Borrower acknowledges that the documents set forth on Exhibit
A hereto that were to have been delivered at the Closing have not been
delivered. Borrower acknowledges that Lender does not waive delivery of those
documents and performance of certain conditions, and, as an inducement to
Lender to extend the Maturity Date of the Loan, Borrower agrees to perform
those conditions and deliver the documents set forth on Exhibit A hereto, in
each case to Lender's satisfaction, within the applicable time periods set
forth on Exhibit A hereto.
This letter agreement shall constitute a Loan Document. Upon
any failure to complete the conditions or deliver the documents within the
applicable time periods set forth on Exhibit
<PAGE> 2
A, Lender shall have the right to declare an Event of Default for all purposes
under the Loan Agreement and the other Loan Documents. Except as expressly set
forth herein, Lender, has not, and shall not been deemed to have, waived
compliance by Borrower with any provision of the Loan Documents or to have
waived any rights of Lender thereunder.
This letter agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of New York, without
regard to principles of conflicts of laws. This letter agreement may not be
modified or amended or any term or provision hereof waived or discharged except
by a writing signed by Lender and Borrower. All of the terms of this letter
agreement shall be binding upon Borrower, its respective successors and
assigns, and inure to the benefit of Lender.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
2
<PAGE> 3
IN WITNESS WHEREOF, Borrower has executed this letter
agreement as of the date first written above.
Very truly yours,
MALIBU CENTERS, INC., a Delaware corporation
By:
-----------------------------------------
Name:
Title:
3
<PAGE> 4
EXHIBIT A
<TABLE>
<CAPTION>
=========================================================================================================================
DELIVERY TIME AFTER CLOSING
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Borrower agrees to purchase the title insurance policy evidenced by the title Within 10 days of Lender's
commitment issued by Stewart Title North Texas dated September 27, 1998 (No. request or an Event of
97113147) attached hereto as Exhibit B either at Lender's request or within 10 Default.
days of the occurrence of an Event of Default.
- -------------------------------------------------------------------------------------------------------------------------
2. Borrower agrees to deliver an opinions each in a form reasonably acceptable to 10 Days
Lender from from New York counsel and California counsel where applicable with
respect to the enforceability and due authorization of the relevant Loan
Documents executed on the day hereof.
=========================================================================================================================
</TABLE>
4
<PAGE> 1
EXHIBIT 10(f)
SECOND REAFFIRMATION AND RATIFICATION
OF GUARANTY
THIS SECOND REAFFIRMATION AND RATIFICATION OF GUARANTY
("Second Reaffirmation") made as of the _____ day of October, 1998, by MALIBU
CENTERS, INC., a Delaware corporation, (the "GUARANTOR") in favor of Lender
(hereinafter defined).
W I T N E S S E T H :
WHEREAS, MEI Holdings, L.P., a Delaware limited partnership
("BORROWER"), has entered into a Loan Agreement, dated as of June 5, 1997, with
Nomura Asset Capital Corporation, a Delaware corporation ("LENDER"), as amended
by that certain Letter Agreement dated as of June 27, 1997, as amended by that
certain Letter Agreement dated as of March 30, 1998 (the "ORIGINAL LOAN
AGREEMENT"), as amended and restated by that certain Amended and Restated Loan
Agreement dated as of May 8, 1998 pursuant to which Lender made an additional
$10,000,000 loan to Borrower as further amended by that certain letter
agreement dated the date hereof (the "RESTATED MEI LOAN AGREEMENT") pursuant to
which Lender made an additional $1,034,759 loan to Borrower for an aggregate
loan amount of $21,034,759 (the "LOAN");
WHEREAS, in connection with the Original Loan Agreement
Guarantor executed and delivered a certain Guaranty in favor of Lender, dated
as of June 27, 1997 (the "ORIGINAL GUARANTY") as reaffirmed by that certain
Reaffirmation and Ratification of Guaranty dated as of May 8, 1998 (the
"REAFFIRMATION", the Reaffirmation and the Original Guaranty are hereinafter
collectively referred to as the "GUARANTY");
WHEREAS, Borrower and Guarantor have each chosen to exercise
the option to extend the term of each one's respective loan and to amend the
terms and provisions of the Guaranty.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), the
receipt of which is hereby acknowledged, the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by each of the parties hereto, and in order to reaffirm and ratify
the Guaranty, the Guarantor hereby acknowledges, agrees for itself, its
successors and assigns and confirms that all
<PAGE> 2
of the above recitals are true, correct and complete, and the Guarantor hereby
covenants and agrees with Lender as follows:
1. References to the Centers Guaranty, the MCI Guaranty or any
guaranty executed by MCI or Malibu Centers, Inc, in any or all of the Loan
Documents (or the MCI Loan Documents) shall be deemed to include references to
such Guaranty as reaffirmed and ratified by this Second Reaffirmation.
2. Guarantor acknowledges the continuing validity of its Guaranty
in favor of Lender and represents, warrants and confirms the non-existence of
any offsets, defenses or counterclaims to its obligations thereunder and waives
its right to assert any set-off, counterclaim or crossclaim of any nature
whatsoever in any litigation relating to its Guaranty or otherwise with respect
to the Obligations (provided, however that the foregoing shall not be deemed a
waiver of the right of the Guarantor to assert any compulsory counterclaim
maintained in a court of the United States, or of the State of New York if such
counterclaim is compelled under local law or rule of procedure).
3. Guarantor reacknowledges and reaffirms all of the
representations, warranties, terms and obligations contained in the Guaranty,
which shall remain in full force and effect for all the obligations of the
Guarantor now or hereafter owing to Lender pursuant to the terms and conditions
of the Guaranty and acknowledges, agrees, represents and warrants that no oral
or other agreements, understandings, representations or warranties exist with
respect to the Guaranty or with respect to the obligations of Guarantor
thereunder except those specifically set forth in this Second Reaffirmation.
4. Guarantor hereby acknowledges and affirms that the Loan has
been increased to $21,034,759.
5. Guarantor represents, warrants and confirms that no Material
Adverse Change has occurred since May 8, 1998, that there are no judgments
against it in any of the courts of the United States and that there is no
litigation, active, pending or to the best of its actual knowledge, threatened,
against it which might adversely affect its ability to pay when due any amounts
which may become payable in respect of its Guaranty or the MCI Loan Agreement
(hereinafter defined).
6. Guarantor restates all of the representations and warranties
contained in that certain Loan Agreement, dated June 27, 1997, between
Guarantor and Lender, as
2
<PAGE> 3
amended by that certain Letter Agreement dated as of March 30, 1998 as further
amended by that certain letter agreement dated the date hereof (the "MCI LOAN
AGREEMENT") and represents and warranties to Lender that all of the
representations and warranties contained in the MCI Loan Agreement are true and
correct in all material respects and that no Default (as defined in the MCI
Loan Agreement) or Event of Default (as defined in the MCI Loan Agreement) has
occurred or is continuing and that Guarantor is in compliance in all material
respects with all terms and conditions set forth in the MCI Loan Agreement and
in each other Loan Document (as defined in the MCI Loan Agreement, such
documents the "MCI LOAN DOCUMENTS") on its part to be observed or performed.
The MCI Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by Guarantor, including the defense of usury, nor would
the operation of any of the terms of the MCI Loan Documents, or the exercise of
any right thereunder, render the MCI 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 Guarantor has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.
7. This Second Reaffirmation may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to
constitute but one and the same instrument.
8. If Guarantor fails to execute this Second Reaffirmation, or if
such execution shall prove ineffective for any reason, there shall be no
implication arising out of such failure to sign that Guarantor, is released
from any of its obligations under the Guaranty.
9. Guarantor acknowledges and agrees that it has entered into and
delivered this Second Reaffirmation of its own free will, voluntarily and
without coercion or duress of any kind, and has been represented in connection
herewith by counsel of its choice and is fully aware of the terms contained in
this Second Reaffirmation.
3
<PAGE> 4
IN WITNESS WHEREOF, Guarantor has duly executed this Second
Reaffirmation the day and year first above written.
MALIBU CENTERS, INC., a Delaware
corporation
By:
--------------------------------
Name:
Title:
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 269,844
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,897,985
<CURRENT-ASSETS> 7,109,486
<PP&E> 114,991,301<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 127,776,276
<CURRENT-LIABILITIES> 45,158,118
<BONDS> 106,191,908
0
0
<COMMON> 141,607,037
<OTHER-SE> (138,636,726)
<TOTAL-LIABILITY-AND-EQUITY> 2,970,311
<SALES> 37,209,422
<TOTAL-REVENUES> 37,209,422
<CGS> 0
<TOTAL-COSTS> 46,174,610
<OTHER-EXPENSES> (404,956)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,289,802
<INCOME-PRETAX> (17,850,034)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,850,034)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,850,034)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
<FN>
<F1>Property, plant and equipment represents net amounts
</FN>
</TABLE>
